2022 (2) TMI 1448 - AT - Service Tax

Levy of service tax - receipts from allottees of residential units - commercial complexes which is no different from transactions with allottees of residential units - Development charge and management charge under management, maintenance or repair service - Extended period of limitation. Receipts from allottees of residential units - HELD THAT - It is seen from the records that, much like housing work undertaken as part of programmes of several state governments, the appellant acquires land, supervises the contractors who are awarded the projects and seeks applicants for completed units which are allotted by draw of lots or other approved process. These constitute sale of immovable property and not services rendered to the allottees who evince their interest in acquiring the units only after completion. Consequently, fastening of tax liability in terms of section 65(105)(zzzh) of Finance Act, 1994 in the absence of service is incorrect. Receipts from commercial complexes - HELD THAT - The activity of awarding and ensuring the execution of the work is not undertaken on behalf of allottees who enter the transaction at a much later stage. Being sale of immovable property, the receipts are beyond the purview of section 65(105)(zzq) of Finance Act, 1994, intended for bringing commercial or industrial construction service to tax. Development charge and management charge under management, maintenance or repair service - HELD THAT - A transaction cannot be subjected tax liability under Finance Act, 1994 when it is clearly a transaction of sale with no perceivable service element - The elaborate submissions of the assessee in response to the notice may assist in making that determination and, that it has not been done, jeopardises the conclusion of taxability. It would, therefore, be appropriate for that to be determined afresh by the original authority. To enable that exercise, it is appropriate to set aside the impugned order in its entirety but, while doing so, to remand the determination of liability of ₹ 4,35,91,083/- back to the original authority to render a finding by application of the taxable entry of section 65(105)(zzg) of Finance Act, 1994 in its fullness. Extended period of limitation - HELD THAT - As it is ruled on the non-taxability of most of the receipts sought to be taxed and the remaining portion is to be subject to ascertainment of taxability, that aspect will have to considered only after determination of liability, if any. Consequently, the issue of limitation is also left open to be raised before the adjudicating authority. Appeal disposed off.

Issues involved:

1. Taxability of receipts from allottees of residential units.
2. Taxability of receipts from commercial complexes.
3. Taxability of 'development charges' and 'management charges' under 'management, maintenance or repair service'.
4. Legitimacy of invoking the extended period of limitation under section 73 of Finance Act, 1994.
5. Penalties imposed under sections 76, 77, and 78 of Finance Act, 1994.

Issue-wise Detailed Analysis:

1. Taxability of receipts from allottees of residential units:
The impugned order confirmed a demand of Rs. 533,62,07,090/- on receipts from allottees of residential units. The Tribunal observed that the activities of the appellant, which include acquiring land, supervising contractors, and allotting completed units by draw of lots or other processes, constitute the sale of immovable property. Since these activities do not involve services rendered to the allottees, fastening of tax liability under section 65(105)(zzzh) of Finance Act, 1994 is incorrect.

2. Taxability of receipts from commercial complexes:
A demand of Rs. 1,38,71,101/- was confirmed on receipts from commercial complexes. The Tribunal noted that the transactions with allottees of commercial complexes are similar to those of residential units, involving the sale of immovable property. Therefore, these receipts are beyond the purview of section 65(105)(zzq) of Finance Act, 1994, intended for taxing 'commercial or industrial construction service'.

3. Taxability of 'development charges' and 'management charges' under 'management, maintenance or repair service':
The adjudicating authority concluded that 'development charges' and 'management charges' are taxable under 'management, maintenance or repair service'. However, the Tribunal found that the authority erroneously included the entirety of 'other income' reported in the schedule, which comprises various receipts not covered within the allegations in the show cause notice. The Tribunal emphasized that the determination of taxability should involve an evaluation of the activity for conformity within the ambit of section 65(105)(zzg) of Finance Act, 1994. The Tribunal remanded the determination of liability of Rs. 4,35,91,083/- back to the original authority for a fresh finding by applying the 'taxable entry' of section 65(105)(zzg) in its fullness.

4. Legitimacy of invoking the extended period of limitation under section 73 of Finance Act, 1994:
The Tribunal observed that since most of the receipts sought to be taxed were ruled non-taxable and the remaining portion is to be subject to further determination, the issue of invoking the extended period of limitation should be considered only after determining the liability, if any. Therefore, this aspect was left open to be raised before the adjudicating authority.

5. Penalties imposed under sections 76, 77, and 78 of Finance Act, 1994:
The penalties imposed under sections 76, 77, and 78 of Finance Act, 1994 were challenged in the appeal. Given the Tribunal's ruling on the non-taxability of the majority of the receipts and the remand of the remaining portion for further determination, the issue of penalties was implicitly left to be reconsidered based on the final determination of tax liability.

Conclusion:
The Tribunal set aside the impugned order in its entirety, except for the admitted liability of Rs. 1,98,16,579/-. The determination of liability of Rs. 4,35,91,083/- was remanded back to the original authority for a fresh finding. The issue of invoking the extended period of limitation and the penalties imposed were left open for reconsideration based on the final determination of tax liability. The appeal was disposed of accordingly.

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