Customs, Excise & Service Tax Appellate Tribunal, Ahmedabad: In an appeal filed against order of confirmation of the demand of service tax by Commissioner (Appeals), the two-member Bench of Satendra Vikram Singh (Technical Member) and Somesh Arora (Judicial Member) allowed the appeal and stated that the activity of transfer of tenancy and occupancy rights in respect of immovable property did not come under the definition of service under Section 65-B(44) of the Finance Act, 1994 (‘Finance Act’). Hence, the amount received from the owner for surrendering and relinquishing tenancy and occupancy rights was not taxable.
Background:
The Appellant, Supertex Woven Industries was engaged in the manufacture of excisable goods falling under Chapter 39 of the Central Excise Tariff Act, 1985. During audit of their records for the period 2015-16 and 2016-17, it was found that the appellant had transferred “tenancy and occupancy rights” of a building which was being used by them for their registered office, for consideration of Rs. 6,29,44,000 to the owner. It was alleged that they entered into an agreement with the builder, vacated the said premises but did not pay the service tax of Rs. 94,41,600 on consideration amount. A show-cause notice was issued to the appellant proposing recovery of service tax under Section 73(1) of the Finance Act along with interest under Section 75 and penalty under Sections 77 and 78 of the Finance Act. The adjudicating authority confirmed the service amount, and it was further confirmed by Commissioner (Appeals). Thus, the appellant filed the appeal.
Analysis, Law and Decision
Issue I. Whether impugned show cause notice issued by the ‘Joint Commissioner, Central GST Commissionerate Daman in respect of immovable property located at Mumbai was beyond jurisdiction?
The Tribunal observed that the registered office of the appellant was neither engaged in any independent business activity nor were they availing any separate input services and no separate expenditure head was being maintained. The appellant factory was having both Central Excise registration as well as Service Tax registration. The Tribunal held that the show cause notice was rightly issued by CGST Commissionerate, Daman in absence of any separate business activity by registered office in Mumbai and the service tax liability if any to be paid in respect of their registered office, was to be discharged by the appellant factory.
Issue II. Whether Transfer of occupancy and Tenancy rights in respect of immovable property were covered within the definition of service as defined under Section 65-B(44) of the Finance Act?
The Tribunal observed that the consideration amount received by the appellant was sort of compensation received from the owner for surrendering and relinquishing tenancy and occupancy rights. The Tribunal relied on case of Bhaskar Steel & Ferro Alloys (P) Ltd. v. Commr. (CGST), 2022 SCC OnLine CESTAT 2645 wherein, it was held that a consideration out of surrender of tenancy right was on account of immovable property. Therefore, the same could not be considered as service as per definition under Section 65-B(44) of the Finance Act, thus no service tax was payable.
The Tribunal noted the declaration of the appellant mentioning the receipt of consideration for surrendering and relinquishing their tenancy and occupancy rights in respect of building to the owner. The Tribunal observed that the declaration showed that the consideration amount received by the appellant was a sort of compensation received from the owner for surrendering and relinquishing tenancy and occupancy rights.
The Tribunal held that the activity of transfer of tenancy and occupancy rights in respect of immovable property did not come within the definition of ‘service’ as defined under Section 65-B(44) of the Finance Act. The amount received in lieu of transfer of tenancy and occupancy right was not liable to service tax. The appeal was allowed.
[Supertex Woven Industries v. CCE, Service Tax Appeal No. 13008 of 2019, decided on: 30-9-2025]
Advocates who appeared in this case:
For Appellant(s): Vinod Awtani, Chartered Accountant
For Respondent(s): Neilprakash G Makwana, Authorised Representative
