2013 (1) TMI 268 - AT - Service Tax

Waiver of pre-deposit - Stay of recovery - Real Estate Agency Service - Section 65 (88) Modus operandi - Assessee was a partnership firm in relation to real estate business - Assessee executed agreements with prospective sellers of property - Obtained General Power of Attorney (GPA) from the prospective sellers - the properties of the aforesaid sellers sold to M/s Sahara India Commercial Corporation - The amount so received as sale consideration in each transaction was higher than the amount shown in the corresponding purchase agreement Assessee contended that it s trading activity inasmuch as the appellants were purchasing and selling immovable properties Held that - The modus operandi of the appellants, which we have briefly stated herein before, is crystal clear. They suppressed the relevant facts before the department. Therefore, we are in agreement with the findings recorded by the adjudicating authority on the limitation issue also. We have gone through the facts of the case covered by stay order No. 1280/2011 and have found the same to be distinguishable vis-a-vis the facts of the present case. There is no plea of financial hardships in the stay application. Waiver denied. In favour of revenue

Summary

Issues involved:
1. Waiver of pre-deposit and stay of recovery sought by appellants in relation to adjudged dues
2. Classification of activity as trading or real estate agency service
3. Invocation of extended period of limitation without factual or legal basis
4. Financial difficulties of the appellants

Analysis:

1. Waiver of pre-deposit and stay of recovery:
The appellants sought waiver of pre-deposit and stay of recovery in relation to the adjudged dues. The impugned order was passed concerning a show-cause notice issued to a partnership firm and its successor-firm. The total demand of service tax and education cess exceeded Rs. 1.24 crores for the period from January 2005 to March 2007. Penalties were imposed under Sections 76 & 77 of the Finance Act, 1994. The appellants argued misclassification of their activity as trading and questioned the invocation of the extended period of limitation without a factual or legal basis. They also highlighted financial difficulties, proposing a deposit of only 10% of the service tax amount.

2. Classification of activity:
The Tribunal analyzed the modus operandi of the appellants, clarifying that they were not engaged in purchasing and selling immovable properties but acting as agents holding 'General Power of Attorney' of property owners. The transactions involved selling properties to a third party, with the appellants retaining the difference between the sale consideration and the amount in the purchase agreement. The Tribunal considered this arrangement as falling within the definition of a "real estate agent" under Section 65 (88) of the Finance Act, 1994. The money retained by the appellants was viewed as 'commission,' making the demand prima facie sustainable on merits.

3. Invocation of extended period of limitation:
Regarding the invocation of the extended period of limitation, the Tribunal found no prima facie case for the appellants. It noted that the appellants failed to register with the tax department for the taxable service, did not file returns, and did not pay service tax on the commission received. The Tribunal agreed with the adjudicating authority's findings on the limitation issue, emphasizing the appellants' suppression of relevant facts and lack of cooperation with the department.

4. Financial difficulties of the appellants:
The appellants' plea of financial hardships was considered by the Tribunal. While the appellants proposed a 10% deposit due to financial constraints, the Tribunal found this amount inadequate based on the facts of the case. The Tribunal directed one of the firms to pre-deposit Rs. 30,00,000 within six weeks, subject to compliance, for waiver of pre-deposit and stay of recovery concerning penalties, service tax, education cess, and interest.

In conclusion, the Tribunal upheld the demand for service tax and penalties, rejected the plea for waiver of pre-deposit in full, and directed a specific pre-deposit amount within a specified timeframe for one of the appellants, considering the nature of the transactions and financial circumstances presented.