2018 (11) TMI 1472 - AT - Service Tax

Classification of services - Real Estate Agent Services or not - It appeared to Revenue that the appellant was liable to pay the service tax under the classification Real Estate Agent Service under section 65(88) of the Finance Act which defines a real estate agent as a person who is engaged in rendering any service in relation to sale, purchase, leasing and renting, of real estate and includes a real estate consultant - time limitation. Held that - There is no consideration defined and/or provided for the alleged service. In absence of any defined consideration for the alleged service, there is no contract of service at all, and hence the transaction is not liable to service tax. Under the facts and circumstances, it is found that the appellant entered into an agreement of trading in land, wherein they agreed to transfer, a measurement or area of land, in a particular area in favour of the Sahara India. The appellant was also obligated to examine the title of the prospective land owner and to further ensure the availability of land owner at the office of the Registrar for execution of the sale deed. In fact Sahara India instead of paying the price directly to the land owner, paid lump sum amount to the appellant. Thereafter the appellant identified the land, the seller, and after being satisfied with the title of the seller, entered into agreement with the seller and obtained power of attorney, in their favour. Thereafter the appellant transferred the land in favour of Sahara India. Thus the transaction is one of trading in land. In such transactions the appellant could either incur a loss or have a surplus (profit). It is very clear from the provision of the MoU that the amount payable to the appellant is not quantified and it is more of the nature of a margin and share in the profit of the deal in purchase of land. For levy of service tax, a specific amount has to be agreed between the service recipient and the service provider. As no fixed amount has been agreed in the MoU which have been signed between the parties, the amount of the remuneration for service, if any is not clear in this case - since the specific remuneration has not been fixed in the deal for acquisition of the land, both the parties have worked more as a partner in the deal rather than as an agent and the principle, therefore the taxable value itself has not acquired finality in this case. The MoU has not been executed fully and therefore the actual remuneration to the appellant have not got finalized and therefore issuing the show cause notice in such a stage was premature and unwarranted. Extended period of limitation - Held that - The issue relates to interpretation, and there is no malafide on the part of the appellant. The transaction is duly recorded in the books of accounts maintained by the appellant. Further there is no suppression of information from the revenue - extended period not applicable. Appeal allowed - decided in favor of appellant.

Issues Involved:
1. Liability to service tax under the category ‘Real Estate Agent Services’.
2. Classification of services provided by the appellant.
3. Determination of consideration for services.
4. Applicability of extended period of limitation.
5. Quantum of service tax and penalties.

Issue-wise Detailed Analysis:

1. Liability to Service Tax under ‘Real Estate Agent Services’:
The primary issue was whether the appellant was liable to pay service tax under the category ‘Real Estate Agent Services’ as defined under Sections 65(88), 65(89), and 65(105)(v) of the Finance Act. The appellant argued that they were not acting as an agent of Sahara India but were transacting on a principal-to-principal basis. The Tribunal found that the appellant entered into an agreement for trading in land, where they were responsible for procuring land for Sahara India. The Tribunal concluded that the transaction was one of trading in land and not a service liable to service tax.

2. Classification of Services Provided by the Appellant:
The Revenue contended that the appellant provided services relating to the acquisition and development of real estate, which fell under the definition of ‘Real Estate Agent Services’. The appellant countered that their activities were part of a principal-to-principal transaction for the purchase and sale of land. The Tribunal agreed with the appellant, stating that the MOU between the parties was for the sale and purchase of land, not for providing services. The Tribunal emphasized that the incidental obligations of the appellant were part of the overall transaction of land trading.

3. Determination of Consideration for Services:
The Revenue argued that the consideration for the appellant's services was the difference between the average rate per acre and the actual price paid to the landowners. The Tribunal noted that the MOU did not specify a fixed amount as consideration for services. Instead, it mentioned that any difference between the amount paid to landowners and the average rate would be the appellant's margin or profit. The Tribunal held that for a transaction to be liable for service tax, there must be a clear and direct nexus between the consideration and the service provided, which was absent in this case.

4. Applicability of Extended Period of Limitation:
The Revenue invoked the extended period of limitation, alleging suppression of facts by the appellant. The Tribunal found no malafide intent or suppression of information by the appellant. The transactions were duly recorded in the appellant's books of accounts, and there was no evidence of deliberate evasion of service tax. Consequently, the Tribunal held that the extended period of limitation was not applicable.

5. Quantum of Service Tax and Penalties:
The Tribunal observed that the exact amount of remuneration for any alleged service was not quantified in the MOU. The MOUs were not fully executed at the time of the show cause notice, and the actual remuneration to the appellant had not been finalized. Therefore, demanding service tax on the entire amount paid to the appellant was deemed unsustainable. The Tribunal also noted that there was no malafide intent on the part of the appellant, and the extended period of limitation could not be invoked. As a result, the Tribunal set aside the impugned order, allowing the appeals and entitling the appellant to consequential benefits.

Conclusion:
The Tribunal concluded that the appellant was not liable to pay service tax under the category of ‘Real Estate Agent Services’. The transactions were found to be principal-to-principal dealings in land trading, with no clear consideration for services. The extended period of limitation was not applicable due to the absence of malafide intent or suppression of facts. The appeals were allowed, and the impugned order was set aside.

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