2015 (9) TMI 1039 - HC - Service Tax

Waiver of pre-deposit - construction of residential complex - Valuation - Inclusion in the assessable value - the profit/loss on account of purchase and sale of the land - Held that - The AA has in the order dated 29th November 2013 come to the conclusion, on an analysis of the two MOUs entered into between the Appellant and SI, that the Appellant was working as an agent for SICCL and further that it had rendered two kinds of taxable services one as a real estate agent/real estate consultant under Section 65 (89) of the FA and the other relating to levelling of soil including filling of gorges/nallah, removing of shrubs, grass and rubbish etc. classifiable under the head site formation and clearance excavation and earth moving and demolition services , as defined under Section 65 (97a) of the FA. - It further prima facie appears that the AA overlooked the fact that even as per the SCN no land in Allahabad was purchased although the Appellant received ₹ 4 crores for that purpose. The Appellant s explanation that it returned the said sum to SICCL in the form of shares of 2 of its group companies does not appear to have been considered. A further question that would arise is whether the entire profit generated from the purchase of land in Jodhpur can be taken to be value of the taxable services, if any, rendered by the Appellant. Those questions cannot obviously be examined at this stage but will have to await the final determination in the appeal before the CESTAT. - Appellant has made out a prima facie case and that the balance of convenience at this stage in making a conditional order of pre-deposit is in favour of the Appellant. - Appellant shall make a pre-deposit of 5% of the demand - Partial Stay granted.

Summary

Issues:
1. Appeal against CESTAT order under Section 35G of the Central Excises Act, 1944.
2. Taxability of services provided in relation to land transactions.
3. Calculation of service tax liability and pre-deposit requirement.
4. Prima facie case made by the Appellant.
5. Consideration of profit earned in service tax computation.

Analysis:
1. The appeal was filed against the CESTAT order by M/s. Mercury Estates under Section 35G of the Central Excises Act, 1944, challenging the stay application decision related to an order-in-original passed by the Commissioner of Service Tax (CST). The case involved transactions with Sahara India Commercial Corporation Ltd. for setting up residential townships, leading to a show cause notice issued by the Directorate General of Central Excise Intelligence.

2. The Adjudicating Authority (AA) held that the Appellant provided taxable 'real estate' services but agreed that the cost/value of land cannot be included in the gross value for levy of service tax. However, the AA determined the service tax liability based on the entire sum received by the Appellant, leading to a dispute regarding the taxable value for service tax computation.

3. The CESTAT ordered the Appellant to make a pre-deposit of 25% of the service tax demand, emphasizing the inclusion of land value in the assessable value for service tax calculation. The Court stayed further proceedings pending the appeal and considered the Appellant's submissions challenging the service tax demand calculation and pre-deposit requirement.

4. The Court found that the Appellant made out a prima facie case regarding the taxable services provided and the computation of service tax liability. It noted discrepancies in the AA's calculation and the Appellant's explanation regarding the utilization of funds received for land purchase, directing a conditional pre-deposit based on the profit earned in land transactions.

5. While not expressing an opinion on the merits of the contentions, the Court modified the pre-deposit amount considering the profit earned by the Appellant in land transactions. The interim order was extended, and the CESTAT was directed to proceed with the appeal based on the revised pre-deposit amount, allowing for a full consideration of the case on its merits.