Page 78 - GSTL_30th April 2020_Vol 35_Part 5

564 GST LAW TIMES [ Vol. 35
4. Due to the various policy decisions taken by the Government of In-
dia and GoR, the JV company was not given the title of the land. The Deputy
Commissioner, GoR, vide his letter dated 14-9-2012 informed BLMCL, that their
request for transfer of 17,323.5 bigha of land of Kapurdi Lignite Project was re-
jected along with Khatedari land. The JV company, BLMCL was also denied the
permission to create the mortgage of mining lease in favour of lending institu-
tion. BLMCL had unilaterally, in its Board meeting on 13-12-2012, decided to
record the payment made towards the acquisition of land, as having been made
towards the ‘grant of surface right’ for Kapurdi and Jalipa land.
5. Pursuant to the investigation conducted by the Service Tax Depart-
ment, a show cause notice was issued on 19-9-2014 treating the acquired land, as
a service under the category of renting of immovable property service, on the
alleged consideration of Rs. 989.92 crore for ‘transfer of surface right’ in favour of
BLMCL. The notice further demanded service tax under ‘Business Auxiliary Ser-
vice’ (BAS for short) on amount of Rs. 10.2 crore which represented 51% of equi-
ty, which the appellant held in the JV company. The Service Tax was also de-
manded on the amount of Rs. 2.21 crore recovered by the appellant for deputa-
tion of their employees to the JV company on the pretext of giving technical
knowledge and other expertise also under the BAS. The show cause notice cul-
minated into impugned order, which is the subject matter of appeal before us.
6. Learned Advocate appearing on behalf of the appellant submits that
there is no renting of immovable property by the appellant to the JV company, so
as to be taxable under ‘renting of immovable property service’. The appellant
was only a lessee under mining lease granted by the GoR, which was transferred
by the assignment, in favour of BLMCL/JV company. The assignment lease was
not in the nature of grant of sub-lease/licence, but all the rights and obligations
that were to be discharged by the appellant were performed by the BLMCL. It
was a simple assignment deed by the appellant in favour of BLMCL. It was also
stated by the Learned Advocate that the right of mining lease is nothing but ex-
traction of mining ore, underlying the surface of the earth. While granting such
right, incidental rights over the mining area is also granted as the ‘surface right’,
which the Revenue failed to appreciate and treated that as the primary activities,
which in fact was the incidental one. The deposit, which was made to the LAO,
was not for the grant of surface right, but was rather for the payment of land ac-
quired from the Khatedar/cultivator. After the acquisition of land the title of the
land vested with the GoR, which is also evident from the mutation records. The
mutation record showed the GoR as a land owner, but the same was mutated in
favour of JV company for the purpose of conducting the required mining activi-
ties. Therefore, the renting of land acquired for mining activities, as has been
perceived by the Department, is incorrect appreciation of the legal provision un-
der the Act. It was also submitted that renting of vacant land for mining purpos-
es was specifically excluded from the definition of renting of immovable proper-
ty services. The Point of Taxation Rules, 2011, specifically mentions that no ser-
vice tax can be demanded in a situation when the services had been rendered
and payment were invoiced and made on a prior date from which the activity
became taxable. It was further submitted that even the activities as alleged in the
show cause notice and held in impugned order, is treated to be a taxable event
then the appellant is required to be treated as pure agent, as no consideration
amount has been retained by the appellant nor even any mark up has been done,
while distributing the payment made towards the purchase of land by the LAO.

GST LAW TIMES  30th April 2020  78