CESTAT Bangalore Sets Aside Service Tax Demand On Vacant Land Leased By New Mangalore Port Trust Before July 2010

The Bangalore Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has set aside the balance service tax demand raised against New Mangalore Port Trust on lease and licence fees collected from users of vacant land for the period prior to July 1, 2010.

A coram of Judicial Member P.A. Augustian and Technical Member R. Bhagya Devi partly allowed the appeal filed by the port trust.

“In view of the above, we do not find any justification in sustaining the demand prior to 01.07.2010.”

The dispute arose from three show-cause notices issued to New Mangalore Port Trust for the period from June 1, 2007 to March 31, 2010. The notices sought service tax on lease and licence fees collected from users of vacant land leased or licensed by the port trust.

According to the record, the port trust had offered vacant land on lease or licence to users for storing goods. In some cases, the land was used for the construction of structures for storage and other specified purposes.

The Commissioner had held that the activity attracted service tax under the category of Renting of Immovable Property Service. The demand was confirmed, and penalties were imposed.

Before the tribunal, the port trust argued that the land in question was specifically identifiable vacant land. It contended that the land was not appurtenant to any building and was excluded from the definition of immovable property during the relevant period.

The port trust also argued that the amendment covering certain categories of vacant land came into force only from July 1, 2010. According to the port trust, the amendment could not be applied to the period covered by the notices.

The Revenue supported the Commissioner's order. It argued that the land had been rented out for commercial use. The Revenue also pointed out that the port trust had collected and paid service tax from its clients.

The tribunal noted that the dispute related to a period prior to July 1, 2010. It observed that the Commissioner had relied on provisions that came into force only from that date.

The tribunal observed:

“We also find that the definition of Section 65(105)(zzzz) during the disputed period excluded the vacant land whether or not having facilities clearly incidental to the use of such vacant land, hence, we find justification in the argument of the appellant that prior to 01.07.2010, the appellant was not liable to pay service tax on the vacant land.”

The tribunal referred to the Allahabad High Court's decision in Greater Noida Development Authority and its earlier decision in Tuticorin Port Trust, which dealt with similar issues.

It concluded that the demand for the period prior to July 1, 2010 could not be sustained.

The tribunal noted that New Mangalore Port Trust had collected and paid service tax of about ₹3.81 crore. It recorded that the payment was not disputed.

The tribunal upheld the appropriation of that amount. It set aside the remaining demand and penalties for the period prior to July 1, 2010.

For Appellant: Advocate J.S. Bhanu Murthy,

For Revenue: M.A. Jithendra, Assistant Commissioner (AR)