2014 (12) TMI 1241 - AT - Service Tax

Valuation - determination of amount and time when the consideration was received - Construction of Residential Complex Service - Service tax of ₹ 2,27,94,428/- with interest has been demanded from the appellant on the ground that the amount collected from the buyers towards Undivided Share of Land can be taken as consideration attributable to the land owners under the Joint Development Agreement and be subjected to service tax - Held that - As per Notification No. 36/2010-S.T. dated 28.6.2010, in respect of new services introduced by Budget 2010, if value towards any service has been received before 1.7.2010, service tax on such value is exempted. In this case, the agreement was entered into on 26.4.2010 and on that date the land was handed over, it can be said that consideration of construction of residential complex was received by the appellant on that date. We also find that the submissions of learned counsel that no monetary consideration was agreed with the land owner and the appellant as per the JDA and therefore, consideration is not ascertainable has also some force. Once consideration is not ascertainable, valuation has to be done as per Section 67 read with Service Tax (Determination of Valuation) Rules, 2006. However, only with effect from 1.7.2012, Rule 3 covered cases where value is not ascertainable and prior to this period, it only covered cases where such value is not wholly or partly consisting of money . - Prima facie case is in favor of assessee - stay granted.

Summary

Issues:
1. Liability of service tax on consideration attributable to land owners under Joint Development Agreement.
2. Applicability of service tax under 'Construction of Residential Complex Service'.
3. Imposition of penalty under Section 78 of Finance Act, 1994.

Analysis:
1. The judgment deals with the demand of service tax amounting to Rs. 2,27,94,428/- with interest from the appellant based on the amount collected from buyers towards 'Undivided Share of Land' under a Joint Development Agreement (JDA). The contention was that this amount can be considered as consideration attributable to the land owners and subjected to service tax under the category of 'Construction of Residential Complex Service'. Additionally, a penalty under Section 78 of the Finance Act, 1994 was imposed for the period from April 2011 to March 2012, with a show-cause notice issued on 20.11.2012.

2. The appellant had entered into a JDA with land owners for constructing residential apartments/flats, transferring Undivided Share over the land to independent buyers under Tripartite Agreements. The specific project in question was 'Sobha Dew Flower', with a total amount of Rs. 67,06,21,611/- collected towards 'undivided share of the land'. The appellant argued that no service tax liability existed due to the absence of consideration. The appellant's counsel contended that the JDA predated the introduction of 'Residential Complex Service' and the liability to pay tax arose after the JDA was executed. Reference was made to Notification No. 36/2010-ST and the Point of Taxation Rules for continuous supply of service to support the argument that tax was not due.

3. The Tribunal considered the submissions made by the appellant's counsel, acknowledging the complexity of the legal issues involved, including the definition of taxable service, point of taxation, valuation rules, and the introduction dates of relevant provisions. Notably, the Tribunal found that the appellant had made a prima facie case on the grounds that the consideration for construction of the residential complex could be deemed to have been received before the taxable service came into effect. The Tribunal also noted the argument regarding the unascertainable consideration and the applicability of valuation rules. Consequently, the requirement of pre-deposit was waived, and a stay against recovery was granted during the appeal's pendency.

This detailed analysis of the judgment provides a comprehensive understanding of the issues addressed and the Tribunal's reasoning behind the decision to waive the pre-deposit requirement.