Custom, Excise & Service Tax Tribunal
Safari Retreats Pvt Ltd vs Commissioner-Bbsr Commissionerate on 17 December, 2024
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
EASTERN ZONAL BENCH : KOLKATA
REGIONAL BENCH - COURT NO. 2
Service Tax Appeal No. 75197 of 2020
(Arising out of Order-in-Original No. PR.COMMR./BBSR/ST/02-05/2020 dated
27.01.2020 passed by the Principal Commissioner, G.S.T. and Central Excise,
Bhubaneshwar, C.R. Building, Rajaswa Vihar, Bhubaneswar - 751 007, Odisha)
M/s. Safari Retreats Private Limited : Appellant
Plot No. 721, Rasulgarh,
Bhubaneswar - 751 010 (Odisha)
VERSUS
Principal Commissioner of G.S.T. and C.Ex., : Respondent
C.R. Building, Rajaswa Vihar,
Bhubaneswar - 751 007 (Odisha)
APPEARANCE:
Shri Tarun Chatterjee, Advocate
Shri Raju Mondal, Advocate
For the Appellant
Shri Debapriya Sue, Authorized Representative for the Respondent
CORAM:
HON'BLE SHRI R. MURALIDHAR, MEMBER (JUDICIAL)
HON'BLE SHRI K. ANPAZHAKAN, MEMBER (TECHNICAL)
FINAL ORDER NO. 77871 / 2024
DATE OF HEARING: 05.12.2024
DATE OF DECISION: 17.12.2024
ORDER:[PER SHRI R. MURALIDHAR] The Appellant is a Private Limited Company operating under Service Tax Registration No. AAGCS2244FSD002. They were rendering services under the category of "Commercial or Industrial Construction Service" [CICS] and were discharging Service Tax after availing the abatement benefit in terms of Notification No.26/2012-ST, dated 20.06.2012. Accordingly, they were paying Service Tax on 30% of the amount received and were taking CENVAT Credit for the input services used.
Page 2 of 36Appeal No.: ST/75197/2020-DB
2. An audit was taken up for the period 2012-13 to 2015-16 on 15.11.2016 and on the basis of the observations made by the audit, the Show Cause Notice was issued for the period 2013-14 to 2015-16 on 20.04.2018. For the subsequent period 2016-17 three more Show Cause Notices were issued. The details are as per the following Table :
SL SCN NO. & Date Period Demand of Deman Disallow of the Total No Service Tax d of inadmissible on Renting Service input service (in Rs.) of Tax on credit Immovable Securit Property y/Legal (in Rs.) Service (in Rs.) (in Rs.) 1 V(01)481/Audit/S 2013-14 7,63,20,798 86,892 4,29,01,489 11,93,09,179 T/Gr.1/BBSR/2016 3966-70A, Dt 20- to 04-2018 2015-16 2 V(01)98/Audit/ST/ 2016-17 0 0 12,76,264 12,76,264 Gr.1/BBSR/2017/1 634-38A, Dt. 29-
01-2019 3 V(01)98/Audit/ST/ 2016-17 0 0 13,69,86,654 13,69,86,654 Gr.1/BBSR/2017/5 382-86A, Dt. 26- 03-2019 4 V(01)98/Audit/ST/ 2016-17 3,95,12,109 0 0 3,95,12,109 Gr.1/BBSR/2017/5 387-91A, Dt.26- 03-2019 TOTAL 11,58,32,907 86,892 18,11,64,407 29,70,84,206 Page 3 of 36 Appeal No.: ST/75197/2020-DB
3. The Adjudicating authority took up all the four Show Cause Notices for disposal together and confirmed the demands. Being aggrieved, the appellant is before the Tribunal.
4. The Ld. Counsel appearing on behalf of the appellant summarizes the demands and their stand as under : -
(1) The Revenue is in error in treating the services provided by the appellant as that of 'Renting of Immovable Property', whereas the appellant has provided the Construction of Industrial Complex Service [CICS]. Hence, the demand confirmed under the Renting of Immovable Property services is legally not sustainable and is required to be set aside.
(2) The appellant, having provided the service of CICS, are required to discharge the Service Tax after taking the abatement of 70% in terms of Notification No.26/2012 ST dated 20.6.2012. They are also eligible to take the CENVAT Credit for Input Services used. The Revenue has erred in taking the stand that the appellant is not eligible to take the CENVAT Credit on Input Services. Hence, the confirmed demand is required to be set aside.
(3) In respect of Legal Services, the demand has been made under Reverse Charge basis. The appellant is not disputing the Page 4 of 36 Appeal No.: ST/75197/2020-DB same and they have paid the Service Tax in respect of such RCM based demand. As the Service Tax paid under RCM would be eligible for CENVAT Credit, there would be no intention to evade. Hence, the demand raised by invoking the extended period is not legally sustainable. However, they are contesting the issue only towards the penalty imposed.
(4) It is also submitted that the appellant was discharging the Service Tax under the category of CICS and filing the ST 3 Returns. No queries were raised for the Service Tax paid under this category, till the Audit was taken up much later in 2016. Hence, the appellant submits that the demand under the first Show Cause Notice issued on 20.04.2018 for the period 2012-13 to 2015-16 is hit by time bar.
5. The detailed submissions on the above issues were made as under :-
(i) The appellant obtained leasehold land for 90 years from the Government of Odisha by Lease Agreement dated 01-03-1982, by way of further lease deeds between the appellant and Government of Odisha, they obtained additional land for construction of Multi Storey Commercial Cum Multiplex and Office Buildings called 'Esplaned-One' which the appellant intended to sell to the buyers.Page 5 of 36
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(ii) After getting the Building Plan sanctioned by the Bhubaneswar Development Authority the appellant commenced construction of Multi Storey Commercial Cum Multiplex and Office Buildings called 'Esplaned-One'.
(iii) During the period 2013-14 to 2016-17, the appellant executed agreement (Sub-Lease Agreement) for permanent assignment of the commercial space (Shops, Offices etc) including leasehold rights to the intended buyers.
(iv) The appellant took Service Tax Registration under the category of "Commercial or Industrial Construction Service" and discharged Service Tax on the amount received towards purchase of the Commercial space/office from the intended buyers.
(v) The appellant discharged Service Tax after taking abatement benefit under Notification No.26/2012-ST, dated 20-06-2012 i.e. the appellant has discharged the Service Tax on 30% of the amount received. The appellant states that they have taken CENVAT Credit of input services used for providing the aforesaid output service i.e. CICS.
(vi) Once the appellant executed the registered Deed of Assignment (sub-lease) in favour of the purchaser, the right, title and interest of the property is permanently transferred, therefore, the transaction must be treated as 'sale of the immovable property', within the meaning of Section 54 of the Transfer of Property of Act,1882, which read as follows:
Page 6 of 36Appeal No.: ST/75197/2020-DB " 'Sale' is a transfer of ownership in exchange for a price paid or promised or part-paid and part-promised" ,
(vii) The appellant submits that it is admitted fact on record that the appellant has transferred the leasehold rights of the immovable property for one time consideration termed as " Sub-
Lease Premium" , the appellant has not received any rent , therefore, the service provided by the appellant cannot be treated as 'Renting of the Immovable Property' services.
(viii) The appellant has not received any amount as 'rent', the amount received is 'advance' towards purchase of constructed space for commercial use before obtaining the Building Completion Certificate/Occupancy Certificate.
(ix) From the sample copy of the Application for purchase of the office space, Allotment Letter, Agreement for Sub-Lease and registered Indenture of Assignment (Sub-lease) , it can be seen that as per sub-clause (a) and (b) of clause (6) read with sub-clause (viii) and (ix) clause (5) , it can be seen that the appellant has transferred the constructed office space with all rights , title and interest which is sale of immovable property under Section 54 of the Transfer of Property Act,1882.
(x) In respect of each and every Sub-lease Agreement entered into, stamp duty was paid under the respective State laws. Thus the transaction is akin to that of sale and the stamp Page 7 of 36 Appeal No.: ST/75197/2020-DB duty as applicable on conveyance was applicable.
(xi) The appellant submits that it does not hold any right in relation to the property after execution of the sub-lease deed. There is no condition on the buyers that they cannot further transfer, assign, sub lease, etc. the property to any other person. In fact, the appellant had itself been given the land on lease by the Orissa Government and the appellant was allowed to transfer the same by way of lease.
(xii) The Service Tax on 'Renting of Immovable Property' is payable on the rent; in the instant case the appellant has not received any amount as 'rent', the amount received is one time "Sub- Lease Premium" for sale of leasehold rights
(xiii) There is difference between the Premium or Salami and the lease rent. The appellant submits that the difference between the Premium or Salami 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.).
(xiv) From this decision, it gets clarified that the price paid for transfer of possession or the right to enjoy the property is called the 'Premium or Salami' and the periodical payments made for continuous use of the property under lease is called 'rent'. The Page 8 of 36 Appeal No.: ST/75197/2020-DB Appellant has received only a one-time payment as Premium and hence the Premium received by the Appellant cannot be called as 'rent'.
(xv) 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). Reliance is placed on this case law. (xvi) The appellant relies on the decision of the Hon'ble Tribunal in the case of Greater Noida Industrial Development Authority v. Commissioner of Central Excise and Service Tax, Noida - 2015 (38) S.T.R. 1062 (Tribunal), wherein it has been held that the 'Salami or Premium' received in respect of lease of immovable property is not exigible to service tax.
(xvii) The appellant also placed reliance in the decision of the Kolkata CESTAT in the case of Bengal Silver Spring Projects Ltd Vs Principal Commissioner of Service Tax - I
- Appeal No.76203/2016 ST - Final Order No.77501/2024 dated 14.11.2024, on an identical issue of sub-leasing of property on a long term basis, the Tribunal has held that the Salami or Premium amount can not be treated as Rent and hence no Service Tax demand can be made under category of Renting of Immovable Property service.
Page 9 of 36Appeal No.: ST/75197/2020-DB (xviii) In view of the factual details discussed above, duly backed by documentary evidence and the cited case laws, the confirmed demand of Rs.11,58,32,907/- by the Adjudicating authority under the classification of 'Renting of Immovable Property' services, is required to be set aside on merits.
(xix) Coming of the confirmed demand on account of the CENVAT Credit taken by the appellant, admittedly the appellant undertook the service of Construction of Industrial Complex Service [CICS]. It would be important to go through the relevant portion of Notification No.20/2012 ST dated 20.6.2012, which is extracted below :
TABLE Sl. Description of taxable service Percentage Conditions No. (1) (2) (3) (4) 12 Construction of a complex, building, civil structure or a part thereof, 30 (i) CENVAT credit on inputs used for intended for a sale to a buyer, wholly or partly except where entire providing the taxable service has not been consideration is received after issuance of completion certificate by taken under the provisions of the CENVAT the competent authority Credit Rules, 2004.
(ii) The value of land is included in the amount charged from the service receiver.
(xx) From the above provisions, it would get clarified that the service provider can pay the Service Tax on 30% of the total consideration, subject to the following two conditions :
Page 10 of 36Appeal No.: ST/75197/2020-DB i. The CENVAT Credit has not been availed on Inputs.
ii. The value of land is included in the
amount charged from the service
receiver.
(xxi) In the case of the appellant, the
consideration received from the purchaser is inclusive of the land value, which is not being disputed by the Revenue. The appellant has taken the CENVAT Credit only on Service Tax paid by them for 'input services' utilized by them. They have not taken any CENVAT Credit on inputs. Thus, both the conditions specified in the Notification has been fulfilled by the appellants. Therefore, the Adjudicating authority is in error in holding that the appellant is not eligible for the CENVAT credit. Accordingly the confirmed demand of Rs.18,11,64,407 is required to be set aside on merits.
(xxii) The Show Cause Notice issued on 20.04.2018 for the period 2012-13 to 2015-16 is hit by time bar, for the following reasons :
(a) The appellant has treated the service as that of CICS and was paying the Service Tax. Such Service Tax payments and the ST 3 Returns filed by them were being received by the Dept. and no queries were raised. This being so, the question of suppression with an intent to evade payment of Service Tax cannot be made out against the appellant.Page 11 of 36
Appeal No.: ST/75197/2020-DB
(b) The appellant has documentary evidence, including the details of Stamp Duty paid on the transaction value on the Sub-Lease deed, to the effect that the service rendered is that of CICS and not Renting of Immovable property. Their belief is backed by the cited case laws. Hence, it is a question of Bonafide belief on the part of the appellant that the service rendered is not liable for Service Tax under the category of 'Renting of Immovable Property Service'.
(c) All the transactions towards receipt of amounts and payment of Service Tax, payment of Stamp Duty etc are properly accounted for in the Books of accounts. Only after verification of these books of accounts, the demand has been quantified. Hence, no case of suppression with an intent to evade payment of Service Tax has been made out by the Revenue.
(d) In view of these submissions, the entire demand of Rs.11,93,09,179/-
[Rs.7,63,20,798 as Service Tax on Renting of Immovable Property Service, Rs.4,29,01,489/- under CENVAT Credit taken on Input Services, Rs.86,892/- as Service Tax on Legal Services on RCM basis], is required to be set aside on account of time bar.
Page 12 of 36Appeal No.: ST/75197/2020-DB (xxiii) However, the appellant is not contesting the amount of Rs.75,296/- paid on account of Legal Services on RCM basis, but is only contesting the balance amount and the interest and the penalty imposed. In this case, since the CENVAT Credit is available to them, there cannot be any intent to evade, as has been held in catena of decisions.
6. The Ld. Authorized Representative appearing on behalf of the Revenue reiterated the detailed findings of the Adjudicating authority. He submits that the property is not sold, but is only given on long-term lease by the appellant. Therefore, the amounts received are in the nature of rent received and cannot be treated as 'sale consideration'. The appellants have taken the CENVAT Credit after taking the abatement in terms of Notification No. 26/2012-ST dated 20.06.2012, which is not permissible. Hence, he justifies the confirmed demands.
7. Heard both sides and perused the appeal papers and other documentary evidence placed before us.
8. We observe that the appellant has been claiming that they have rendered the service under the category of Construction of Industrial Complex Service [CICS]. Under this classification, they have also claimed the abatement while making the Service Tax payment. On the other hand, the Revenue has taken the view that the service amounts to 'Renting of Immovable Service'.
Page 13 of 36Appeal No.: ST/75197/2020-DB ▪ Renting of Immovable Property Service:
9. On going through the documentary evidence placed by the appellant, the following facts emerge :
(1) The appellant has entered into a Lease Agreement with the Govt of Odisha on 01.03.1982 obtaining the leasehold for a period of 90 years. By way of further lease deeds, they have obtained additional land for construction of Multi Storey Commercial Cum Multiplex and Office Buildings. After getting the Building Plan sanctioned by the Bhubaneswar Development Authority, the appellants have carried out the construction activity and executed Sub-Lease Agreement for permanent assignment of the commercial space (Shops, Offices etc) including leasehold rights to the intended buyers.
(2) From the various documents like Application for purchase of the office space, Allotment Letter, Agreement for Sub-Lease and registered Indenture of Assignment (Sub-lease) and clauses contained therein, it is seen that the appellant has transferred the constructed office space with all rights , title and interest which is treated sale of immovable property under Section 54 of the Transfer of Property Act,1882. On the consideration received, the requisite Stamp Duty is paid. Occupancy certificate is being issued, once the construction is complete in all respect and the unit is fit for operation as a commercial premise.
Page 14 of 36Appeal No.: ST/75197/2020-DB (3) Sample copy of the Lease Agreement, [relevant portion], Stamp Duty Payment and Occupancy Certificate are reproduced below:
Page 15 of 36Appeal No.: ST/75197/2020-DB Page 16 of 36 Appeal No.: ST/75197/2020-DB Page 17 of 36 Appeal No.: ST/75197/2020-DB Page 18 of 36 Appeal No.: ST/75197/2020-DB Page 19 of 36 Appeal No.: ST/75197/2020-DB Page 20 of 36 Appeal No.: ST/75197/2020-DB Page 21 of 36 Appeal No.: ST/75197/2020-DB Page 22 of 36 Appeal No.: ST/75197/2020-DB
10. Section 54 of the Transfer of Property of Act,1882, reads as under :
" 'Sale' is a transfer of ownership in exchange for a price paid or promised or part-paid and part-promised".
It is an admitted fact on record that the appellant has transferred the leasehold rights of the immovable property for one time consideration termed as Sub- Lease Premium".
10.1. The State Govt of Odisha requires stamp duty to be paid on such transactions, treating the same as deemed sale. Accordingly, the appellants have paid the requisite stamp duty on the total consideration received from the buyers.
10.2. It is also observed that the appellant has received the lumpsum amount as consideration from the buyers on a one-time basis. There is no evidence that the appellant has been collecting the amounts regularly on account of Lease. Thus, it gets clarified that the appellant has not received any amount as rent but the amount received is in the nature of amount towards purchase of constructed space for commercial use 10.2.1. In the cited judgement of the Madras 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 activity of lease, consideration thereof have been discussed in detail. The relevant portion of the decision is reproduced below : -
Page 23 of 36Appeal No.: ST/75197/2020-DB "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."
10.2.2. As per this judgment, in case of Renting or Leasing, the Lessee makes periodical payments for the continuous enjoyment of the benefits under the lease. When such payments are not made on periodical basis, the amount paid cannot be equated to 'Rent'.
10.3. The Hon'ble Apex court in the case of Commissioner of Income Tax v. The Panbari Tea Co. Ltd. [(1965) 57 ITR 422 (S.C.)], had the occasion to differentiate between the 'Premium' and 'Rent'. The relevant portion of this decision is extracted below : -Page 24 of 36
Appeal No.: ST/75197/2020-DB "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 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 Page 25 of 36 Appeal No.: ST/75197/2020-DB 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 instalments 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 instalments cannot obviously be decisive of the question, for that might have been to accommodate the lessee."
10.3.1. This judgement clarifies that while the Premium or Salami is a one-time payment, the 'rent' is payable at regular intervals. It also recognizes that in trade and commerce practice of payments on account of premium and rent exists.
10.4. The issue as to whether the Service Tax is payable on 'One time premium' in case of long term leasing, was before the Tribunal in the case of Greater Noida Industrial Development Authority v. Commissioner of Central Excise and Service Tax, Noida [(2015 (38) S.T.R. 1062 (Tribunal)].
The relevant extracts are reproduced below : -
Page 26 of 36Appeal No.: ST/75197/2020-DB "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 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."
Page 27 of 36Appeal No.: ST/75197/2020-DB 10.4.1. In the above case, the Tribunal has relied upon the decision of the Hon'ble Supreme Court in the case of Panbari Tea Co., cited supra, while examining as to whether Service Tax is payable when an amount is being paid on lumpsum basis for long term basis. It has been concluded that only when the amounts are paid at regular intervals, the same can be viewed as 'Rent'. Since only the rent received is exigible to Service Tax under the classification of 'Renting of Immovable property', the Tribunal has held that amount received in lumpsum on one time basis on account of long term lease would not require any Service Tax payment.
10.5. We also observe that the appellant has placed reliance on the decision of the CESTAT at Kolkata in the case of Bengal Silver Spring Projects Ltd. Vs. Principal Commissioner of Service Tax - I vide Final Order No.77501 of 2024 dated 14.11.2024 in Service Tax Appeal No. 76203 of 2016, wherein it has been held as under : -
"2. Brief facts of the case are that the appellant had entered into an agreement with Kolkata Municipal Corporation (KMC in short) to develop and maintain 8-acres of land. As per the lease agreement with KMC, appellant is entitled to all the construction / erection / structure of any nature whatsoever as the absolute owner thereof and to enter into agreement for transfer of its leasehold rights together with the constructed areas belonging to it. Accordingly, the appellant sub-leased the properties to various parties. In respect of the land to be mutated by the sub-lessee in their name, the sub-lessee is deemed to be the lessee of the said plot and has to apply to KMC for renewal of lease after expiry of the 99 years lease period. After mutation, the full rights and title Page 28 of 36 Appeal No.: ST/75197/2020-DB goes in favour of the sub-lessee, subject to renewal of the original deed after its expiry. Therefore, the appellant treated the said transaction as 'sale of leasehold rights' and not paid service tax on the outright transfer of lease hold rights. However, the department considered the transaction of long term lease undertaken by the appellant as a taxable service liable for service tax under the category of 'Renting of immovable property service'. The department considered the one time Premium/ Salami received by the appellant from the sub- lessee as consideration towards the taxable service namely, 'Renting of Immovable Property Service'.
.........
6.3. We observe that the Appellant does not have any reversionary right of the property after the permanent transfer of their leasehold rights to the respective sub-lessee. It is only the assignees who have the right to get the lease renewed in their favour after completing the formalities directly with the KMC and the Appellant does not have any role in this regard. We observe that once they received the one-time salami/premium from the said sub lessees, the appellant cannot be said to be a 'lessor' of the said leasehold property for the purpose of levy of service tax. Since the leasehold right along with obligations are permanently assigned in favour of the assignees herein and the property would not come back to the Appellant, we hold that the transaction cannot be considered as sub-lease of property thereby attracting service tax liability under "Renting of immovable property".
6.4. We observe that a similar view has been taken by this bench in the case of Luxmi Township Ltd. Versus Commissioner CGST & C. Ex., Siliguri [2023 (79) G.S.T.L. 232 (Tri. - Kolkata)].,wherein on Page 29 of 36 Appeal No.: ST/75197/2020-DB similar facts and circumstances this Tribunal has held as under:
33. In view of the decisions mentioned above, it is clear that consideration, i.e. one time payment, in the form of Premium or Salami 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 assignees and the rent is payable by the assignees to the state of West Bengal through DLLRO. Accordingly, we hold that the premium or salami paid to the Appellant for transfer of interest in the property, is not exigible to the service tax as held by the Tribunal in the case of Greater Noida Industrial Development Authority v. Commissioner of Central Excise and Service Tax, Noida.
6.4. In this case, we observe that the appellant has only received the one time premium as the consideration. There was no periodical rent payment. Accordingly, we hold that the permanent transfer of lease hold right by appellant to various parties would not be liable to Service Tax."
11. When the factual matrix of the present Appeal is applied to the cited decisions, particularly that of this Tribunal in the cases of Bengal Silver Spring Projects Ltd. (cited supra) and Greater Noida Industrial Development Authority (cited supra), we find that these case laws are squarely applicable to the facts of the present case.
Page 30 of 36Appeal No.: ST/75197/2020-DB 11.1. Accordingly, we hold that the appellant has not rendered any service under the category of 'Renting of Immovable property'. Therefore, the confirmed demand of Rs.11,58,32,907/-, is legally not sustainable and we set aside the same and allow the Appeal filed by the appellant on merits to this extent.
▪ Disallowance of input service credit:
12. Coming to the issue of the Construction of Industrial Complex Service rendered by the appellants, we observe that the appellant have undertaken full construction of the complex and have sold the individual units [On long term sub-lease] to the buyers. They have paid the Service Tax on the service portion, by claiming the abatement benefit in terms of Sl. No.12 of Notification No.26/2012-S.T. dated 20.06.2012. The Department has received such Service Tax paid by them and the ST-3 Returns filed by the appellant. The condition specified under this Notification is to the effect that CENVAT Credit cannot be taken for the 'inputs' if the appellant claims the abatement of 70%. Thus, the ineligibility to take the CENVAT Credit is specifically confined to 'inputs' only. This shows that the assessee opting to claim the abatement of 70% can take the CENVAT Credit in respect of the 'input services' and the 'capital goods'. In the present case, the appellant has availed the CENVAT Credit in respect of 'input services' only. The Department, in the proceedings, has not brought in any evidence to indicate that the appellant has taken the CENVAT Credit in respect of any 'inputs', like cement, steel, consumables, etc. We observe from the Show Cause Notice that the entire emphasis of the Page 31 of 36 Appeal No.: ST/75197/2020-DB Revenue is to the effect that the appellant have provided the service of 'Renting of Immovable Property Service', thereby being ineligible to take the CENVAT Credit.
12.1. Since, the appellants have only rendered the Construction of Industrial Complex Service [CICS], we do not find any reason to deny the CENVAT Credit of Rs.18,11,64,407/- taken on the input services, particularly when no contravention whatsoever has been brought about by the Revenue in the proceedings initiated. Accordingly, we set aside the impugned order to this extent and allow the Appeal on merits.
12.2. We have already held that the service rendered by the appellant would not fall under the category of 'Renting of Immovable Property Services'. However, even if we hypothetically assume for a moment that the service falls under this category, the Revenue cannot deny the CENVAT Credit since there is a catena of decisions of the Tribunals and the Hon'ble High Courts holding that when the Renting of Immovable Property Service is rendered, the assessee would be eligible to take the CENVAT Credit. The CENVAT credit would thus be eligible not only for the input services, but also for the inputs and capital goods in such cases.
12.3. It would be useful to go through the case law of D L F Promenade Ltd. vs Commissioner, Service Tax-Delhi vide Final Order No. 50293 of 2023 dated 29 January, 2020 [ Service Tax Appeal No. 54213 of 2014], wherein it has been held as under:-
"17. The Madras High Court in Dymos India Automotive examined whether CENVAT Credit on "commercial or industrial construction‟ service can Page 32 of 36 Appeal No.: ST/75197/2020-DB be utilized for payment of service tax on "renting of immovable property‟ and observed as follows:-
"10. The Tribunal also referred to the decision in the case of CCE, Coimbatore Vs. Lakshmi Technology & Engineering Indus Ltd. [reported in (2011) 23 STR 265 (Tri.- Chennai)] and also the decision in the case of Navaratna S.G. Highway Property Private Limited Vs. CST [reported in (2012) 28 STR 166 (Tri.-Ahmd.)] and held that without construction of the building, the renting of immovable property services cannot be provided and that therefore, construction service is an eligible service for credit for providing output service of renting of immovable property.
11. In our considered view, the conclusion of the Tribunal is well founded, as construction service is an eligible service for credit for providing output service of renting of immovable property and without construction of the building, the renting of immovable property cannot be provided. We are also of the opinion that there is no error in the decision taken by the Tribunal."
18. The aforesaid decision of the Madras High Court makes reference to the decision of the Tribunal in Navaratna S.G. Highway. The said decision in Navaratna S.G. Highway, after placing reliance upon a decision of the Andhra Pradesh High Court in Sai Sahmita Storages, observed as follows:-
"3.2 The definition of "inputs‟ is limited to the definition of "input services‟ as can be seen from the definition given above. Credit of duty paid on inputs is available when the inputs are used for providing an "output service‟. Therefore, there is a need to say that the inputs have been used for providing an „output service‟. In the case of "input service‟, the definition includes input services used by a provider of taxable service for providing an output service. Therefore the definition of input and input service are pari materia as far as the service providers are concerned. That being the position, the decision of the Hon'ble High Court of Andhra Pradesh would be applicable to the present case. In that case also, the Hon'ble High Court took the view that without use of cement and TMT bars for construction of warehouse assessee could not have provided "storage and warehousing service‟. In this case also, without utilizing the service, mall could not Page 33 of 36 Appeal No.: ST/75197/2020-DB have been constructed and therefore the renting of immovable property would not have been possible. The issue involved is squarely covered by the decision of the Hon'ble High Court of Andhra Pradesh. Since the service tax demand itself is not sustainable, the question of imposition of penalty does not arise. The appeal is allowed with consequential relief to the appellants."
......
20. In view of the aforesaid decisions of the High Courts, there is no manner of doubt that CENVAT Credit availed by the appellant on inputs, inputs services and capital goods service used for construction of the Mall, which was ultimately let out could not have been denied to the appellant. The findings to the contrary recorded by the Commissioner cannot be sustained and are, accordingly, set aside."
13. In the present case, the Department has taken a stand that the appellant is rendering the service of 'Renting of Immovable Property'. As per the cited decisions of High Courts and the Tribunal, the appellant would not only be eligible for the CENVAT Credit of Inputs Services, but also for the CENVAT Credit in respect of the inputs. In such a case, the entire confirmed demand of Rs.11,58,32,907/- as Service Tax on Renting of Immovable Property Service, would get fully off-set by the CENVAT Credit of Rs. 18,11,64,407/- taken by the appellant. Thus, the contrary stand taken by the Revenue is fatal to their case. Therefore, we hold that even on this count, the confirmed demands of Rs.18,11,64,407/- and Rs.11,58,32,907/- are legally not sustainable and hence we set them aside on merits.
Page 34 of 36Appeal No.: ST/75197/2020-DB ▪ Time bar:
14. Coming to the arguments on account of time bar as canvassed by the appellant, we find considerable force in the same. Undeniably, the appellant is Registered with the Department. They have treated their service as that of Construction of Industrial Complex Service (CICS) and were paying Service Tax under this category. They have also been filing their ST-3 Returns. The Department had no qualms in accepting the Service Tax payments and the ST-3 Returns filed. No queries have been raised about the CENVAT being taken and Service Tax being paid. All the details required for the quantification of demand have been gathered from the books of accounts of the appellant. Hence, we find that the Department has not made out any case of suppression, with an intent to evade, against the appellant. Therefore, we hold that the confirmed demand in respect of the extended period is hit by time bar. Accordingly, we set aside the confirmed demand for the extended period on account of time bar also.
▪ Security/Legal Service:
15. Coming to the demand of Rs.86,892/- towards Service Tax to be paid on Legal Services on reverse charge basis, it is observed that the period involved pertains to 2013-14 to 2015-16. The entire demand is hit by time bar. However, the appellant has already provided evidence towards payment of Rs.75,296/-, which is not being agitated by them. Therefore, we set aside the penalty imposed of Rs.86,892/- on this count.
Page 35 of 36Appeal No.: ST/75197/2020-DB
16. To summarize : -
(a) We hold that the service provided by the appellant is not classifiable under 'Renting of Immovable Property Service'. Hence, the confirmed demand of Rs.11,58,32,907/- is set aside, on merits.
(b) We hold that the appellant is eligible to take the CENVAT Credit for the Input Services while rendering the service of CICS, even after taking the abatement. Hence, we set aside the confirmed demand of Rs.18,11,64,407/-, on merits.
(c) We also find that the Revenue has taken a contrary stand in the present proceedings. If the service were to be that of Renting of Immovable Property Service, the appellant would be eligible for the CENVAT Credit of Rs.18,11,64,407/-
because of which the entire confirmed demand of Rs.11,58,32,907/- would get off-set. Therefore, on this count, both the confirmed demands of Rs.18,11,64,407/- and Rs.11,58,32,907/- do not survive.
(d) The confirmed demand for the extended period stands set aside on account of time bar.
(e) The confirmed demand of Rs.86,892/- is held as time barred. However, the amount of Rs.75,296/- already paid by the appellant and not being contested, is allowed to be appropriated.
(f) Since the demands have been set aside, all the penalties also stand set aside.
Page 36 of 36Appeal No.: ST/75197/2020-DB
17. The appeal stands disposed of thus.
(Order pronounced in the open court on 17.12.2024) Sd/-
(R. MURALIDHAR) MEMBER (JUDICIAL) Sd/-
(K. ANPAZHAKAN) MEMBER (TECHNICAL) Sdd