Are Buildings Used for Car Parking Exempt from Service Tax?

Building or part of land used for car parking is exempt from levy of service tax:

Case Overview:

The case involves Brookefields Estates Private Limited and the Commissioner of Central Excise and Service Tax (CESTAT Chennai). The CESTAT Chennai ruled that a building or its part constructed on land, which is used for car parking, is entitled to an exemption from the Service Tax levy under Section 65(105)(zzzz) of the Finance Act, 1994.

As a result, they approved the refund claim.

Background:

Brookefields Estates Private Limited applied for a refund on 15.11.2012, seeking a refund of the Service Tax they had paid for parking services they provided from 01.11.2011 to 30.06.2012.

They believed they weren't required to pay Service Tax on parking fees as it wasn't covered under the definition of RIPS (Renting of Immovable Property Service). This led them to request a refund of Rs.12,57,268/-.

Legal Proceedings:

Department issued a Show Cause Notice on 11.02.2013, proposing to reject the refund claimed by Brookefields Estates.

The adjudicating authority, after considering the company's response, rejected the refund claim.

The first appellate authority upheld the decision. Brookefields Estates then appealed to the CESTAT Chennai.

Conclusion:

The CESTAT Chennai concluded that a building or its part constructed on land and used for car parking is entitled to the exemption from Service Tax under Section 65(105)(zzzz) of the Finance Act, 1994.

The rejection of the refund claim was deemed inappropriate.

CESTAT overturned the order, and allowed the appeal, provided they had not passed on the duty to others.

Court Name : CESTAT Chennai

Parties : Brookefields Estates Private Limited Vs Commissioner of Central Excise and Service Tax

Decision Date : 10 August 2023

Judgement ref : Service Tax Appeal No. 40814 of 2014

IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL

CHENNAI

REGIONAL BENCH – COURT NO. I

Service Tax Appeal No. 40814 of 2014

(Arising out of Order-in-Appeal No. CMB-CEX-000-APP-011-14 dated 31.01.2014

passed by the Commissioner of Customs, Central Excise and Service Tax (Appeals), 6/7, A.T.D. Street, Race Course Road, Coimbatore – 641 018)

M/s. Brookefields Estates Private Limited

67-71, Krishnaswamy Road,

Coimbatore – 641 001

: Appellant

VERSUS

Commissioner of Central Excise and Service Tax

6/7, A.T.D. Street, Race Course Road,

Coimbatore – 641 018

: Respondent

APPEARANCE:

Shri Dwarakesh Prabhakaran, Advocate for the Appellant

Smt. Anandalakshmi Ganeshram, Superintendent for the Respondent

CORAM: HON’BLE MR. P. DINESHA, MEMBER (JUDICIAL)

HON’BLE MR. M. AJIT KUMAR, MEMBER (TECHNICAL)

FINAL ORDER NO. 40663 / 2023

DATE OF HEARING: 19.07.2023

DATE OF DECISION: 10.08.2023

Order : [Per Hon’ble Mr. P. Dinesha]

This appeal is filed by the assessee-appellant against

the Order-in-Appeal No. CMB-CEX-000-APP-011-14 dated

31.01.2014 passed by the Commissioner of Customs,

Central Excise and Service Tax (Appeals), Coimbatore.

2.1 Brief facts leading to the present dispute are that the

appellant is registered as a provider of taxable services

under the category of renting of immovable property

service [hereinafter referred to as ‘RIPS’] and sale of space

for advertisement within the meaning of Section

65(105)(zzzz) and Section 65(105)(zzzm) of the Finance

Act, 1994 respectively.

2.2 It appears that the appellant filed an application for

refund on 15.11.2012 seeking refund of the Service Tax

paid by them on the parking services provided by them

during the period from 01.11.2011 to 30.06.2012. It

appears that the appellant realized that they were not

liable to pay any Service Tax on the parking charges as the

same is not covered in the definition of RIPS, which

prompted the appellant to seek refund of Rs.12,57,268/-

2.3 The Revenue entertained a doubt that the parking

space provided by the appellant in the open land in and

around the shopping mall and some portion of built-up area

could not be regarded as “land”, but as an integral part of

the building and as such, the area was not excluded from

the definition of immovable property for the purposes of

service under RIPS as claimed by the appellant.

3. Therefore, a Show Cause Notice dated 11.02.2013

was issued proposing, inter alia, to reject the refund

claimed by the appellant.

4. It appears that the appellant filed a detailed reply dated

25.03.2013 inter alia claiming that the parking space

provided by them was “land” and not “building”, “land”

could not be interpreted to mean “vacant land”. They also

appear to have referred to the definition of RIPS under

Section 65(105)(zzzz) ibid. to contend that land which is

inter alia used for parking purposes, stood excluded from

the above definition. It also appears that the appellant took

a stand that they did not pass on the incidence of taxation

to their customers and hence, there was no element of

unjust enrichment.

5. The adjudicating authority having considered the

reply during adjudication, however, proceeded to reject the

refund claim made by the appellant vide Order-in-Original

Sl. No. R (14)/2013-(AC) dated 29.10.2013. In the said

order, the adjudicating authority has held that the

definition of immovable property did include the parking

area as well.

6. Aggrieved by the above rejection, it appears that the

appellant filed an appeal before the first appellate

authority, but however, even the first appellate authority

vide Order-in-Appeal No. CMB-CEX-000-APP-011-14 dated

31.01.2014 having rejected their appeal, the present

appeal has been filed before this forum.

7. Heard Shri Dwarakesh Prabhakaran, Ld. Advocate

and Smt. Anandalakshmi Ganeshram, Ld. Superintendent.

8.1 The submissions of the Ld. Advocate could be

summarized as under: -

(i) The appellant is the owner of ‘Brookefields

Mall’ in Coimbatore and the main taxable service is

letting out shops in the mall.

(ii) The claim for refund made by the appellant

was on the ground that they had inadvertently

remitted Service Tax on the parking charges

collected by them from the public / visitors to the

mall for parking of vehicles in the open land, stilt

floor or basement floor.

(iii) The above parking charges were exempted

from Service Tax by virtue of “land” used for parking

purposes being excluded from the definition of

immovable property under Explanation 1 (c) to

Section 65(105)(zzzz) ibid.

(iv) The word “land” has been consciously

adopted by the legislature in Explanation 1 (c) as

opposed to “vacant land” under Explanations 1 (a)

and 1 (b), clearly implying thereby that even if land

is not vacant, the same would be eligible for

exemption under Explanation 1(c).

(v) It is practically impossible to provide

education, sports, circus, entertainment or parking

services on vacant land as some kind of

infrastructure is required for providing the said

services and therefore, there is conscious omission

of use of “vacant” in Explanation 1(c).

(vi) Without prejudice to the above, he would

submit that the use must naturally be in reference

to the person who is using the property i.e., the

service recipient, but however, here, the parking

charges were collected only from the public / visitors

to the shopping mall which could not be treated as

using the parking space in the course of furtherance

of business or commerce.

(vii) The price charged for parking did not include

any element of tax, which was collected vide

machine generated charge slips depending on the

duration of parking.

(viii) Though the parking charges were exempted,

the appellant did remit the Service Tax

inadvertently, but however, the incidence of tax was

not passed on.

(ix) The dispute relates to the period from

01.11.2011 to 30.06.2012; thus, the said charges

were also exempted when the Negative List was

introduced / took effect from 01.07.2012, but

however, with effect from 01.04.2013, the

exemption granted under the Negative List was also

withdrawn.

(x) The appellant having some of its services as

exempted, the CENVAT Credit initially utilized for

payment of duty was proportionately reversed under

Rule 6 (3A) of the CENVAT Credit Rules, 2004.

8.2 He would place reliance on the decision of the

Hon’ble Supreme Court in the case of P. Rami Reddy & ors.

v. State of Andhra Pradesh & ors. [(1988) 3 SCC 433]

wherein the meaning of “land” in a legal sense has been

held to include structures, if any, raised thereon.

9. Per contra, Ld. Superintendent supported the

findings of the lower authorities. She would also rely on an

order of the Principal Bench of the CESTAT in the case of

M/s. Select Infrastructure Pvt. Ltd. v. Commissioner of

Central Excise, Delhi-I [2018-TIOL-688-CESTAT-DEL].

10. We have heard the rival contentions, we have

perused the documents placed on record and we have also

gone through the decision / order relied upon during the

course of arguments.

11. After hearing both sides, we find that the issues to

be decided by us are: -

(1)Whether the parking facility provided by the

appellant in the “land” is covered under the

definition of RIPS within the meaning of Section

65(105)(zzzz) ibid.?

(2)Whether the rejection of refund is in order?

12.1 We find it relevant to reproduce the provisions of

Section 65(105)(zzzz) of the Finance Act, 1994 for

convenience since the issue to be decided by us is in the

context of the above definition: -

“Section 65. Definitions. — In this Chapter, unless the

context otherwise requires, -

(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. — 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 a 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, but does not

include —

(a) vacant land 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

purposes of accommodation, including

hotels, hostels, boarding houses, holiday

accommodation, tents, camping facilities.

(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;

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 purposes shall be deemed to be

immovable property for use in the course or furtherance

of business or commerce;”

12.2 The inclusive part of the definition of ‘immovable

property’ covers inter alia building and part of a building

and the land appurtenant thereto and also land incidental

to the use of such building or part of a building. Clause (iv)

of Explanation 1 excludes, inter alia, “land” used for

educational, sports, circus, entertainment and parking

purposes.

12.3 We find that the legislature has used the words

“land” and “vacant land” in accordance with the context,

wherever applicable. When “land” in a legal sense includes

structures, if any, raised thereon, the same covers the land

appurtenant to a building or a part of the building as well.

13. Ld. Advocate stressed heavily on the use of “vacant”

in exclusion clauses (a) and (b) and “land” used in

exclusion clause (c) of the definition of RIPS under Section

65(105)(zzzz). It is his contention that the omission to use

“vacant” at (c) above is a conscious omission since here,

in the case on hand, such land is used for parking purposes

only and hence, they are covered by the non-inclusion

clause (c) i.e., land used for ‘parking purposes’.

14.1 The impugned order holds the view that since the

car parking is provided from an immovable property

(building) which is not vacant land, it is liable to tax during

the period under dispute. From a reading of the provisions,

it is seen that, for the purposes of sub-clause (zzzz) of

Section 65 (105), “immovable property” does not include

land used for parking purposes. Clause (c) which deals

with the exclusion states:

“(c) land used for educational, sports, circus,

entertainment and parking purposes;”

14.2 While clauses (a) and (b) under Explanation 1 make

a reference to ‘vacant land’, clause (c) refers only to ‘land’.

The purpose for the use of land is also mentioned as

educational, sports, circus, entertainment and parking.

Therefore, the word “parking” takes colour from the

preceding words educational, sports, circus,

entertainment. These activities in the normal course are of

a nature that would normally be carried out in buildings to

be put up either as a temporary or a permanent structure

on land. It is perhaps for this reason that exclusion clause

(c) uses the term ‘land’ instead of the term ‘vacant land’

as used in exclusion clauses (a) and (b).

14.3 In view of our discussion, a building or its part put

up on land and which is used for car parking will get the

benefit of the exclusion from levy of Service Tax under

Section 65(105)(zzzz) ibid., as it stood then.

15. Consequently, the rejection of the refund claim is

held to be not in order.

16. Hence, the impugned order is set aside and the

appeal is allowed, subject to the duty having not been

passed on, with consequential benefits, if any, as per law.

(Order pronounced in the open court on 10.08.2023)

(M. AJIT KUMAR) (P. DINESHA)

MEMBER (TECHNICAL) MEMBER (JUDICIAL)