2019 (6) TMI 633 - AT - Service Tax

Classification of services - taxable service Real Estate Agent and Site Formation and Clearance, Excavation and Earth Moving and Demolition provided by the Appellant during the period 2005-2006 to 2009-2010 - Circular dated 27 July 2005 - HELD THAT - The clauses of the present agreement clearly indicate that extensive construction and development had to be carried out by the Appellant and, thereafter, land/ plots were to be sold. The finances were also to be arranged by the Appellant. An agent does not carry out these activities. Thus, for this reason also the impugned order cannot be sustained. A Division bench of the Tribunal in M/S RADIUS CORPORATION LTD. VERSUS CCE, RAIPUR 2013 (9) TMI 517 - CESTAT NEW DELHI examined the scope for site formation services and it was observed that the contract signed for construction of the Major Ground Balancing Reservoir for raising the height of the existing reservoir would not fall under the category of site formation . The activity carried out by the Appellant would, therefore, not fall under site formation . Extended period of limitation - HELD THAT - It is not necessary to deal with the other submissions advanced by learned Counsel for the Appellant relating to co-venture or extended period of limitation. The pre-deposit made by the Appellant in this Appeal shall be refunded to the Appellant within a period of two months from the date of copy of the order is produced before the competent authority. Appeal allowed - decided in favor of appellant.

Issues Involved:
1. Classification of services under "Site Formation" and "Real Estate Agent".
2. Vagueness of the show cause notice and the impugned order.
3. Applicability of Section 65A of the Finance Act for classification.
4. Nature of the agreement between the Appellant and the Owners.
5. Eligibility of the Appellant for cum service tax benefit.
6. Invocation of the extended period of limitation and imposition of penalties.

Detailed Analysis:

1. Classification of Services:
The Department issued a show cause notice alleging that the Appellant evaded payment of Service Tax on services classified under "Real Estate Agent" and "Site Formation and Clearance, Excavation and Earth Moving and Demolition". The Commissioner confirmed this classification, stating that the activities of leveling land, laying infrastructure, and marketing plots fall under these categories. The Appellant argued that the services were not classifiable under these categories, as they acted on their own behalf and not as an agent.

2. Vagueness of the Show Cause Notice and the Impugned Order:
The show cause notice and the impugned order were found to be vague. The notice did not clearly specify which category of service was leviable to tax, stating only that "service tax appears to be leviable as per the statutory provisions on real estate developed by site preparation on consideration basis." This lack of clarity violated Section 65A of the Finance Act, which requires precise classification of services. The Tribunal emphasized that the notice should have clearly indicated whether the service of "real estate agent" or "site formation" was leviable to tax.

3. Applicability of Section 65A of the Finance Act:
Section 65A of the Finance Act deals with the classification of taxable services. It states that if a service is classifiable under two or more sub-clauses, the sub-clause providing the most specific description should be preferred. The Tribunal noted that the show cause notice failed to classify the services properly under Section 65A, leading to the setting aside of the impugned order.

4. Nature of the Agreement Between the Appellant and the Owners:
The agreement granted the Appellant exclusive rights to develop and sell plots. The Appellant was responsible for all development activities, including arranging finances and obtaining necessary permissions. The Tribunal found that the Appellant acted on a principal-to-principal basis and not as an agent of the Owners. This principal-to-principal relationship meant that the Appellant was not providing "real estate agent" services.

5. Eligibility of the Appellant for Cum Service Tax Benefit:
The Commissioner had granted the benefit of cum service tax to the Appellant, reducing the service tax amount from ?5,45,52,288/- to ?4,87,71,787/-. The Tribunal upheld this benefit but noted that the primary issue was the improper classification of services.

6. Invocation of the Extended Period of Limitation and Imposition of Penalties:
The Tribunal did not find it necessary to address the issues of the extended period of limitation and penalties, as the primary grounds for setting aside the impugned order were the improper classification of services and the vagueness of the show cause notice.

Conclusion:
The Tribunal set aside the impugned order due to the improper classification of services and the vagueness of the show cause notice. It emphasized the need for precise classification under Section 65A and found that the Appellant acted on a principal-to-principal basis, not as an agent. The appeal was allowed, and the pre-deposit made by the Appellant was ordered to be refunded.

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