Custom, Excise & Service Tax Tribunal
Flower Marketing Committee vs Delhi - I on 30 August, 2018
IN THE CUSTOMS, EXCISE & SERVICE TAX
APPELLATE TRIBUNAL
West Block No. 2, R.K. Puram, New Delhi - 110 066.
Principal Bench, New Delhi
COURT NO. IV
DATE OF HEARING : 10/08/2018.
DATE OF DECISION: 30/08/2018.
Service Tax Appeals No. 50310, 51257 and 51275 of 2017
[Arising out of the Order-in-Appeal No. 106-108-ST-DLH-2016-17
dated 13-10-2016 passed by The Commissioner (Appeals - I),
Service Tax, New Delhi.]
M/s Flower Marketing Committee ]
M/s Agriculture Produce Marketing Committee ] Appellants
M/s Fish Poultry and Egg Marketing Committee ]
Versus
CCE, Delhi - I Respondent
Appearance Ms. Preety Makkar, Advocate - for the appellants. Shri Vivek Pandey, Authorized Representative (DR) - for the Respondent.
CORAM: Hon'ble Shri C.L. Mahar, Member (Technical) Hon'ble Ms. Rachna Gupta, Member (Judicial) Final Order No. 52887-52889/2018 Dated : 30/08/2018 Per. C.L. Mahar :-
The brief facts of the matter are that the appellant is a market body for facilitating sale of flowers and has been constituted under the Delhi Agricultural Produce Marketing Act, 1998. The Delhi Agricultural Marketing Board has purchased land
2 ST/50310 of 2017 at Gazipur area for development of flower marketing committee. For facilitating the traders/retailers in the business of purchase and sale of flowers, the appellant have allotted land in the Gazipur market yard which is known as flower marketing committee to various dealers/traders on the basis of a monthly licence fee which varies between Rs. 2,560/- to Rs. 3,842/- per month. The Department has issued following three show cause notices :
i) No. 312/AE/Gr-4/2013-14 dated 30/04/2013 ;
ii) No. 840/2-13-14 dated 31/03/2014 ; and
iii) No. 11/2014-15 dated 15/04/2015.
to the appellant entertaining a view that the appellant have given the sheds/shops/phars on rent to various traders and the activity of renting of such immovable property is subject to service tax under the category of renting of immovable property. The show cause notices have been adjudicated by Additional Commissioner vide his order dated 29th March, 2016 wherein this above- mentioned service tax amount have been confirmed and penalties under the various sections including Section 78 of the Finance Act, 1994 have been imposed. The appellant have gone in appeal before Commissioner (Appeals) against the above- mentioned order of the Additional Commissioner and the learned Commissioner (Appeals) has also upheld the order of lower authority. The appellants are before us against the above- mentioned order of Commissioner (Appeals). The learned 3 ST/50310 of 2017 Advocate appearing on behalf of the appellants has pleaded that Flower Marketing Committee is discharging statutory functions as prescribed under Delhi Agricultural Produce Marketing Act, 1998. The learned Advocate has also pleaded that the appellant have only provided the vacant land on which ‗Phars' or temporary structures have been constructed by the traders themselves in the form of tin sheds etc. and therefore the appellant have not provided any service of renting of immovable property as defined under Section 65 (105) (zzzz) of the Finance Act, 1994. It has also been contended that under Section 66D of the Finance Act, 1994 under sub-clauses (a) and (d), the activity pertaining to agricultural and local bodies is exempted from the levy of service tax as they fall under the category of the negative list of items. It has further been added that Section 66D (a) the services by the Government or local bodies are exempted and as the APMC under which the appellant works is a local authority under the Delhi Agricultural Produce Marketing Regulation Act and is being assessed as the local authority by the Income Tax Authorities and thus they are not covered by the provisions of Service Tax Act. It has also been contended that apart from above, the activities covered under the negative list under Section 66D under sub- clause (d) the services by any Agricultural Produce Marketing Committee or Board provided by commission agent for sale or purchase produces do not come within the purview of service tax including renting or listing of agro machinery or vacant land with or without structures. Learned Advocate has also contended that 4 ST/50310 of 2017 extended time period for demanding service tax under Section 73 (1) is also not invokable in respect of the show cause notice dated 30th April, 2013 as being a semi-Government agency they had no intention to evade service tax with any malafide intention, suppression of facts or mis-representation, fraud etc. They have also relied on the Hon'ble Supreme Court judgment in the case of Padmini Products vs. CCE, Bangalore - (1989) 4 SCC 275 wherein it has been held that ―something positive other than mere in connection with or failure on the part of the manufacturer or producer or conscious deliberate withholding of information when the manufacture knew otherwise, is required to be established before it is settled with any liability beyond a period of six months‖ and the learned Advocate was of the view that since being a semi-agency they have no intention to evade service tax and therefore extended time proviso for demanding service tax cannot be invoked in their case. The learned Advocate has also argued that since no malafide are involved in non- payment of service tax and therefore penalty under Section 78 is also not invokable in their case. They have relied upon several judgments in this regard.
i) Sanjay Indl. Corporation vs. CCE, Mumbai -
2015 (318) E.L.T. 15 ;
ii) Amca Batteries Limited, Bangalore vs. CCE -
(2003) 4 SCC 41 ;
iii) Surat Municipal Corporation vs. CCE - (2006) 5 STT 252 (CESTAT) 5 ST/50310 of 2017
2. We have heard learned Departmental Representative who has reiterated the findings as given in the order-in-appeal.
3. We have heard both the sides and perused the record of appeal.
4. It is a matter of record that the appellant have provided phars/tin sheds on charging of a licence fee in the flower marketing yard at Gazipur. The licence fee for ‗Phars'/Tin Sheds is chargeable on monthly basis and they have not paid any service tax on the amounts recovered as lease fee/rent from the various traders using the premises of the appellant. As per the provisions of Finance Act, 1994 the activity of the rent of immovable property is specifically covered under Section 65 (105) (zzzz) wherein it has been provided that :-
―to any person, by any other person, by renting of immovable property or any other service in relation to such 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 6 ST/50310 of 2017
(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 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 hotels, hostels, boarding houses, holiday accommodation, tents, camping facilities.
Explanation 2. - For the purposes of this sub-clause, an immovable property partly for use in the course or furtherance of business or commerce and partly for residential or any other purposes shall be deemed to be immovable property for use in the course or furtherance of business or commerce;‖
5. It can be seen from the above definition that for an activity or service to be covered under the above definition following ingredients need to be satisfied :
7 ST/50310 of 2017
(i) That service must be provided by any person to any other person by renting of the immovable property ;
(ii) That such renting is for use in the course of or for furtherance of the business or commerce examining the facts in the present case with regard to the above-mentioned two conditions. It is a matter of record that the phars/tin sheds/ shops are being rented by the appellant to the various traders on monthly basis and these traders are engaged in their activity of marketing/selling purchasing of the flowers and other agricultural producers from the rented premises. It can be seen from the above that both the conditions are being fulfilled in the present case. The argument of learned Advocate that the sheds are of temporary nature is primarily does not exclude them from the scope of renting of the immovable property since the place allocated to them is in the form of a piece of land on which shed which has been made is of temporary nature but the place provided by the appellant for the trader is of the permanent/immovable nature and therefore the above activity certainly falls under the category of renting of the immovable property and therefore rightly taxable under this classification.
6. Now coming to the next argument of the learned Advocate that their activity are also covered by Section 66D of the Finance Act, 1994 which covers the negative list of items which are exempted from the levy of service tax. The learned Advocate has primarily argued that they are covered by the provisions of 8 ST/50310 of 2017 Section 66D (a) and 66D (d). The Relevant Sections are reproduced here below :-
"SECTION [66D. Negative list of services. -- The negative list shall comprise of the following services, namely :--
(a) services by Government or a local authority excluding the following services to the extent they are not covered elsewhere--
[(i) * * * * ]
(ii) services in relation to an aircraft or a vessel, inside or
outside the precincts of a port or an airport;
(iii) transport of goods or passengers; or
(iv) [Any service], other than services covered under clauses (i) to (iii) above, provided to business entities;
Section 66D.
(d) services relating to agriculture or agricultural produce by way of--
(i) agricultural operations directly related to production of any agricultural produce including cultivation, harvesting, threshing, plant protection or [ * * * ] testing;
(ii) supply of farm labour;
(iii) processes carried out at an agricultural farm including tending, pruning, cutting, harvesting, drying, cleaning, trimming, sun drying, fumigating, curing, sorting, grading, cooling or bulk packaging and such like operations which do not alter the essential characteristics of agricultural 9 ST/50310 of 2017 produce but make it only marketable for the primary market;
(iv) renting or leasing of agro machinery or vacant land with or without a structure incidental to its use;
(v) loading, unloading, packing, storage or warehousing of agricultural produce;
(vi) agricultural extension services;
(vii) services by any Agricultural Produce Marketing Committee or Board or services provided by a commission agent for sale or purchase of agricultural produce;‖
7. The activities which are covered under Section 66D (a) are of the nature which are purely in the public interest and undertaken as a mandatory and statutory function. We find that the appellant is a body which is not a local authority and therefore the exemption under Section 66D (a) is not available to them. We are also of opinion that renting of shops/Phars is not the mandatory responsibility of the appellant. Coming to the provisions of Section 66 D (d) of the activities covered thereunder are primarily pertaining to agricultural and other relied activities but does not cover renting of land for construction of phar or shed for undertaking the business or commerce of trading in flowers, it therefore felt that the shops which are rented by the appellant for business does not fall under the negative list under Section 66D (d) of Finance Act, 1994. The provisions of Section 66D (d) (iv) of the Finance Act, 1994 only provides when the agriculture land is used for agriculture or for its producers but not for shops which are used for carrying out business or commerce.
10 ST/50310 of 2017
8. In view of above, we are of the view that the activity of renting of phars/tin sheds/shops for marketing/trading of flowers etc. by the traders is taxable under the category of renting of immovable property and therefore we find that there is no infirmity in the orders passed by the subordinate authorities confirming the service tax on the amounts collected by the appellant from various traders towards lease fee or rent.
9. Now coming to the question of leviability of service tax under the extended time proviso under Section 73 (1) of the Finance Act, 1994 as well as levy of penalty under Section 78 of the Finance Act is concerned, we agree with the learned Advocate that the ingredients of intention to evade service tax are certainly missing in this case and there have been genuine confusion regarding the leviability of service tax on the rents collected by the various agricultural produce marketing boards/committees in this regard. We follow the Hon'ble Supreme Court judgment in the case of Padmini Products vs. CCE, Bangalore (supra) and hold that extended time proviso in this case is not legally invokable in this case. We also hold that penalty under Section 78 of the Finance Act, 1994 is also not invokable in this case. The appeals are accordingly decided. The appeals are therefore allowed by way of remand to the Original Adjudicating Authority with the following direction :-
11 ST/50310 of 2017
(i) demand of service tax need to be confirmed for all the show cause notices for the normal period of demand ;
(ii) no penalty under Section 78 need to be imposed.
10. Appeals are decided accordingly.
(Order pronounced in open court on 30/08/2018.) (Rachna Gupta) (C.L. Mahar) Member (Judicial) Member (Technical) PK