The Delhi Bench of Customs,Excise and Service Tax Appellate Tribunal(CESTAT) dismissed the department’s appeal and upheld the refund of service tax paid on conversion charges under Section 104 of the Finance Act, 1994, related to a long-term industrial lease.
The Revenue-appellant,challenged the order that set aside the order-in-original and allowed the respondent’s refund claim under Section 104 of the Finance Act, 1994. In this case, Sesame Foods Pvt. Ltd.,respondent-assessee,was a 100% EOU engaged in manufacturing sesame-based products. It was allotted 20,000 sq. mt. industrial plot by RIICO through a 99-year lease dated 21.05.1999.
Later, the assessee sought a change in land use to commercial, which RIICO approved after collecting conversion charges along with service tax of ₹1,50,44,629. The amount was paid by the assessee and deposited by RIICO with the Government.
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Since service tax was not applicable on conversion charges, the assessee filed a refund claim on 15.05.2015. The Assistant Commissioner returned the claim, citing absence of tax payment records and suggesting the refund should be claimed from RIICO. When the assessee re-submitted the claim, it was rejected on the ground that the service tax was paid by RIICO under self-assessment, and only RIICO could seek reassessment.
The assessee appealed to the Commissioner (Appeals), who remanded the matter back to the Adjudicating Authority(AA) with instructions to pass a reasoned order.
A show cause notice was issued on 15.07.2015 to reject the refund claim, stating that the service tax was correctly paid to RIICO. The Assistant Commissioner rejected the claim on 10.03.2016. The assessee appealed, and the Commissioner (Appeals) allowed the refund under Section 104 of the Act.
It was also found that the respondent had borne the service tax and not passed it on. The Revenue then filed the present appeal before the Tribunal.
The two member bench comprising Binu Tamta(Judicial Member) and Hemambika R.Priya(Technical Member) noted that the refund was rightly allowed, as no service tax was applicable on conversion charges paid to RIICO for changing the land use from industrial to commercial. This refund was granted under Section 104(2) of the Finance Act, 1994.
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Section 104, added from 31.03.2017, stated that no service tax was to be collected on upfront charges for long-term leases of 30 years or more granted by state industrial bodies between 01.06.2007 and 21.09.2016. It also allowed refund of such tax if already collected.
The appellate tribunal found that RIICO’s role was only to approve the land use change and not to provide any service. Since the lease deed was for over 30 years and within the eligible period, and the respondent had paid the tax, they were entitled to a refund.
The refund claim was also filed on 15.05.2015 well before the deadline of 30.09.2017. The CESTAT found no error in the Commissioner (Appeals)’s order allowing the refund on both merit and limitation.
The tribunal referred to the decision in RIICO Ltd. v. CCE, Jaipur-I, which held that lump-sum payments for long-term leases of 30 years or more were not subject to service tax under Section 104 of the Finance Act, 1994.
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The Commissioner (Appeals) checked if the respondent had passed the tax burden to others. The respondent provided a certificate confirming the tax amount of ₹1,50,44,629 paid to RIICO was not passed on. The company’s accounts also showed this amount as refundable from the government.
The appellate tribunal agreed the refund was allowed correctly under Section 104. Since the refund was supported by law, other arguments were not considered. The CESTAT found no reason to change the order and confirmed it.
Therefore,the appeal filed by the revenue was dismissed.
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