COMMISSIONER, CENTRAL EXCISE, CUSTOMS AND SERVICE TAX-BHOPAL vs MADHYA PRADESH AUDYOGIK KENDRA VIKAS NIGAM LTD

CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
NEW DELHI

PRINCIPAL BENCH- COURT NO. I
SERVICE TAX APPEAL No. 51919 of 2016

(Arising out of Order-in-Original No. 25-28/PC/ST/BPL-ST/2015 dated 31.12.2015
passed by the Principal Commissioner of Central Excise & Service Tax, Bhopal)
Commissioner of Central Excise, .…Appellant
Customs & Service Tax
48, Administrative Area, Hills,
Bhopal, Madhya Pradesh

Versus

M/s Madhya Pradesh Audyogik .…Respondent
Kendra Vikas Nigam Limited
st
1 Floor, Tawa Complex, E5, Arera Colony,
Bhopal, Madhya Pradesh

A PPEARANCE :

Shri S.K. Meena authorised representative of the department
Shri Rajat Dosi, advocate for the respondent

CORAM :
HON’BLE DR. RACHNA GUPTA, OFFICIATING PRESIDENT
HON’BLE MR. P.V. SUBBA RAO, MEMBER (TECHNICAL)

Date of Hearing : 13.05.2026
Date of Decision : 07.09.2026


FINAL ORDER NO. 51428/2026

DR. RACHNA GUPTA:

1
M/s Madhya Pradesh Audyogik Kendra Vikas Nigam Limited ,
the respondent herein, is a state government owned company
created with the objective to develop industrial growth centres and to
promote the development of industries in the state of Madhya
Pradesh. For the purpose M/s MPAKVNL is to provide land on lease for
establishment of industry for which they collect yearly lease rent as
used to be agreed in the agreement of lease. M/s MPAKVNL is a
company incorporated under Company’s Act. The department opined
that the said activity of the respondent is the taxable activity of
renting immovable property as is defined under section 65/90(a) of

1. M/s MPAKVNL, respondent

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2
the Finance Act, 1994 and also qualifies to be called as service in
terms of section 65B(44) of the Act which is not covered under
section 66D of the Act. However, the respondent was not registered
with the service tax department. The M/s MPAKVNL was, accordingly,
enquired.
2. On the basis of information provided by the respondent about
the amount of lease rent received for renting land/shop/gomtee for
the period with effect from 01.06.2007 to 30.03.2014, it was
observed that an amount of Rs. 55,89,93,145/- has been received by
the respondent for rendering the aforesaid activity without
discharging the service tax liability. Based on the said information,
following show cause notices have been issued:
S.
SCN No. and Date Period Amount (in
No.
Rs.)
1 56/Commr/ST/BPL-I/2012
01.06.2007 to
3,50,67,378/-
dated 10.09.2012
31.08.2011
2 124/Commr/ST/BPL-I/2012
01.09.2011 to
99,68,152/-
dated 19.10.2012
30.09.2012
3 94/Commr/ST/Adj/BPL-I/2014
01.10.2012 to
93,10,680/-
dated 29.09.2014
31.03.2013
4 17/Commr/ST/Adj/BPL-I/2015
01.04.2013 to
96,77,383/-
dated 16.04.2015
31.03.2014
TOTAL 6,40,23,593/-

Resultantly, service tax amounting to Rs. 6,40,23,593/- upon the
aforesaid amount received by the respondent, was proposed to be
recovered from the respondent along with the interest at the
applicable rate in terms of section 75 of the Act. The penalties were
also proposed to be imposed in terms of sections 70, 76 and 77 of
the Act. The said proposal had been adjudicated vide the Order-in-
Original no. 25-28/2015 dated 29.12.2015 vide which the Principal

2. the Act

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Commissioner had dropped partial demand except the demand for
the period 01.10.2010 to 31.03.2011 and for the period 01.04.2011
to 31.08.2011 amounting to Rs. 23,92,191/- and also the demand for
the period 01.09.2011 to 31.03.2015 amounting to Rs. 2,89,56,215/-
has been confirmed. Being aggrieved of the dropping out of the
remaining demand, that the department is in appeal before us.
3. We have heard Shri S.K. Meena, learned authorised
representative for the department and Shri Rajat Dosi, learned
counsel for the respondent.
4. Learned authorised representative appearing for the appellant
department submitted that the respondent irrespective is the
governmental authority but while leasing out land for development of
industry the respondents were earning profits and hence the
exemption as pleaded by them is not available for the activity in
question. The respondents were liable to pay service tax. Since they
have failed even to take registration with the service tax department,
there is pleaded no infirmity when the show cause notices were
issued invoking the extended period of limitation. However the
Principal Commissioner wrongly held that there is no suppression on
part of the respondent. Tribunal's ruling in Nizam Sugar Factory
3
Ltd. vs. Collector of Central Excise , is relied upon which clarifies
that departmental knowledge does not negate the extended period.
Learned departmental representative submitted that the non-
disclosure of service-related income establishes suppression, as held
4
in Bharati Cellular Ltd. and Anr. v. Jai Distillers P. Ltd. , where
non-submission of ST-3 return details was deemed suppression.
Additionally, the Principal Commissioner erred in not imposing
penalties under Section 78, as the Party did not meet the conditions

3. 1990 (50) ELT 168 (Tri-Delhi)

4. 2006 (4) BOM CR 280

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for penalty waiver under Section 80(2) of the Act. The Department
argues that penalties are a deterrent, supported by Hindustan Steel
5
Ltd. v. State of Orissa . Finally it is submitted that the recipient’s
status as a government corporation does not exempt it from tax
compliance.
5. With these submissions, the order under challenge, to the
extent of dropping the demand proposed by the different show cause
notices is prayed to be set aside and the appeal filed by the
department is prayed to be allowed.
6. While rebutting these submissions, learned counsel for the
respondent has submitted that the respondent is a state government
industrial development corporation undertaking establishment of
industrial units by way of grant of land lease of 30 years or more of
industrial plots. It is submitted that though the activity of renting of
immovable property became taxable with effect from 01.06.2007,
however, the renting of vacant land has been specifically excluded
under clause (b) of the explanation II to section 65(105)(zzzz) of the
Act. It is only with effect from 01.07.2010 that the activity of renting
vacant land on lease/license for construction of building/temporary
structure to be used for furtherance of business/commerce became
taxable. It is for this reason that the respondent did not obtain the
service tax registration. The aforesaid position got cleared by Hon’ble
High Court of Allahabad in the case of Commissioner of Service
6
Tax, Noida vs. Greater Noida Development Authority .
7. Learned counsel further submitted that is is now a settled
position of law that no service tax can be demanded in respect of
amount paid as one time premium. Hence the demand of of service
tax on the said amount is not sustainable. The order under challenge

5. 978 ELT (J 159) / [1972] 83 ITR 26)
6. 2015 (40) STR 46 Allahabad

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is rather liable to be set aside with respect to confirmation of demand
of service tax. For the above reasons the demand which has been
dropped by the adjudicating authority below has no infirmity. With
these submissions the appeal of the department is prayed to be
dismissed.
8. Having heard both the parties, perusing the entire record, we
have foremost perused the meaning of the activity rendered by the
respondent, i.e. renting of immovable property defined under Section
65(90a) of the Act, as follows:

Prior to 30.06.2010
Section 65(90a) "renting of immovable property" includes renting,
letting, leasing, licensing or other similar arrangements of immovable
property for use in the course or furtherance of business or
commerce but does not include-
(i) xxx xxx xxx
(ii) xxx xxx xxx
Explanation 1- xxx xxx xxx
Explanation 2. xxxxxxxxxx
Section 65(105) - “taxable service” means any service provided or
to be provided.
xxx xxx xxx
(zzzz) to any person, by any other person in relation to renting of
immovable property for use in the course or furtherance of business
or commerce.
Explanation-1. xxxxxxxxxx
but does not include
xxxxxxxxxxxx
Explanation 2.- xxx xxx xxx

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From 01.07.2010
“ Section 65 (105) - “taxable service” means any service provided or
to be provided-
(zzzz) 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 or for furtherance of, business or commerce.
Explanation 1- xxx xxx xxx
Explanation 2.- xxx xxx xxx”
From 01.07.2012
It would also be appropriate to reproduce sections 65(41), 65B(44),
66B, 66D and 66E of the Finance Act inserted w.e.f. 01.07.2012 and
they are as follows:
“Section 65(41) “ renting” means allowing, permitting or granting
access, entry, occupation, use or any such facility, wholly or partly, in
an immovable property, with or without the transfer of possession or
control of the said immovable property and includes letting, leasing,
licensing or other similar arrangements in respect of immovable
property.
Section 65(44) “ service” means any activity carried out by a person
for another for consideration, and includes a declared service, but
shall not include-
(a) an activity which constitutes merely,-
(i) a transfer of title in goods or immovable property, by way of sale,
gift or in any other manner, or
(ii) such transfer, delivery or supply of any goods which is deemed to
be a sale within the meaning of clause (29A) of article 366 of the
Constitution; or
(iii) a transaction in money or actionable claim; xxx xxx xxx

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Section 66B . Charge of service tax on and after Finance Act, 2012
There shall be levied a tax (hereinafter referred to as the service tax)
at the rate of fourteen per cent on the value of all services, other
than those services specified in the negative list, provided or agreed
to be provided in the taxable territory by one person to another and
collected in such manner as may be prescribed.
It is seen that “renting of immovable property”, amongst others,
includes leasing or other similar arrangement of immovable property
for use in the course or furtherance of, business or commerce.
“Lease” has not been defined in the Finance Act. Under section 105 of
the Transfer of Property Act, 1882, lease has been defined in the
following manner:
“105. A lease of immovable property is a transfer of a right to enjoy
such property, made for a certain time, express or implied, or in
perpetuity, in consideration of a price paid or promised, or of money,
a share of crops, service or any other thing of value, to be rendered
periodically or on specified occasions to the transferor by the
transferee, who accepts the transfer on such terms.
The transferor is called the lessor, the transferee is called the lessee,
the price is called the premium, and the money, share service or
other thing to be so rendered is called the rent.”
The Supreme Court in Panbari Tea, in the context of section 105 of
the Transfer of Property Act, held that when the interest of the lessor
is parted with for a price, the price paid is called premium but the
periodical payment made for continuous enjoyment of the benefits
under the lease is called rent. Thus, premium is a consideration paid
for being let into possession for the purpose of creating a tenancy.
There is, therefore, a distinction between the price paid for transfer of
a right to enjoy the property and the rent to be paid periodically for

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continuous enjoyment of the benefits under the lease. A lease,
therefore, would include both premium and the periodical rent. Such
being the position, when „renting of immovable property‟ includes
leasing, the value of premium would be taxable under section
65(105)(zzzz) of the Finance Act.
9. Keeping in view the said position of law, it is clear that the
immovable property including the vacant land is leviable to service
tax with effect from 01.07.2010. Prior thereto renting of vacant land
was not taxable, hence the order dropping the demand of service tax
for rendering the activity of renting of vacant land prior to
01.07.2010 has rightly been dropped.
10. Further we are not in consensus with the plea of the respondent
that one time premium or salami received while leasing out the
immovable property is not taxable. The Larger Bench of this Tribunal
in the case of RII Rajasthan State Industrial Development &
Investment Corporation Ltd vs. Commissioner, Central Excise
7
& Service Tax Commissionerate, Alwar (supra) has held that one
time premium/salami amount collected from the persons to whom the
immovable property has been leased out is leviable to service tax
under renting of immovable property service during the period, prior
to and post 01.07.2012. Hence the respondent is rightly held liable to
service tax vis-à-vis the said activity. It is observed that demand for
the period 01.06.2007 to 30.09.2010 has been dropped holding it to
be time barred demand.
11. It is an admitted fact that the respondent is a governmental
authority. It is the settled law that there can be no malafide intent
with the government or the governmental authority to evade service
tax. Since, for invoking the extended period of limitation there should

7. 2025 33 Centax 73 (Tri. Del)

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be an intent to evade duty, the misstatement or suppression must be
willful as was held by Hon’ble Supreme Court in the case of Cosmic
8
Dye Chemicals vs. C.C.E. Bombay . Hon’ble Supreme Court in
9
another case titled Gopal Zarda Udyog vs. CCE Delhi has held as
follows:
“Extended period is applicable only when
something positive other than mere inaction or
failure on the part of the manufacturer is proved.
Conscious and deliberate withholding of the
information by manufacturer is necessary for
invoking the extended period. If the department
had full knowledge or the manufacturer had
reasonable belief that he is not required to give a
particular information, only normal period of
limitation i.e. 1 year is applicable.”
12. In Hindustan Steels Ltd (supra), the Supreme Court held that
Penalty will not ordinarily be impugned unless the party obliged either
acted deliberately in defiance of law and was guilty of conduct
contumacious, or dishonest or acted in conscious disregard of its
obligation. The Hon’ble Court held that even if a minimum penalty is
prescribed the authority competent to impose penalty will be justified
in refusing to invoke penalty when there is a technical or venial
breach of the provisions of the Act or where the breach flows from
the bonafide belief that the offender is not liable to act in the manner
prescribed by the statue. Thus, on the same analogy the party are
not liable for any penal action & so the penal proceedings initiated in
the show cause notice merits to be dropped.
13. In view of the above discussion about the settled position of
law, we hold that the respondent had no intent to evade the tax.
Otherwise also, department has not produced any positive evidence
in that respect. The authorities relied upon by the department are,

8. 1995 (75) ELT 721 S.C.
9. 2005 (188) ELT 251 S.C.

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therefore, not applicable. As a consequence of the entire above
discussion we hold that the show cause notices should not have
invoked the extended period of limitation. The adjudicating authority
below is held to have rightly dropped the demand of service tax for
the extended period, i.e., with effect from 01.06.2007 to 30.09.2010.
14. With these observations, the order under challenge is upheld.
Consequently, the departmental appeal is hereby dismissed.

(Order pronounced on 07.09.2026 )


(DR. RACHNA GUPTA)
OFFICIATING PRESIDENT





(P.V. SUBBA RAO)

MEMBER (TECHNICAL)

Apoorva