Custom, Excise & Service Tax Tribunal
Creative Infocity Ltd vs Ahmedabad-Iii on 5 November, 2024
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
AHMEDABAD
REGIONAL BENCH, COURT NO. 3
SERVICE TAX APPEAL NO. 11878 OF 2014
[Arising out of OIO-AHM-EXCUS-003-COM-062-13-14 dated 27/03/2014 passed by
Commissioner of Central Excise-AHMEDABAD-III]
CREATIVE INFOCITY LTD Appellant
Info Tower-I, Near Indroda Circle, Air Port Road,
Gandhinagar, Gujarat
Vs.
COMMISSIONER OF CENTRAL EXCISE-
AHMEDABAD-III Respondent
Custom House... 2nd Floor, OPP. Old Gujarat High Court, Navrangpura, Ahmedabad, Gujarat-380009 WITH SERVICE TAX APPEAL NO. 11859 OF 2016 [Arising out of OIA-AHM-EXCUS-003-APP-087-16-17 dated 24/08/2016 passed by Commissioner of Central Excise-AHMEDABAD-I] CREATIVE INFOCITY LTD Appellant Info Tower-I, Near Indroda Circle, Air Port Road, Gandhinagar, Gujarat Vs. COMMISSIONER OF CENTRAL EXCISE-
AHMEDABAD-III Respondent Custom House... 2nd Floor, OPP. Old Gujarat High Court, Navrangpura, Ahmedabad, Gujarat-380009 AND SERVICE TAX APPEAL NO. 11313 OF 2017 [Arising out of OIA-AHM-EXCUS-003-APP-270-16-17 dated 23/03/2017 passed by Commissioner of Service Tax-SERVICE TAX - AHMEDABAD] CREATIVE INFOCITY LTD Appellant Info Tower-I, Near Indroda Circle, Air Port Road, Gandhinagar, Gujarat Vs. COMMISSIONER OF CENTRAL EXCISE-
AHMEDABAD-III Respondent Custom House... 2nd Floor, OPP. Old Gujarat High Court, Navrangpura, Ahmedabad, Gujarat-380009 Appearance:
Shri Vipul Khandhar, Chartered Accountant for the Appellant Shri Mihir G Rayka, Additional Commissioner (AR) for the Respondent CORAM: HON'BLE MR. RAMESH NAIR, MEMBER ( JUDICIAL ) HON'BLE MR. C. L. MAHAR, MEMBER ( TECHNICAL ) Page |2 ST/11878/2014, ST/11859/2016 & ST/11313/2017-DB FINAL ORDER NO._12614-12616/2024 Date of Hearing : 12.08.2024 Date of Decision : 05.11.2024 RAMESH NAIR These appeals are filed against orders passed by the Commissioner of Service Tax- Ahmedabad. Being involved common issue, all the appeals are taken up together for disposal.
1.1 The fact of the case is that the appellant are engaged in the providing the taxable services viz., Banking & Financial Services, GTA, renting of immovable property, etc. During the course of audit by the department, it was found that Appellant has shown an amount as "Revenue from Real Estate Schemes". On detailed enquiry, as per the revenue, the said income pertains to lease premiums received from the lessees with whom the Appellant has made lease agreements. Appellant have entered into lease agreement with M/s. Gujarat Information Ltd. (A Government of Gujarat Organization) for the period of 32 years under which M/s Gujarat Information Ltd. has given land admeasuring 150 acres to the Appellant for right to develop and sub-lease the developed property on lease rent. The Appellant further transferred on sub-lease developed portion of land to their client on collecting lease premiums under a lease agreement. It appeared that the income on account of "Revenue from Real Estate" was on account of the sub-lease. The lease premiums received by Appellant from the lessees with whom they made lease agreement during the period from 01.07.2007 to 30.09.2011 is covered under the definition of taxable services defined under Section 65(105)(zzzz) of the Finance Act, 1994.
Accordingly, Show cause notices were issued proposing demand of service tax and proposing imposition of penalty on appellant. The adjudicating authority in respective impugned orders confirmed the service tax demands Page |3 ST/11878/2014, ST/11859/2016 & ST/11313/2017-DB along with interest and also ordered for imposition of penalty. Therefore, the appellant filed the present appeals.
2. Shri Vipul Khandhar, Learned Chartered Accountant appearing on behalf of the appellant submits that department has raised demand of service tax on loan lessor onetime payment under the head of renting of immovable property service, whereas leassee has been in receipt of the irrevocable right of the property, which has been registered with the registrar of land with stamp duty and mortgageable right has been allowed to the lessee. By using name as sub lease agreement, it cannot be called as leasing transaction.
2.1 By relying the concession agreement executed between Appellant and Gujarat Informatics Ltd. (GIL) he submits that the agreement executed by the Appellant in favour of the end users are perpetual so far as ownership rights of such end users is concerned. Upon transfer of the project assets by Appellant to GIL and eventual conversion of lease hold rights to free hold rights in favor of end users no further action or deed need to be executed. Thus, the stamp duty on the agreement has accordingly been paid and the agreements have been classified as transfer of rights through sale. In the present matter the ownership has been passed to purchaser, depreciation claimed by the owners of a capital asset. In appellant case property has been passed to the purchaser, purchasers claims the benefit of depreciation & other benefits as a owner. So the appellant's transaction is relating to the sale of immovable properties only. So by name lease it cannot be classifiable as a renting transactions. 2.2 He argued that "renting of immovable property services" has been applicable when provided, that means service in relation to renting alone is liable. In present matter appellant are not providing any service of renting Page |4 ST/11878/2014, ST/11859/2016 & ST/11313/2017-DB of immovable property. Appellant are transferring ownership right as per Section 20(a) conveyance immovable property of transfer of properties Act. 2.3 He further submits that appellants are not provider of any services in relation to 'renting of immovable property service'. They are transferring ownership to the sub lessee as per mutually agreed terms for the one time consideration either in lump sum or deferred payment against the transfer properties.
2.4 He also argued that the extended period of limitation cannot be invoked in the present case since there is no suppression, willful misstatement on the part of the Appellant. They have regularly filed ST-3 returns. Department carried out audit from time to time on yearly basis. Therefore, question of any suppression, willful misstatement on the part of the Appellant does not arise.
2.5 He further submits that second and third SCN for the extended period cannot be sustainable. He placed reliance on the Judgment of Nizam Sugar Vs. Collector of C.Ex. - 2008 (9) STR 314 (SC).
3. On other hand Shri M.G. Rayka Ld. Additional Commissioner (AR) appearing on behalf of the revenue reiterated the findings in the impugned orders and submitted that the sub-lease executed by the Appellant with their customers fall within the ambit of the definition of 'Renting of immovable property''. The sub-lease executed cannot be considered as 'sale of property'. Accordingly, he prayed for upholding the impugned orders.
4 We have heard both sides, considered the rival submissions and perused the record. From the information available on the record, we Page |5 ST/11878/2014, ST/11859/2016 & ST/11313/2017-DB observe that the lease agreement dtd. 26.01.2001 has been made between M/s Gujarat Informatics Ltd. and Appellant for the task of promoting information technology and provide the incentive to develop "The Infocity Project" at Gandhinagar in association with a private participants. Appellant have acquired the land as per lease agreement 'Indenture of Master Lease' between M/s Creative Infocity Ltd.& M/s Gujarat Informatics Ltd. Appellant have entered into lease agreement with M/s Gujarat Informatics Ltd. The leases have and hold the project sites / the said land for the term of 32 years subject to and upon the condition that the lessee shall duly perform and observe all the covenants and agreements hereinafter contained and on the part of Lessee to be performed and observed and subject also to the right of the sub lessees for an automatic renewal of the lease for a further period of 30 years and thereafter for an automatic conversion to freehold in the name of sub lessees. Appellant prepared indenture of Sub-Lease agreement on which they pay stamp duty under article 20(a) Conveyance -Immovable Property registered deed and registration fee, when they hand over possession to the client. Appellant collected one time premium on land per Sq. Ft. and annual lease rent & consideration so called real estate income for the transfer of properties. Thus, the issue to be decided in the present appeal is whether this transaction is covered under the definition of 'Renting of Immovable Property' as defined in Section 65(105)(zzzz) of the Finance Act, 1994. For that, it is necessary to analyze the definition of 'Renting of immovable property service' as it existed prior to 1-7-2010 and thereafter. For the sake of ready reference the said definitions are reproduced below:
"Section 65(105)(zzzz) of the erstwhile provisions of the act (effective till 30-6-2012) provided the definition of "Taxable service" which means any service provided or to be provided to any person, by any other person, by renting of immovable property or any other service in relation to such Page |6 ST/11878/2014, ST/11859/2016 & ST/11313/2017-DB renting for use in the course of or, for furtherance of, business or commerce.
Explanation 1 - For the purposes of this sub-clause, "immovable property"
includes -
(i) Building and part of a building, and the land appurtenant thereto;
(ii) Land incidental to the use of such building or part of a building;
(iii) The common or shared areas and facilities relating thereto; and
(iv) In case of a building located in a complex or an industrial estate, all common areas and facilities relating thereto, within such complex or estate,
(v) Vacant land, given on lease or license for construction of building or temporary structure at a later but, does not stage to be used for furtherance of business or commerce but, does not include -
(a) Vacant land solely used for agriculture, aquaculture, farming, forestry, animal husbandry, mining purposes;
(b) Vacant land, whether or not having facilities clearly incidental to the use of such vacant land;
(c) Land used for educational, sports, circus, entertainment and parking purposes; and
(d) Building used solely for residential purposes and buildings used for the purposes of accommodation, including hostels, boarding houses, holiday accommodation, tents, camping facilities."
4.1 In the Negative List regime effective from 1-7-2012, Renting of immovable property has been included in the 'Declared List' of services, viz., Section 66E of the Finance Act, which specifically made 'Renting of immovable property' as 'Declared Service'. The term "Renting of immovable property" has been defined under clause (41) of Section 65B of the Act and also under clause (f) of Rule 2 of the Service Tax Rules, 1994. Rule 2(f) of the Service Tax Rules, 1994 defines "Renting of Immovable Property"
means any service provided or agreed to be provided by renting of immovable property or any other service in relation to such renting.
4.2 Section 65B(41) of the Act defines 'renting' as allowing, permitting or granting access, entry, occupation, use or any such facility, wholly or partly Page |7 ST/11878/2014, ST/11859/2016 & ST/11313/2017-DB in an immovable property and includes letting, leasing, licensing or other similar arrangement in respect of immovable property.
4.3 We observe that the Revenue has inferred the term 'renting' from the above definitions and stated that it includes leasing. Ld. Commissioner observed that Appellant has provided developed property in lease to a sub-
lessee. There are two persons involved in this transaction. The one who is giving the property on lease and the one who is receiving the property on lease. The property is immovable property for which a term is fixed. The lease property is for furtherance of business or commerce. Therefore a taxable service has been rendered.
4.4 We find that the as per Section 105 of the Transfer of Property Act, 1882 the term lease is defined as follows :-
"A lease of immovable property is a transfer of a right to enjoy such property, made for a certain time, express or implied, or in perpetuity, in consideration of a price paid or promised, or of money, a share of crops, service or any other thing of value, to be rendered periodically or on specified occasions to the transferor by the transferee, who accepts the transfer on such terms.
Lessor, lessee, premium and rent defined : The transferor is called the lessor, the transferee is called the lessee, the price is called the premium, and the money, share, service or other thing to be so rendered is called the rent."
4.5 Thus, we observe that the issue to be decided here is whether the permanent transfer of the developed property lease hold rights by the Appellant to the their customers would be termed as 'sub-lease' to bring it under the ambit of levy of service tax or it can be termed as 'sale of leasehold rights' which is not liable to service tax. In this regard it is relevant to see the conveyance deed, the copies of which are scanned and reproduced below :-
Page |8 ST/11878/2014, ST/11859/2016 & ST/11313/2017-DB Page |9 ST/11878/2014, ST/11859/2016 & ST/11313/2017-DB P a g e | 10 ST/11878/2014, ST/11859/2016 & ST/11313/2017-DB P a g e | 11 ST/11878/2014, ST/11859/2016 & ST/11313/2017-DB P a g e | 12 ST/11878/2014, ST/11859/2016 & ST/11313/2017-DB P a g e | 13 ST/11878/2014, ST/11859/2016 & ST/11313/2017-DB P a g e | 14 ST/11878/2014, ST/11859/2016 & ST/11313/2017-DB P a g e | 15 ST/11878/2014, ST/11859/2016 & ST/11313/2017-DB P a g e | 16 ST/11878/2014, ST/11859/2016 & ST/11313/2017-DB P a g e | 17 ST/11878/2014, ST/11859/2016 & ST/11313/2017-DB P a g e | 18 ST/11878/2014, ST/11859/2016 & ST/11313/2017-DB P a g e | 19 ST/11878/2014, ST/11859/2016 & ST/11313/2017-DB P a g e | 20 ST/11878/2014, ST/11859/2016 & ST/11313/2017-DB P a g e | 21 ST/11878/2014, ST/11859/2016 & ST/11313/2017-DB P a g e | 22 ST/11878/2014, ST/11859/2016 & ST/11313/2017-DB P a g e | 23 ST/11878/2014, ST/11859/2016 & ST/11313/2017-DB P a g e | 24 ST/11878/2014, ST/11859/2016 & ST/11313/2017-DB P a g e | 25 ST/11878/2014, ST/11859/2016 & ST/11313/2017-DB Further the sample documents related to ownership change is scanned and reproduced below :-
P a g e | 26 ST/11878/2014, ST/11859/2016 & ST/11313/2017-DB English translation of above document :-
P a g e | 27 ST/11878/2014, ST/11859/2016 & ST/11313/2017-DB 4.6 From the above it is evident that ownership of developed property alongwith all rights have been passed by the appellant to the purchaser/customers. In a normal lease, the lessor retains the reversionary rights and the property is returned back to them after the lease period. The Title of the property is never transferred to the lessee. Thus, we observe that the terms and conditions of the conveyance deeds clearly indicate that it is not a lease or sub-lease as alleged in the impugned order. In the instant cases, from the above Deed, we observe that the Appellant does not have any reversionary right of the property after the permanent transfer of their leasehold rights to their customers. We find that the Appellant have executed a Deed with the Gujarat Informatics Ltd. and acquired land for a period of 32 years, and after development transfer the same on long term lease in favour of the customers vide conveyance deed.
Appellant also paid the stamp duty and registration fees when they hand over possession to the client at the rate applicable to outright sale of property and not at the rate which applicable to the agreement to renting of a property. Such transfer of leasehold right of developed property by the appellant on lumsum amount cannot be called as 'lease' and hence it would not fall under the definition of taxable service as defined under Section 65(105)(zzzz) of the Finance Act, 1994. We observe that once the Appellant executed the Deed in favour of the customers, the 'Title' of the property which has been assigned to them has been transferred in the name of the clients/ customers. Subsequently, the property have also been mutated in the name of the respective clients. Therefore, the transaction must be treated as 'sale of leasehold rights' and service tax would not be applicable on the outright transfer of rights. Further, after the transfer, the Appellant have not received any consideration as 'rent'. The amount they received as one time payment as 'lum sum payment' is meant for the developmental activities undertaken by them on the land received from the M/s GIL. After permanent transfer of the leasehold rights to the customers, P a g e | 28 ST/11878/2014, ST/11859/2016 & ST/11313/2017-DB they have no right on the land for any further activity on the land. Thus, we are of the view that the transaction undertaken by the Appellant cannot be termed as 'lease' or 'sub-lease' for the purpose of levy of service tax. Since the leasehold right alongwith obligations are permanently assigned in favour of the customer herein and the property would not come back to the Appellant, it cannot be considered as sub-lease of property thereby attracting the service tax liability under "Renting of immovable property". 4.7 We also observe that the lum sum premium amount received by the Appellant cannot be equated with rent payable on regular intervals for continuous use of the property. The difference between the Premium and the lease rent as envisaged in Section 105 of the Transfer of Property Act, 1882, has been dealt in the decision of the Hon'ble High Court in the case of A.R. Krishnamurthy and A.R. Rajagopalan v. Commissioner of Income Tax, Madras, (1982) 133 ITR 922 (Mad.). The relevant portion of the decision is reproduced below:-
"Section 105 of the Transfer of Property Act defines a lease of immovable property as "a transfer of a right to enjoy such property, made for a certain time, express or implied or in perpetuity, in consideration of a price paid or promised, or of money, a share of crops, service or any other thing of value to be rendered periodically or on specified occasions to the transferor by the transferee, who accepts the transfer on such terms. The transferor is called the lessor, the transferee is called the lessee, the price is called the premium and the money, share, service or other thing to be so rendered is called the rent". A lease thus consists of a right to the possession and use of the property owned by some other person. It is an outcome of the separation of ownership and possession. The lessor of the land is the who owned and possessed it, but has transferred the possession of it to another. The price paid for the transfer of possession or the right to enjoy the property is called the premium under section 105 of the Transfer of Property Act. The periodical payments made for the continuous enjoyment of the benefits under the lease are called rents or royalties."
P a g e | 29 ST/11878/2014, ST/11859/2016 & ST/11313/2017-DB From the decision cited above, it is observed that the price paid for transfer of possession or the right to enjoy the property is called the 'Premium' and the periodical payments made for continuous use of the property under lease is called 'rent'. The Appellant has received a one time payment as Premium and hence by relying on the above decision we hold that the Premium received by the Appellant cannot be called as 'rent'. 4.8 We further find that the difference between the 'Premium' and 'Rent' has been highlighted in the Judgment of the Hon'ble supreme Court in the case of Commissioner of Income Tax v. The Panbari Tea Co. Ltd., (1965) 57 ITR 422 (SC), the relevant para of the decision is reproduced below :-
"Under section 105 of the Transfer of Property Act, a lease of immovable property is a transfer of a right to enjoy the property made for a certain time, express or implied, or in perpetuity, in consideration of a price paid or promised, or of money, a share of crops, service or any other thing of value, to be rendered periodically or on specified occasions to the transferor by the transferee, who accepts the transfer on such terms. The transferor is called the lessor, the transferee is called the lessee, the price is called the premium, and the money, share, service or other thing to be so rendered is called the rent. The section, therefore, brings out the distinction between a price paid for a transfer of a right to enjoy the property and the rent to be paid periodically to the lessor. When the interest of the lessor is parted with for a price, the price paid is premium or salami. But the periodical payments made for the continuous enjoyment of the benefits under the lease are in the nature of rent. The former is a capital income and the latter a revenue receipt. There may be circumstances where the parties may camouflage the real nature of the transaction by using clever phraseology. In some cases, the so-called premium is a fact advance rent and in others rent is deferred price. It is not the form but the substance of the transaction that matters. The nomenclature used may not be decisive or conclusive but it helps the court, having regard to the other circumstances, to ascertain the intention of the parties.
Bearing the said principles in mind let us scrutinize the lease deed dated March 31, 1950. Under that document interest in two large tea estates comprising 320 acres and 305 acres respectively under tea, along with the bungalows, factory buildings, houses, godowns, cooly lines and other erections and structures, was parted by the lessor to the lessee for a period P a g e | 30 ST/11878/2014, ST/11859/2016 & ST/11313/2017-DB of 10 years; and during that period the lessee could enjoy the said tea estates in the manner prescribed in the document. Under the document, therefore, there was a transfer of substantive interest of the lessor in the estates to the lessee and a conferment of a right on the lessee to use the said estates by exploiting the same. Under clause 4 of the lease deed for the transfer of the right a premium of Rs. 2,25,000/- had to be paid to the lessor and for using the estates the lessee had to pay an annual rent of Rs. 54,000/-. Both the premium and the rent were payable in installments in the manner provided in the document. The parties were businessmen presumably well-versed in the working of tea estates. They must be assumed to have known the difference between the two expressions "premium" and "rent"; and they had designedly used those two expressions to connote two different payments. The annual rent fixed was a considerable sum of Rs. 54,000 and the premium, when spread over 10 years, would work out to Rs. 22,500 a year. There is no reason, therefore, to assume that the parties camouflaged their real intention and fixed a part of the rent in the shape of premium. The mere fact that the premium was made payable in installments cannot obviously be decisive of the question, for that might have been to accommodate the lessee."
4.9 We also observe that the Tribunal in the case of Greater Noida Industrial Development Authority v. Commissioner of Central Excise and Service Tax, Noida (2014) 51 Taxmann.com 73 (New Delhi-CESTAT) = 2015 (38) S.T.R. 1062 (Tribunal), held that the 'Salami or Premium' received in respect of lease of immovable property is not exigible to service tax. The relevant portion of the said decision is reproduced below :-
"10. Whether the Service Tax is chargeable only on the lease rent or also on one time premium amount charged in respect of long term leases? 10.1 A lease is a transaction, which has to be supported by consideration. The consideration may be either premium or rent or both. The consideration which is paid periodically is called rent. As regards premium, the Apex Court in the case of Commissioner of Income Tax, Assam and Manipur v. Panbari Tea Co. Ltd. reported in (1965) 3 SCR 811 has made a distinction between premium and rent observing that when the interest of the lessor is parted with for a price, the price paid is premium or salami, but the periodical payments for continuous enjoyment are in the nature of rent, the former is a Capital Income and the latter is the revenue receipt. Thus, the premium is the price paid for obtaining the lease of an immovable property. While rent, on the other hand, is the payment made for use and occupation of the P a g e | 31 ST/11878/2014, ST/11859/2016 & ST/11313/2017-DB immovable property leased. Since taxing event under Section 65(105)(zzzz) read with Section 65(90)(a) is renting of immovable property, Service Tax would be leviable only on the element of rent i.e. the payments made for continuous enjoyment under lease which are in the nature of the rent irrespective of whether this rent is collected periodically or in advance in lump sum. Service Tax under section 65(105)(zzzz) read with Section 65(90a) cannot be charged on the "premium" or 'salami' paid by the lessee to the lessor for transfer of interest in the property from the lessor to the lessee as this amount is not for continued enjoyment of the property leased. Since the levy of Service Tax is on renting of immovable property, not on transfer of interest in property from lessor to lessee, Service Tax would be chargeable only on the rent whether it is charged periodically or at a time in advance. In these appeals, in the show cause notice dated 19-3-2012 issued by the Addl. Director, DGCEI, New Delhi, Service Tax has been demanded only on the lease rent and not on the premium amount while in the subsequent show cause notice dated 17-10-2012 issued by the Commissioner of Central Excise and Service Tax, Noida, the amount of premium has also been included in the lease rent for the purpose of charging of Service Tax for which no valid reasons have been given. Therefore, the Order-in-Original dated 30-4-2013 confirming the Service Tax demand on the premium amount is not correct and to this extent, the Service Tax demand would not be sustainable."
4.10 In view of the decisions mentioned above, it is clear that consideration, i.e. lum sum amount, in the form of Premium and consideration in the form of 'rent' connotes two different types of consideration. In the instant case, we observe that the Appellant has not received any 'rent' from the customers. Accordingly, we hold that the amount paid by the customers to the Appellant for transfer of right in perpetuity in the property, is not exigible to the service tax. 4.11 Without prejudice, we also find that demands are barred by limitation. The department has issued show cause notices to the appellant by invoking the extended period. The details of show cause notices are as under: -
P a g e | 32 ST/11878/2014, ST/11859/2016 & ST/11313/2017-DB Show Cause Notice SCN dtd. Period 1st SCN 04.10.2010 2005-06 to 2008-09 2nd SCN 18.10.2012 July 2007 to September 2011 3rd SCN 08.05.2014 October 2011 to March 2013 4th SCN 18.04.2016 2013-14 to 2014-15 4.12 We find that Appellant have filed ST-3 returns regularly. The details of the considerations received by them in the respective Financial years are available in their profit and loss account and books of accounts. During the investigation Appellant has furnished all information regarding the disputed transactions. All information regarding the receipts from the customer are available in their profit and loss account. They were filing returns regularly.
If the department has any doubt about the service tax paid by them, they could have clarified the same with the Appellant. Moreover, as discussed above on merit the issue involved interpretation of statute on the taxability of renting of immovable property in the facts of the present facts. In view of the above, we find that there is no suppression involved in this case and the demand beyond the limitation period is not sustainable being time barred.
4.13 We also find that in terms of Section 73(1) of Finance Act, 1994, where any tax has not been levied or short paid or erroneously refunded, the central excise officers may within one year from the relevant date, serve notice on the person chargeable with the Service Tax which has not been levied or paid or which has been short levied or short paid or the person to whom such tax has been erroneously refunded requiring him to show case as to why he should not pay the amount specified in the show cause notice. The term, "relevant date" is defined in sub-section (6) of the Section 73. With effect from 28-5-2012, the normal limitation period has P a g e | 33 ST/11878/2014, ST/11859/2016 & ST/11313/2017-DB been enhanced to 18 months. In terms of proviso to Section 73(1) wherever Service Tax has not been levied or not paid or short levied or short paid or erroneously refunded by reason of fraud, any wilful suppression of facts, mis-statement or contravention of any provisions of Chapter V of Finance Act, 1994 or of the Rules made thereunder with intent to evade payment of tax, the notice for recovery of such short levied, short paid or erroneously refunded Service Tax can be made within 5 years from the relevant date. Thus, longer limitation period of 5 years is applicable only when there is an element of fraud, collusion, wilful mis-statement, suppression of facts or deliberate contravention of the tax provisions with intent to evade payment of tax. The provisions of Section 73(1) of Finance Act, 1994 are in pari materia with the provisions of the provision to Section 11A(1) of Central Excise Act, 1994. The Apex Court in a series of judgments in the cases of CCE v. Chemphar Drugs & Liniments reported in 1989 (40) E.L.T. 276 (S.C.), Pushpam Pharmaceuticals Company v. CCE, Bombay (S.C.) reported in 1995 (78) E.L.T. 401 (S.C.), Wallace Flour Mills in Cuttack reported in 1989 (41) E.L.T. 198 (S.C.) has held that the extended period of five years for recovery of short paid, short levied or erroneously refunded duty under proviso to Section 11A(1) of Finance Act, 1994 would not be applicable for failure or negligence of the manufacturer to take out licence or to pay duty when there was scope for doubt that the goods were dutiable or not, that the extended period under proviso to Section 11A(1) is applicable only when there is something positive other than mere inaction or failure on the part of the manufacturer or producer or conscious or deliberate withholding of information when the manufacturer knew otherwise, or contravention of the provision of Central Excise Act, 1944 or of the Rules made thereunder with intent to evade payment of duty. It has also been observed that expression "suppression of facts" in proviso to Section 11A(1) is to be interpreted strictly because it has been used in the company of such strong words as "fraud", "collusion", "wilful P a g e | 34 ST/11878/2014, ST/11859/2016 & ST/11313/2017-DB mis-statement", and where the facts are known to both the parties it is not the case of suppression of facts. The Apex Court in the case of Continental Foundation Joint Venture v. CCE, Chandigarh reported in 2007 (216) E.L.T. 177 (S.C.) has held that wherever on account of conflicting judgments on an issue or conflictions circular of the Board on an issue, there is scope for doubt, the extended period under proviso to Section 11A(1) of Central Excise Act, 1944 would not be applicable. In our view, the ratio of the above judgments of the Apex Court would be applicable while interpreting the provisions of Section 73(1) of the Finance Act, 1994. In this case, the appellant is a private limited company one of its functions is the allotment of vacant land to developed and further transfer to customers. In our view, there is merit in the appellant's plea that they were under bona fide belief that the one time premium on land per sq. ft. and lease amount so called real estate income for transfer of properties to clients, would not attract Service Tax under Section 65(105)(zzzz). Therefore, in the circumstances of the case, in our view, longer limitation period from the relevant date would not be applicable.
4.14 Further, we agree with the learned chartered accountant that the decision of Nizam Sugar Factory applies squarely to this case and a subsequent show cause notices could not have been issued invoking extended period of limitation. Thus, in view of law laid down by Hon'ble Supreme Court in the case of Nizam Sugar (supra), the extended period of limitation is also not available to Revenue for subsequent show cause notices. In view of the above discussion, supported by various Apex Court judgments and considering the facts of the present case, we are of the view that the demand under extended period is not sustainable being time barred also apart from merit.
P a g e | 35 ST/11878/2014, ST/11859/2016 & ST/11313/2017-DB 5 In the result, the impugned orders are not sustainable and are accordingly set aside. Appeals filed by the appellant are allowed with consequential relief, if any, as per law.
(Order pronounced in the open Court on 05.11.2024) (RAMESH NAIR) MEMBER ( JUDICIAL ) (C. L. MAHAR) MEMBER ( TECHNICAL ) Dharmi