2018 (2) TMI 1318 - AT - Service Tax

Execution of land acquisition work - Whether service tax is liable to be recovered from appellants under Section 73(1) of the Finance Act, 1994 for the payments made by M/s SICCL, which were routed through appellants? - Held that - any amount received by the assessee from Sahara India would be treated as service and liable to service tax - cost of the land can never be treated as value of the services - demand set aside. Taxability - leveling of soil including of gorges/nallah, removing of shrubs, grass and ruble etc. at Sahara City Homes, Baharaich as per agreement/work order dated 03/11/2003 - Whether service tax is to be recovered from the appellant under Section 73(1) of the Finance Act, 1994 for leveling of soil including of gorges/nallah, removing of shrubs, grass and ruble at Sahara City Homes, Baharaich as per agreement dated 03/11/2003? - Held that - the site formation and excavation and earth moving and demolition service was introduced in the service tax net on 16/06/2005 and the agreement entered between the respondents with M/s Sahara India dated 03/11/2003 expected the work to be finished within a period of 2 months, which is much prior to 16/06/2005 - demand set aside. Appeal dismissed - decided against Revenue.

Summary

Issues involved:
1. Recovery of service tax from the appellants for payments made by M/s SICCL routed through the appellants.
2. Recovery of service tax from the appellants for leveling of soil and related work at Sahara City Homes.
3. Imposition of penalties under Sections 76, 77, and 78 of the Finance Act, 1994.

Analysis of the Judgment:

Issue 1:
The appellants were served a show cause notice proposing a demand of service tax under Section 73(1) of the Finance Act, 1994. The Adjudicating Authority confirmed the demand along with interest and penalties. The Appellate Authority examined the facts and documents submitted by the appellants. It was found that the appellants acquired land for which the total amount was to be paid by M/s SICCL. However, the appellants received a lesser amount than the total cost. The Appellate Authority observed that the levy of service tax on the cost of land is ultra vires as per the Constitution of India. It was held that service tax cannot be recovered for the amount spent on behalf of SICCL towards the cost of land and registry charges. Any payment received by the appellants from SICCL, excluding the amount spent on land purchasing, is to be treated as a service and service tax shall be imposed accordingly.

Issue 2:
Regarding the taxability of leveling of soil and related work at Sahara City Homes, it was noted that the service falls under the net of service tax from a specific date. The agreement for the work expired before this date, making the imposition of service tax incorrect. Additionally, since the appellants had received an amount from SICCL which was spent on land purchasing and registry charges, the receipt of the amount related to the work at Sahara City Homes did not hold merit. The Appellate Authority's decision on this issue was upheld, and no grounds were presented by the Revenue against it.

Conclusion:
The Commissioner (Appeals) decided in favor of the respondents, following relevant legal precedents. Any amount received by the appellants from Sahara India was deemed as a service liable to service tax, while the cost of land was not considered part of the service value. The Appellate Authority's findings on the taxability of the work at Sahara City Homes were upheld, as the service tax was not applicable before a specific date. Consequently, the appeals filed by the Revenue were rejected, and the penalties imposed were upheld.