2019 (11) TMI 1207 - HC - Service Tax

Classification of services - real estate agent service or not - sale of agricultural plot - in the books of accounts the amount was shown as 'OTHER INCOME' - period 2005-06 and 2006-07 - suppression of facts or not - penalty. HELD THAT - The appellant entered into an agreement to purchase of land from the original owner, but did not execute the sale deed in its favour. The appellant got sale deed executed in favour of third party directly from the original owner of land. The appellant first entered into an agreement with the registered owner of land and paid a nominal amount as advance. It was mentioned in the agreement that he is having rights to sell the land to some other person from the date of execution of sale agreement - it cannot be accepted that transaction of sale and purchase of land is a simple sale and purchase of immovable property. When a person from the first day enters into an agreement to purchase some property with an intention to sell it to some other person, it cannot be said that the transaction was of a transaction of simple sale and purchase of immovable property, in fact, the said act attracts the definition of Real Estate Agent and the participation of appellant in view of aforesaid transaction comes within the purview of Service Provider . Extended period of limitation - HELD THAT - The act of appellant clearly shows that he suppressed the facts, therefore, the period of limitation is to be counted from the date of knowledge of the Departmental Authority as provided under sub-section 3(ii) of Section 11A of the Act of 1944 - the appellant has not shown specific source from which the income was received though income was showed in books of account which is a clear act of suppressing correct facts. For the aforementioned reason, the limitation will be counted from the date of knowledge. Imposition of penalty - HELD THAT - The finding recorded by the Assessing Officer for imposition of penalty under Sections 77 and 78 of the Act of 1994 has been affirmed by the Appellate Authority as well as the CESTAT - there is no error or infirmity in the said findings recorded by the Assessing Officer and affirmed by the Appellate Authority and the CESTAT - Penalty upheld. Appeal dismissed - decided against appellant.

Summary

Issues Involved:
1. Liability of payment of service tax with interest.
2. Imposition of penalty under Sections 77 and 78 of the Finance Act, 1994.
3. Classification of the appellant's activities under the definition of "Real Estate Agent."
4. Invocation of the extended period of limitation for issuing the show cause notice.
5. Allegation of suppression of facts by the appellant.

Detailed Analysis:

1. Liability of Payment of Service Tax with Interest:
The appellant, M/s. Chhattisgarh Steel Castings (P) Ltd., was found liable for service tax on income from transactions involving immovable property. The Adjudicating Authority determined that the appellant's activities fell under the definition of "Real Estate Agent" as per Section 65(88) of the Finance Act, 1994. The appellant's defense that the income was from simple sale and purchase of land was rejected, and the service tax liability was confirmed.

2. Imposition of Penalty under Sections 77 and 78 of the Finance Act, 1994:
The Adjudicating Authority imposed penalties under Sections 77 and 78, citing the appellant's failure to register as a real estate agent, non-filing of service tax returns, and suppression of facts. This decision was upheld by both the Appellate Authority and CESTAT. The court found no error in the imposition of penalties, as the appellant had not disclosed the nature of the transactions and had suppressed material facts.

3. Classification of the Appellant's Activities under the Definition of "Real Estate Agent":
The court examined the nature of the appellant's transactions, where the appellant entered into agreements to purchase land but sold it to third parties without executing the sale deed in its favor. This activity was classified as rendering services in relation to the sale and purchase of real estate, fitting the definition of a "Real Estate Agent." The court rejected the appellant's argument that the transactions were simple sales and purchases of immovable property.

4. Invocation of the Extended Period of Limitation for Issuing the Show Cause Notice:
The appellant argued that the show cause notice was barred by limitation, as it was issued in 2010 for transactions from 2005-06 and 2006-07. The court held that the extended period of limitation was applicable due to the suppression of facts by the appellant. The relevant date for the limitation period was the date of knowledge of the Departmental Authority, as per Section 11A of the Central Excise Act, 1944. The court cited precedents to support the view that suppression of facts justified the invocation of the extended period.

5. Allegation of Suppression of Facts by the Appellant:
The court found that the appellant had shown the income from the transactions under "other income" without specifying the source. This lack of disclosure constituted suppression of facts. The appellant's registration under other service tax categories indicated awareness of service tax obligations, further supporting the finding of suppression. The court upheld the findings of the Adjudicating Authority, Appellate Authority, and CESTAT on this issue.

Conclusion:
The court dismissed the appeal, finding no substantial question of law. The appellant's activities were correctly classified under "Real Estate Agent," and the imposition of service tax, interest, and penalties was justified. The invocation of the extended period of limitation was also upheld due to the appellant's suppression of facts.