2025 (4) TMI 184 - HC - Service Tax

Levy of service tax - income earned by the Respondent from selling allotment rights in respect of flats to buyers - amount charged under the name of Demand Survey - cancellation charges and miscellaneous income received by the Respondent - HELD THAT - In the opinion of this Court the CESTAT has followed the decision in Saumya Construction Pvt. Ltd. V. CST Ahmedabad 2013 (12) TMI 379 - CESTAT AHMEDABAD and decisions of Coordinate Benches of CESTAT which have held consistently that when the transaction is one of trading in land and no specific remuneration is fixed in the deal for acquisition of land the same would not be liable to service tax. Insofar as the small demand of Rs. 5, 000/- is concerned which each of the customers had deposited the said amount is primarily for the purpose of certain adjustments if required at the final stage and the same was on a refundable basis. The Court is not inclined to admit the present appeal - Appeal dismissed.

ISSUES PRESENTED and CONSIDERED

The core legal questions considered in this judgment include:

(A) Whether the income earned by the Respondent from selling allotment rights in respect of flats to buyers is eligible for Service Tax.

(B) Whether the amount charged under the name of Demand Survey is taxable under Service Tax.

ISSUE-WISE DETAILED ANALYSIS

(A) Eligibility of Income from Allotment Rights for Service Tax

The relevant legal framework involves the interpretation of the term 'Real Estate Consultant' under Section 654(89) of the Finance Act, 1994. The Adjudicating Authority found that during the period from 1st April 2009 to 30th June 2012, the Respondent did not provide any advice, consultancy, or technical assistance, and thus could not be classified as a 'Real Estate Consultant'. For the subsequent period from 1st July 2012 to 31st March 2014, the benefits arising from the sale of immovable property were determined not to fall within the ambit of service.

The CESTAT supported this view, referencing decisions such as Saumya Construction P. Ltd. and Ess Gee Real Estate Developers Pvt. Ltd., which clarified that the development charges or profits from selling property do not constitute services under 'Real Estate Agent' or 'Real Estate Consultant'. The Tribunal emphasized that unless there is a direct or indirect involvement in the business of sale or purchase of property for commission, service tax is not applicable.

(B) Taxability of Demand Survey Charges

The Adjudicating Authority found no service tax liability on the amount charged for Demand Survey, as it was deemed a deposit adjusted against the property's price or refunded if the property was unsuitable. The CESTAT concurred, noting that the deposit was refundable and primarily for adjustments, not constituting a service.

(C) Applicability of Service Tax on Cancellation Charges and Miscellaneous Income

The Adjudicating Authority ruled that cancellation charges were penalties for non-fulfillment of commitments, not services rendered, thus not subject to service tax. Miscellaneous income was verified as discounts on advertising services, without any service element involved. The CESTAT agreed, emphasizing that no real estate agent service was provided in these instances.

SIGNIFICANT HOLDINGS

The Court held that the CESTAT's findings did not raise substantial questions of law requiring adjudication. It emphasized that the transactions in question were primarily trading in land, not services liable for service tax. The Court noted the substantial time elapsed since the agreement's execution and the potential adverse impacts on numerous government officials involved with the Respondent organization. It concluded that pursuing service tax demands after such a period would unfairly burden these individuals and dismissed the appeal.

The Court's final determination was that no substantial question of law arose, and the appeal was dismissed, affirming the CESTAT's decision to drop the service tax demands.

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