Bihar State Sugar Corporation Limited Vs Commissioner of CGST & Central Excise (CESTAT Kolkata)
CESTAT Sets Aside Service Tax Demand as No Suppression or Intent to Evade Was Established; Service Tax Demand Quashed Because Legal Uncertainty Defeated Extended Limitation; CESTAT Allows Appeal Because Entire Service Tax Demand Was Time-Barred; Extended Limitation Rejected Because No Suppression or Intent to Evade Was Established; CESTAT Rejects Taxability Defence but Allows Appeal Because Demand Was Time-Barred.
The appeal before the CESTAT Kolkata arose from a demand of Service Tax on the appellant for the period from 28 March 2008 to 25 March 2011 in respect of leasing closed sugar factories to private entities. The Department issued a show cause notice demanding Service Tax of ₹14.59 crore under the category of “Renting of Immovable Property.” The adjudicating authority confirmed the demand along with interest and penalty. After earlier proceedings relating to pre-deposit, the appeal came up before the Tribunal for decision on merits and limitation.
The appellant submitted that it was a Government company established to manage and operate loss-making sugar factories acquired by the Government of Bihar under the Bihar Sugar Undertakings (Acquisition) Act, 1985. It had leased the closed sugar factories at Lauriya, Sugauli, Raiyam and Motipur to different private entities. According to the appellant, the leases primarily involved the use of land for storage of goods and therefore did not amount to taxable “Renting of Immovable Property.” It further contended that, being an instrumentality of the State Government, its property and income were exempt from Union taxation under Article 289(1) of the Constitution. On limitation, the appellant argued that the legal position regarding Service Tax on renting of immovable property remained uncertain during the relevant period due to judicial proceedings in the Home Solution Retail India Ltd. cases and the retrospective amendment introduced by the Finance Act, 2010. It submitted that it had acted under a bona fide belief that no Service Tax was payable and that, being a Government company, there was no intention to suppress facts or evade tax. It also relied on decisions of the Chandigarh Bench of the Tribunal and the Calcutta High Court to contend that once the extended period was held to be unavailable, even the demand for the normal period could not survive in the present case.
