Case Details: Rajasthan State Industrial Development & Investment Corporation Ltd Versus Commissioner, Central Excise & Service Tax Commissionerate, Alwar (2025) 33 Centax 73 (Tri.-Del)
Judiciary and Counsel Details
- Justice Dilip Gupta, President and Ms. Binu Tamta, Member (J) and Shri P.V. Subba Rao, Member (T)
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S/Shri Shriram Shreedharan and Kunal Agarwal, Advs., for the Appellant.
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S/Shri Rajpal Sharma and Shambhoo Nath, Special Counsel, for the Respondent.
Facts of the Case
The appellants had allotted and leased industrial plots to various persons and, in addition to periodical rentals, collected a one-time premium/salami amount from the lessees. The Department of Revenue proposed levy of Service Tax on such one-time premium under the category of ‘Renting of Immovable Property service’ in terms of Section 65(90a) read with Section 65(105)(zzzz) of the Finance Act, 1994. Subsequently, Section 65B(44) of the Finance Act, 1994 introduced a statutory definition of ‘service’ to mean any activity carried out for consideration and included a ‘declared service, while Section 66E(a) specifically declared ‘renting of immovable property’ as a service. The appellants contended that a one-time premium/salami was a non-recurring amount in the nature of consideration for entering into an agreement to lease, not covered under ‘renting’, which envisaged only recurring rental payments. They further relied upon Section 105 of the Transfer of Property Act, 1882 to argue that the premium represented consideration distinct from rent and that the exclusion contained in Section 65B(44)(a)(i) of the Finance Act, 1994 operated to exempt such transactions. Conflicting Division Bench rulings on the issue led the original referral Bench to place the matter before the Larger Bench of the CESTAT.
CESTAT Held
The CESTAT held that the one-time premium/salami collected by the appellants was leviable to Service Tax under ‘Renting of Immovable Property service’. It observed that though the Finance Act, 1994 did not define the term ‘lease’, Section 105 of the Transfer of Property Act, 1882 defined a lease to include both premium and rent. It was held that premium or salami, being a one-time consideration for being let into possession and for creation of tenancy rights, was an integral part of the lease transaction and therefore fell within the scope of Service Tax. The Tribunal rejected the contention that premium paid for an agreement to lease was outside the ambit of taxability, stating that the statutory definition of ‘renting’ included leasing in its entirety. Further, with the introduction of Section 65B(44) of the Finance Act, 1994, defining ‘service’ and Section 66E(a) declaring ‘renting of immovable property’ as a service, such premium was equally taxable. The plea that the exclusion under Section 65B(44)(a)(i) applied was also rejected as being contrary to legislative intent. The Larger Bench accordingly answered the reference in favour of the Department of Revenue, holding that one-time premium or salami amounts are liable to Service Tax under Renting of Immovable Property service
List Of Case Cited
- A.R. Krishnaurthy/A.R. Rajagopalan v. Commissioner of Income Tax — [1981] 6 Taxman 289 (Mad.) — Relied on [Para 10]
- City and Industrial Development Corporation of Maharashtra Ltd. v. Commissioner — 2019 (31) G.S.T.L.J84 (Tribunal) — Referred [Paras 1, 2, 19]
- City and Industrial Development Corporation of Maharashtra Ltd. v. Commissioner — Writ Petition No. 1696 of 2021, decided on 11-11-2022 by Bombay High Court — Referred [Paras 2, 19]
- Commissioner of Income-Tax v. Panbari Tea Co. Ltd. — 1965 57 ITR 422 (S.C.) — Relied on [Paras 8, 30, 31]
- Greater Noida Industrial Development Authority v. Commissioner — 2015 (38) S.T.R. 1062 (Tribunal) — Overruled [Paras 1, 17, 18, 32, 34]
- Hobbs Brewers India Pvt. Ltd. v. Union of India — 2016 (45) S.T.R. 60 (Tripura) — Referred [Paras 36, 37]
- Kagal Nagar Parishad v. Commissioner — 2018 (5) TMI 1363-CESTAT Mumbai — Overruled [Paras 1, 18, 32, 34]
- Maharaja Chintamani Saran Nath Sah Deo v. C.I.T. — 1971 (2) SCC 521 — Relied on [Para 9]
- Member For The Board of Agriculture Income Tax v. Sindhurani Chaudhurani — Decided on 24-4-1957 by Supreme Court — Relied on [Para 7]
- Raja Bahadur Kamakshya Narain Singh of Ramgarh v. Commissioner of Income-Tax — Decided on 13-5-1943 — Relied on [Para 6]
- Starcity Entertainment Private Limited v. Commissioner — 2020 (39) G.S.T.L. 266 (Tribunal) — Approved [Paras 1, 20, 36]
