2023 (8) TMI 126 - AT - Service Tax

Demand the service tax along with interest and for imposing penalty - Real Estate Services - rendition of such service or not - non-registration for the said service and non-discharge of service tax liability - invocation of extended period of limitation - reasonable cause for non-imposition of penalties under Section 80 of the Finance Act 1994 or not - HELD THAT - The appellant has strenuously argued that the appellant had not rendered any service as Real Estate Agent and that the amount received is profit from purchase and sale of immovable property. The documents relied to support this argument are the General Power of Attorney and declaration executed by the land owners to the appellant. On bare perusal, it can be seen that these documents do not confer any legal title or possession over the property to the appellant. These documents only facilitate the appellant to find a buyer for the land without the involvement of the land owners. The documents are executed for a trust and assurance that the land owners will not sell their land to any other buyer - The General Power of Attorney is only an authorisation to sell and to find a buyer. This facilitates the appellant for finding a buyer for the land and also avoid the need of each land owner to come to the Register Office. It saves stamp duty also. The sale deed has been ultimately executed by the land owners and not by the appellant. From the facts it is clear that the appellant has acted as a middleman/ agent in the purchase and sale of immovable property and the amount received is consideration for such services - the findings of the adjudicating as well as the Commissioner (Appeals) on the merits of the case, agreed upon - the issue on merits is found against the appellant and in favour of the Revenue. Extended period of limitation - penalties - HELD THAT - It has to be seen that the appellant did not obtain registration under the Real Estate Agent Service and did not pay the service tax. The same would have gone unnoticed, but for the scrutiny by the audit party. Therefore there are no grounds to set aside the demand on the ground of limitation. However, the appellant has put forward explanation that they were under bonafide belief that the transaction is purchase and sale of immovable property and that it did not fall under Real Estate Agent Service. For this reason, in terms of Section 80 of finance Act, 1944 the penalties imposed under Section 77 78 alone, 1994 require to be set aside. The impugned order is modified to the extent of setting aside the penalties imposed under Section 77 and 78 of the Finance Act, 1994 without disturbing the demand of service tax or the interest thereon - appeal allowed in part.

Summary

Issues Involved:
1. Liability to pay service tax under 'Real Estate Agent Service'
2. Invocability of the extended period
3. Reasonable cause for non-imposition of penalties under Section 80 of the Finance Act 1994

Summary:
The appellant, engaged in 'Renting of Immovable Property Services,' faced scrutiny for not registering for 'Real Estate Services' despite receiving payments, leading to a demand for service tax, interest, and penalties. The appellant argued that the received amounts were profits from land transactions, not Real Estate Agent services, supported by General Power of Attorney and declarations from landowners. However, the department contended the appellant acted as an intermediary and suppressed facts to evade tax.

On the first issue, the tribunal found that the appellant indeed acted as a middleman/agent in land transactions, receiving consideration for services rendered, contrary to the appellant's claims. The tribunal agreed with the original authority and Commissioner (Appeals) on the merits, ruling against the appellant and in favor of the Revenue.

Regarding the invocability of the extended period, the tribunal noted that the appellant's failure to register under 'Real Estate Agent Service' and pay service tax would have gone unnoticed without audit scrutiny. While the demand was upheld, penalties under Sections 77 & 78 were set aside based on the appellant's genuine belief that the transactions were not subject to 'Real Estate Agent Service.'

In conclusion, the tribunal modified the order by setting aside penalties under Sections 77 & 78 but upheld the service tax demand and interest. The appeal was partly allowed in this regard.