Leasing of water bodies for fishing purposes is same as leasing of vacant land for aquaculture and therefore, same is fully covered under the exclusion clause of Section 65 of the Finance Act, 1994 and hence not leviable to Service tax.
Thus, it can be seen that fishing/ aquaculture is part of the broader definition of agriculture and thus exempted from levy of service tax. Agriculture being in the negative list of items under Section 66D of the Finance Act, 1994 is not leviable to service tax and thus for this period also, the service tax is not leviable on leasing of water bodies.
FULL TEXT OF THE CESTAT JUDGMENT
The brief facts of the matter are that Department of Fisheries, Government of Rajasthan are auctioning various water bodies for fishing rights to various persons for the purpose of aquaculture. By auctioning these water bodies certain amounts are collected by the Fisheries Department of Government of Rajasthan on annual basis. It has been the contention of the department of Central Excise and Service Tax, Jaipur-I, that leasing out of water bodies for the purpose of aquaculture and fishing rights, amounts to renting of immovable property as defined under Section 65 (90a) of the Finance Act, 1994. On the basis of above, a show cause notice demanding service tax of Rs.10,33,44,783/- was issued on 3 1.3.2014 which has been adjudicated by the impugned order dated 19.1.2015, wherein the above amount of Service Tax has been confirmed and a penalty of equal amount has been imposed under Section 78 of the Finance Act, 1984, penalties under Section 76 and 77 have also been imposed by the learned Commissioner on the Director, Department of Fisheries. It is vehemently argued by the learned Consultant appearing for the appellant that the provisions of Section 65(90a) provides that the Service tax is leviable on renting of immovable property, wherein the taxable services has been defined as any service provided or to be provided to any person by any other person by renting of immovable property or any other service in relation to such renting for use in the course of business or furtherance of business or commerce. The following explanations have also been added:-
Explanation 1 and 2 to the said definition reads as under:
For the purposes of this sub-clause, “immovable property”includes –
(i) Building and part of a building, and the land appurtenant thereto;
(ii) Land incidental to the use of such building or part of the building;
(iii) The common or shared areas and facilities relating thereto; and
(iv) In case of a building located in a complex or an industrial estate, all common areas and facilities relating thereto, within such complex or estate.
(v) Vacant land, given on lease or license for construction of building or temporary structure at a later stage to be used for furtherance of business or commerce:
BUT DOES NOT INCLUDE :-
(a) Vacant land and solely used for agriculture, aquaculture, farming, forestry, animal husbandry, mining purposes;
(b) Vacant land, whether or not having facilities clearly incidental to the use of such vacant land;
(c) Land used for educational sports, circus, entertainment, and parking purposes; and
(d) Building used solely for residential purposes and buildings used for the purpose of accommodation, including hotels, hostels, boarding houses, holiday accommodation, tents, camping facilities.
EXPLANATION 2 –
For the purposes of this sub-clause, an immovable property partly for use in the course or furtherance of business or commerce and partly for residential or any other purpose shall be deemed to be immovable property for use in the course of furtherance of business or coPPerce; ”
2. Learned Consultant has argued that for the demand period between April, 2008 to 30.6.2012, the above provision of the Finance Act were in force and as can be seen from the exclusion clause as given above, the „vacant land solely used for agriculturj aquaculture, farming, forestry, animal husbandry, mining purposes, it is provided that if same is given on lease to any other person for the purpose of commerce or business same is excluded from the scope of definition of „renting of immovable property‟and therefore, beyond the levy of service tax. It has been contended by the learned Consultant that the department has confirmed the demand on a very flimsy ground saying that exclusion clause only covers vacant land and aquaculture under the exclusion clause and not the water bodies, used for aquaculture or for fishing as such. It has further been contended by the Counsel that water bodies required for aquaculture can only exists on the piece of vacant land only and all the three, vacant land, water bodies and aquaculture are absolutely and intimately interconnected, and therefore, the department‟s contention that water bodies are not included in the exclusion clause is legally not sustainable argument. It is further been added that for the demand period between 1.7.2012 to August, 2013, the service tax leviability scope under renting of immovable property has undergone a change and its reads as follows:
“Section 66DThe negative list shall comprise of t e following service, namely:-
(d) Service relating to agriculture or agricultural produce by way of –
(i) Agricultural operations directly related to production of any agricultural produce including cultivation, harvesting, threshing, plant protection of test.
(iv) Renting or leasing of agro machinery or vacant land with or without a structure incidental to its use.
3. As per the provisions of negative list as provided under section 66D of the Finance Act, the operation relating to agriculture have been exempted from the levy of service tax as „agriculture‟has been included in the negative list of the activities provided under 66 D. The scope of agriculture has been further defined under section 65B(3) wherein \the agriculture means the cultivation of plant and rearing of all life-forms of animals, excepts the rearing of horses, for food, fiber, fuel, raw material or other similar products’. It has been the submission of the learned Consultant appearing for the appellants that all life forms rearing or cultivated for food are included under the definition of agriculture and thereby they automatically fall under the negative list of items to be service tax and since the activity of aquaculture falls under the definition of agriculture and natural water bodies leased for aquaculture are not leviable to service tax under the category of “renting of immovable property”.
4. We have heard both the sides and perused the record of the appeal and gone through the submissions of the appellants.
5. We find that for the pre-negative era of Service tax i.e. demand period spanning from April, 2008 to 30.6.2012, the activity of aquaculture was specifically excluded from the scope of „renting of immovable property‟service and we find that auctioning of water bodies by the Department of Fisheries was primarily only for developing the aquaculture and for fishing. The view of the Department that aquaculture and leasing of water bodies are two separate activities and, therefore, leasing of water bodies is not exempted from levy of service tax is certainly not tenable as we find that water bodies can only exists on vacant land and for undertaking aquaculture, the presence of water bodies is absolutely essential and pre-requisite. We therefore, find that the learned adjudicating authority has applied the exclusion explanation to the definition of „renting of immovable property‟ in a very narrow way. We don‟t find any ambiguity in the provisions to say that water bodies rented out for a uaculture, are excluded from the scope of “Renting of immovable property“.
6. We are of the firm opinion that leasing of water bodies for fishing purposes is same as leasing of vacant land for aquaculture and therefore, same is fully covered under the exclusion clause of Section 65 of the Finance Act, 1994 and hence not leviable to Service tax.
7. Now, Coming to the period between 1.7.2012 to August, 2013, we find that same provisions have continued in slightly modified way wherein the activity of agriculture has been included in the negative list of items under section 66 D of the Finance Act, 1994 and agriculture as defined in clause (3) of the Section 65 B, as „the cultivation of plants and rearing of all life-forms of animals, except the rearing of horses, for food, fiber, fuel, raw material or other similar products‟.
8. Thus, it can be seen that fishing/ aquaculture is part of the broader definition of agriculture and thus exempted from levy of service tax. We are of the view that agriculture being in the negative list of items under Section 66D of the Finance Act, 1994 is not leviable to service tax and thus for this period also, the service tax is not leviable on leasing of water bodies.
9. In view of the above, we set aside the impugned order in original dated 19. 1.2005 and appeal is allowed with consequential relief, if any, to the appellant.
(pronounced in the open Court on 11.07.2018 )