2023 (3) TMI 300 - HC - Service Tax

Short payment of service tax - real estate development - transactions for development purchase and transfer emanated from the Memorandum of Understanding concluded with RBEHWS - activities should be construed as service as contemplated under Section 65B 44 of the Finance Act or not - mis-declaration in filing ST-3 returns or not - HELD THAT - The first respondent has not examined the petitioner s transactions with RBEHWS with the land owners who have offered their respective lands for joint development and with the purchasers who have purchased plots in the lands owned by the petitioner. This Court must opine that if it cannot be disputed that mere transfer of title in immovable properties either by way of sale or gift or in any other manner would not amount to a taxable service for a complete adjudication of the petitioner s liability not just to pay appropriate service tax but also interest and penalty the first respondent should have examined the aforesaid transactions separately and decided the petitioner s liability; if for any reason the petitioner s bouquet of transactions is to be considered as inseparable and a composite transaction and hence subject to service tax there must be justifiable reasoning for the same. On a perusal of the first respondent s reasoning this Court would only conclude that these aspects have not been considered and if these aspects are not considered and liability fastened the first respondent would have to usurped jurisdiction even insofar as those transactions which are only transactions for transfer of title. Hence the petitioner must succeed on this score and the proceedings restored to the first respondent for reconsideration - Petition allowed in part.

Issues:
1. Whether the petitioner's activity during the taxable period constitutes a taxable service under the Finance Act, 1994?
2. Whether the petitioner's transactions with Reserve Bank Employees' Housing Welfare Society (RBEHWS) are taxable services?
3. Whether the first respondent correctly concluded that there was mis-declaration in filing 'Nil' ST-3 returns?
4. Whether the first respondent properly examined each transaction separately before deeming them as taxable services?
5. Whether the impugned Order-in-Original lacks jurisdiction?

Analysis:

1. The petitioner, engaged in real estate development, contested the first respondent's Order-in-Original, which found the petitioner's activities between April 2014 and June 2017 to be taxable services under the Finance Act, 1994. The respondent concluded that the petitioner had short declared taxable value and underpaid service tax, leading to interest and a penalty under the Finance Act.

2. The petitioner argued that its transactions with RBEHWS were not taxable services as they involved a bouquet of services, including joint development agreements and land purchases. The petitioner contended that each transaction was distinct and should not be combined to establish taxable services. The respondent, however, maintained that the transactions were taxable services, as per the Memorandum of Understanding with RBEHWS.

3. The petitioner responded to a Show Cause Notice by denying mis-declaration in filing 'Nil' ST-3 returns. The first respondent, after a personal hearing and additional submissions, determined that there was mis-declaration, leading to the conclusion that the petitioner's services were taxable.

4. The petitioner argued that the first respondent failed to examine each transaction separately before deeming them taxable services. The petitioner emphasized that transactions involving transfer of title in immovable property should not be considered taxable services. The court agreed, stating that a comprehensive examination was necessary before imposing tax liability.

5. The court allowed the petition in part, quashing the Order-in-Original and restoring the proceedings to the first respondent for reconsideration. The petitioner was directed to appear before the first respondent for further adjudication. The court highlighted the need for a detailed examination of each transaction to determine tax liability accurately.

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