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Status of assessee being a Government Organisation, extended period is not invokable and so are the penalties: CESTAT, New Delhi

IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL

WEST BLOCK NO.2, R.K. PURAM, NEW DELHI-110066

BENCH-DB

COURT NO. IV

Service Tax Appeal No. ST/52514/2016 [DB]

Arising out of Order-in-Appeal No. 144 (AK) ST/JPR/2016, Dated: 28.04.2016

Passed by the Commissioner (Appeals), Customs, Central Excise and Service Tax, Jaipur

Date of Hearing: 21.12.2018

Date of Decision: 06.03.2019

RAJDHANI KRISHI UPAJ MANDI SAMITI

Vs

COMMISSIONER OF CENTRAL EXCISE AND SERVICE TAX

JAIPUR – I

Appellant Rep by: Mr Ankit Sharma, Adv.

Respondent Rep by: Mr R K Majhi, DR

CORAM: C L Mahar, Member (T)

Rachna Gupta, Member (J)

ST – Assessee is engaged in providing “Renting of Immovable Property Services” who have rented out/leased out mandi shops in mandi premises to various firms and businessmen and received certain amount on account of rent, but they have neither obtained Service Tax Registration nor paid service tax leviable on account of rent for let out shops – A SCN was served proposing recovery as service tax on amount of rent received during 2008-09 to 2012-13 alongwith interest at appropriate rate and proportionate penalty – The assessee’s status as an authority created under Rajasthan State enactment is not in dispute – Their overall functions and the activities were regulated by said enactment and the rules made thereunder is also an admitted fact – The assessee strongly pleaded that they are allotting land/shops to various traders in furtherance of their statutory functions for promoting welfare of agriculturists – The claim of assessee that the allotment of shop or land to the traders cannot be considered as “renting of immovable property” is not tenable – It is clear that the assessee, being an Agricultural Produce Marketing Committee, is excluded from tax liability – Services relating to agricultural produce by way of storage or warehousing are in the negative list – The assessee has admittedly rented out/ leased out mandi shops in mandi premises but to various firms and businessmen against consideration – Same being out of the scope of 66D(iv) and (vii), the assessee is held liable to pay service tax – No infirmity found in the Order under challenge as far as the confirmation of demand alongwith the order of appropriation of amount as was deposited by assessee under VESC Scheme is concerned – For non-payment of Service Tax under this tax entry, special provision was made under Section 80(2) to waive the penalties – Considering the status of assessee as a Government Organisation, the ingredients for invoking demand for extended period are not present in present case – Accordingly, the demands raised shall be restricted to normal period only – On the same reasons, penalties imposed on assessee are also set aside: CESTAT

Appeal partly allowed

Case law cited:

Home Solutions Retail Ltd. v. Union of India – 2010-TIOL-818-HC-DEL-ST… Para 6

FINAL ORDER NO. 50316/2019

Per: Rachna Gupta:

Appellant is engaged in providing “Renting of Immovable Property Services” as defined under Section 65 (90a) of the Finance Act, 1994 and taxable service under Section 65(105)(zzzz) of the Finance Act, 1994 who have rented out/leased out mandi shops in the mandi premises to various firms and businessmen and received certain amount on account of rent, but they have neither obtained Service Tax Registration nor paid service tax leviable on account of rent for let out shops for the period from June 2007 to March 2013. Resultantly, a SCN No. 1996 dated 23.09.2013 was served proposing recovery of Rs. 13,60,975/- as service tax on amount of rent received during 2008-09 to 2012-13 alongwith interest at appropriate rate and proportionate penalty. The said demand was initially confirmed vide Order-in-Original No. 22 dated 27.03.2015. The Appeal thereof was rejected vide the Order-in-Appeal No. 144 dated 27.04.2016. Being aggrieved appellant is before this Tribunal.

2. We have heard Shri Ankit Sharma, CA for the appellant and Shri R.K. Majhi, Ld. DR for the Department.

3. It is submitted on behalf of appellant that Samiti has been constituted for the welfare of agriculturist and is governed by the parent body Rajasthan State Agricultural Market Board, the functions performed by it are statutory duties prescribed by the State and therefore it is not taxable under service tax. These services stand exempted from the whole of service tax w.e.f. 01.07.2012 after the introduction of negative list of services vide insertion of Section 66D(iv) and (vii) of the Finance Act, 1994. Order is accordingly prayed to be set aside and Appeal is prayed to be allowed.

4. Ld. DR on the other hand submitted that the service as that of Renting of Immovable Property is not statutory duty irrespective such service is rendered by Government body. It is further impressed upon that Commissioner(Appeals) has rightly relied upon Board’s Circular No. 89/7/2006-ST dated 18.12.2006 in this respect. There being no infirmity in the Order, Appeal is prayed to be dismissed.

5. After hearing both the parties and perusing the record, we are of the opinion as follows:

5.1 The appellants’ status as an authority created under Rajasthan State enactment is not in dispute. Their overall functions and the activities were regulated by the said enactment and the rules made thereunder is also an admitted fact. The appellant strongly pleaded that they are allotting land/shops to various traders in furtherance of their statutory functions for promoting welfare of agriculturists.

5.2 But we note here that the allotment of land/shops to the traders is not in terms of the Rajasthan Agricultural Produce Markets Act, 1961 or the rules made thereunder. In fact, allotments of land and shops were made by the appellants in terms of the Immovable Property Allotment Rules, 2005 and the fees are received for such allotments, thus, the arrangement for Renting of Immovable Property for a consideration. As such, we find the claim of the appellant that the allotment of shop or land to the traders cannot be considered as “renting of immovable property” is not tenable. We also do not agree with the submission of the appellant that such renting out of shop/land is a mandatory/sovereign function carried out by the appellant. There is no support for such assertion. As such, we find that the appellant are liable to Service Tax on the considerations received by them for renting out the shop/land to traders and others for activities of furtherance of commerce.

5.3 However, we note that with the introduction of Negative List Regime of Taxation w.e.f. 1-7-2012, the appellants’ services were excluded from the tax liability. The relevant provisions of Section 66D are as below :-

“66D. The negative list shall comprise of the following services, namely :-

(a) —-

(b) —-

(c) —-

(d) services relating to agriculture or agricultural produce by way of –

(i) —-

(ii) —-

(iii) —-

(iv) renting or leasing of agro machinery or vacant land with or without a structure incidental to its use;

(v) —-

(vi) —-

(vii) services by any Agricultural Produce Marketing Committee or Board or services provided by a commission agent for sale or purchase of agricultural produce.”

5.4 It is clear that the appellants, being an Agricultural Produce Marketing Committee, is excluded from the tax liability in terms of the above provisions. Services relating to agricultural produce by way of storage or warehousing are in the negative list.

5.5 We have examined the scope of above entry in the negative list along with various clarifications issued by the Government. We find that including Circular No. 89/7/2006-ST dated 18.12.2006 no Service Tax liability on shops/sheds/platforms/land leased out in the notified market area for traders for temporary storage of agricultural produce traded in the market is leviable. However, in respect of shops, premises, buildings, etc., rented/leased out for any other commercial purpose other than with reference to agricultural produce (like bank, general shop, etc.), the same shall not be covered by the negative list and the appellants shall be liable to Service Tax. The appellant herein has admittedly rented out/ leased out mandi shops in mandi premises but to various firms and businessmen against consideration. Same being out of the scope of 66D(iv) and (vii) (as discussed above), the appellant is held liable to pay service tax.

6. We therefore, do not find any infirmity in the Order under challenge as far as the confirmation of demand alongwith the order of appropriation of amount as was deposited by the appellant under VESC Scheme is concerned. However, we also note that the tax entry “renting of immovable property service” itself was subject matter of serious litigation in various judicial forum. In fact, the Hon’ble Delhi High Court in the case of Home Solutions Retail Ltd. v. Union of India – 2011 (21) S.T.R. 109 (Delhi) = 2010-TIOL-818-HC-DEL-ST held that the activity of the rent per se cannot be subjected to Service Tax levy, whereas the activities in relation to renting are liable to Service Tax. The decision of the Delhi High Court led to legislative changes including retrospective amendment of the concerned legal provisions in the Finance Act, 1994. In fact, for non-payment of Service Tax under this tax entry, special provision was made under Section 80(2) to waive the penalties. Considering these backgrounds and the status of the appellant as a Government Organisation, we find that the ingredients for invoking demand for extended period are not present in the present case. Accordingly, the demands raised shall be restricted to normal period only. On the same reasons, we hold that penalties imposed on the appellants are also liable to be set aside.

7. In view of entire above discussion, the Appeal stands partly allowed. Consequential benefit, if any, to follow.

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