2013 (12) TMI 379 - AT - Service Tax

Service Tax liability - Real Estate Agent - Commercial and Industrial Construction services - In-eligible benefit of abatement from the gross value - Benefit of Notification No.12/2003 - Held that - appellant herein had developed land owned by various societies/non-trading corporations under various projects - appellant herein had collected the development charges when the said scheme/project was executed and handed over by them - to get covered under the definition of real estate agent and real estate consultant it has to be brought on record that the person has rendered directly or indirectly any services. It is seen from the records and the agreement entered into by the appellant with various entities we find that the appellant is liable for the profit or the loss of the said project despite the said project was executed in the name of special purpose vehicles. It is also seen that the entire project was financed by the appellant herein. The said facts are not denied or disputed by the lower authorities. It is to be seen on this factual matrix whether there was any service rendered by the appellant in the category of real estate agent for receiving development charges. It is common knowledge that the real estate agent transacts the business of sale or purchase of the property leasing or renting of the property and gets an amount as a commission. Though the definition of real estate consultant talks about evaluation construction design development construction implementation supervision maintenance marketing acquisition or management of real estate it has to borne out of the record that such services are rendered. Adjudicating authority has confirmed various other demands on the appellant in a finding that the appellant is not liable to shift the Service Tax liability under the category of Works Contract services as he has already discharged Service Tax liability under the category of commercial and industrial construction services. It is undisputed that the appellant had discharged the Service Tax liability as understood by him under the category of commercial and industrial construction services and later on shifted to works contract services - construction of residential complex services cannot be liable to Service Tax prior to 01.06.2007 if the appellant has paid VAT on the impugned activity as Works Contract - claim of the appellant that they have correctly discharged the Service Tax liability by availing the abatement as given under Notification No.12/2003 is also justified in as much as there is nothing on record that the appellant has not used any material for completion of said project - Following decision of Commissioner of Service Tax Versus Sujal Developers 2011 (4) TMI 1023 - Gujarat High Court and Cemex Engineers Vs CST Cochin 2009 (3) TMI 423 - CESTAT BANGALORE - Decided in favour of assessee.

Summary

Issues Involved:
1. Liability of the appellant to discharge Service Tax under the category of real estate agent services for the amount received as development charges.
2. Requirement for the appellant to discharge differential Service Tax liability under the head commercial and industrial construction services for the period post 01.06.2007.
3. Denial of the benefit of Notification No.12/2003 for availing abatement of 67% of the value and discharge of Service Tax liability on 33%.

Issue-wise Detailed Analysis:

1. Liability under the Category of Real Estate Agent Services:
The appellant, M/s Saumya Construction Pvt. Ltd. (SCPL), was alleged to have provided services categorized under real estate agent services for the development charges received. The definition of "real estate agent" under Section 65(88) of the Finance Act, 1994, includes a person engaged in rendering services related to the sale, purchase, leasing, or renting of real estate. The adjudicating authority concluded that SCPL provided real estate consultant services and confirmed the demand for Service Tax. However, SCPL contended that the development charges were profits from their own projects, not commissions for services rendered. The Tribunal found that SCPL undertook the entire development project, financed it, and bore the profit or loss, indicating no service was rendered to another party. The Tribunal also referenced CBEC Circular No.151/2/2012-ST, which clarified that construction services by a builder/developer are not taxable if they involve a tripartite business model. The Tribunal concluded that SCPL's activities did not fall under real estate agent services and set aside the demand.

2. Differential Service Tax Liability Post 01.06.2007:
The appellant had initially discharged Service Tax under commercial and industrial construction services and later shifted to works contract services. The adjudicating authority did not accept this shift, asserting that once a project starts under a particular classification, it cannot be changed. However, the Tribunal noted that the decision in Cemex Engineers (2010) supported the appellant's claim that if VAT was paid on the activity as a works contract, the classification could be shifted. Therefore, the Tribunal found the appellant's shift to works contract services justified and set aside the demand for differential Service Tax.

3. Benefit of Notification No.12/2003 for Abatement:
The appellant claimed the benefit of Notification No.12/2003, which allows an abatement of 67% from the gross value for Service Tax purposes. The adjudicating authority denied this benefit, but the Tribunal found no evidence that the appellant had not used any material for the completion of the projects. Therefore, the Tribunal concluded that the appellant was entitled to the abatement and set aside the denial.

Conclusion:
The Tribunal set aside the impugned order, allowing the appeal with consequential relief. The key findings were that SCPL's activities did not fall under real estate agent services, the shift to works contract services was justified, and the appellant was entitled to the abatement under Notification No.12/2003. The Tribunal's decision was supported by the judgment of the Hon'ble High Court of Gujarat in the case of Sujal Developers, which dealt with similar issues.