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TMI Blog2019 (6) TMI 633X X X X Extracts X X X X X X X X Extracts X X X X ..... lant would, therefore, not fall under site formation . Extended period of limitation - HELD THAT:- It is not necessary to deal with the other submissions advanced by learned Counsel for the Appellant relating to co-venture or extended period of limitation. The pre-deposit made by the Appellant in this Appeal shall be refunded to the Appellant within a period of two months from the date of copy of the order is produced before the competent authority. Appeal allowed - decided in favor of appellant. - Service Tax Appeal No. 1798 of 2012-DB - Final Order No. 50766/2019 - Dated:- 30-5-2019 - MR. JUSTICE DILIP GUPTA, PRESIDENT And MR. BIJAY KUMAR, MEMBER (TECHNICAL) Shri B.L. Narasimhan, Advocate And Shri Narender Singhavi Advocate for the Appellant Shri Amresh Jain, Authorized Representative for the Respondent ORDER JUSTICE DILIP GUPTA This appeal is directed against the order dated 29 February, 2012 passed by the Commissioner of Central Excise, Jaipur by which the demand of Service Tax has been confirmed. The Commissioner has also imposed penalty under sections 78, 76 and 7 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arance, Excavation and Earth Moving and Demolition 3 provided by the Appellant during the period 2005-2006 to 2009-2010. The show cause notice mentions that the Appellant had signed an agreement with the Owners on 5 September, 2001 and received grant and rights for development of immovable property situated in Khasra No. 426. The show cause interpreted the development agreement to mean preparation of a site for developing a real estate for commercial purpose . The agreement was, therefore, considered to be a composite agreement attracting levy of Service Tax on each of the constituent Site Formation and Real Estate Agent . Paragraph 8 of the show cause notice, which deals with this aspect, is reproduced below:- 8. Whereas, gist of the Agreement mentioned above clearly indicates that the activities undertaken by the developers were leveling of land, laying of roads, street lightening, recreation of gardens, boundary walls, water connections, sewerage connections, electrical sub-stations and all other amenities and services as per the approved layout plans, which squarely covered under the category of site preparatory service. The developer has rendered pri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in section 65(97a) of the Act and the definition of Real Estate Agent as contained in section 65(88) of the Act and on consideration of the fact that the Appellant had been granted the right for development of land, the Commissioner concluded that the activities of developing the land by leveling it and carrying out infrastructural work, would fall under the definition of Site Formation . Further, after noticing that the Appellant was also required to market the developed plots and retain consideration from the sale proceeds of the plots and remit the land value to the Owners in terms of Clauses 12 and 13 of the Agreement, the Commissioner concluded that the Appellant had also provided service of a Real Estate Agent to the Owners. The Agreement was, therefore, acknowledged as a composite agreement in which the developer had to provide two services, both of which were taxable. Paragraphs 22, 23 and 24 of the Order which deal with this aspect are reproduced below: 22. From the above facts it is clear that the developer had undertaken the work of developing the land by leveling of land and carried out all the infrastructural work including laying of roads, s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d plots on behalf of the land owner and in turn rendered the service of Real Estate Agent. The developer had retained the consideration from the sale proceeds of the developed Plots for their services rendered to the land owner on which service tax is leviable as per the statutory provisions discussed above. I also find that both the services are taxable and there is no needs to bifurcate the consideration service wise. (emphasis supplied) 7. The Appellant was, however, held entitled to the benefit of cum service tax and so the amount of service tax was directed to be recalculated. The Commissioner, therefore, confirmed the demand of Service Tax amounting to ₹ 4,87,71,787/- instead of 5,45,22,288/-, but with penalty under sections 78,76 and 77. 8. Shri B.L. Narasimhan, learned counsel appearing for the Appellant has made the following submissions:- (i) Confirmation of demand under two categories of service Site Formation and Real Estate Agent is not sustainable; (ii) The show cause notice as well as the impugned order are not only vague but also in the teeth of section 65A of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d and assigned to the Appellant the exclusive right to develop the said property and to sell individual developed plots and the Appellant accepted such authority, permission and the right to develop the said property and to sell the developed plots in a phased manner. The relevant clauses of the agreement are reproduced below:- WHEREAS A. The Owners represent that they are the absolute owners and seized and possessed of or otherwise well and sufficiently entitled, inter alia, to all that piece or parcel of land bearing khasra No. 426 of Jodhpur Tehsil, admeasuring 1,19,86,800 sq. ft. (One Crore Nineteen Lacs Eighty Six Thousand Eight Hundred square feet) or thereabouts together with a palace known as Umaid Bhawan and a hotel known as Umaid Bhawan Palace and the hereditaments and premises standing thereon. (hereinafter referred to as the said entire Property ). The said entire property is described in Annexure A herein and shown surrounded by yellow colour boundary line on the Plan hereto annexed and marked as Annexure B . B. The Owners propose to develop a portion of the said entire property to the extent admeasuring a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the date of approval of the plans or such period as may be mutually agreed upon. The period of completion of the remaining phases shall be seven years from the date of approval of plans or such extended period as may be mutually agreed after completion of first phase. -------------------- 11. The Developers shall subject to clause 6 above be responsible for doing, executing and carrying out all such acts, deeds and things as may be necessary to complete the said project including the following: a. To bring and /or arrange finance within a period of nine months from the date of approval of plans towards initial cost for infrastructure, roads, sewerage treatments, cables, water lines, electricity, etc., as may be required, for the development of the said property. -------------- d. Applying and obtaining from officers of the Government of Rajasthan all such permissions/consent/ sanctions/approvals as may be necessary for the development envisaged herein and to do and perform all acts connected therewith or pertaining thereto, including any applicati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... --------------- (c). The Owners shall receive a minimum of ₹ 400/- per sq. yards towards the land cost for residential and commercial plots. However in respect of the plots utilized for public utilities like schools, hospitals. Colleges, religious places, etc. the Owners will be entitled to receive such amount as may be mutually agreed between the parties. 13. It is agreed between the parties hereto that on completion of the entire project, if any land and/or plots with or without construction remain unsold, then the same shall be divided between the Owners and the Developers equally. In that event, the Developers shall pay to the Owners only the cost of the land and/or plots retained by the Developers after deducting the cost of development therefrom. The price of the land or of the plots along with the construction thereon retained by the Developers shall be ascertained as may be mutually agreed upon between the parties hereto and if the parties fail to do so, then a Valuer shall be jointly appointed by the Owners and the Developers to determine the price of the unsold land/or plots and such valuation will be final and bind ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted as a Partnership/ Joint Venture between the parties and that the Appellant had been given only the right to develop the property and that each of them had undertaken their respective obligation and have the rights specified on their own account and on principal to principal basis and not on behalf of or on account of or as agent of any of them or anyone else. 13. According to the Revenue the activities undertaken by the appellant would fall in the taxable category of site formation and real estate agent . 14. It is, therefore, appropriate to reproduce the definition of site formation as contained in section 65(97a) of the Act and it is as follows:- 65(97a) site formation and clearance, excavation and earth moving and demolition includes,- (i) Drilling, boring and core extraction services for construction, geophysical, geological or similar purposes; or (ii) Soil stabilization; or (iii) Horizontal drilling for the passage of cables or drain pipes; or (iv) Land reclamation work; or (v) Contaminated top soil stripped work; or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urs first among the sub-clauses which equally merit consideration; 18. It is in the light of the aforesaid provisions of the agreement and the definitions of real estate agent and site formation services that the submissions advanced by learned Counsel for the Appellant and the Authorized Representative of the Department have to be examined. 19. Learned counsel for the Appellant placed emphasis on paragraph 8 of the show cause notice that has been reproduced above, and pointed out that whereas the first part of the said paragraph refers to the activities undertaken by the Appellant under the category of site preparation , the second portion of the paragraph refers to the activities undertaken by the appellant under the category of real estate agent and it has been alleged that service tax appears to be leviable as per statutory provision on real estate developed by site preparation on consideration basis . Learned counsel submitted that it was incumbent for the Department to have classified the activities under one or the other category of service contemplated under section 65(105) of the Act in view of the provisions of section 65A of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se which provides the most specific description shall be preferred to sub-clauses providing a more description; (b) composite services consisting of a combination of different services which cannot be classified in the manner specified in (a) shall be classified as if they consisted of a service which gives them their essential character, in so far as this criterion is applicable; (c) when a service cannot be classified in the manner specified in clause (a) or clause (b), it shall be classified under the sub-clause which occurs first among the sub-clauses which equally mere consideration. 22. Paragraph 8 of the show cause notice does mention that composite services were rendered by the assessee consisting of real estate agent and site formation . Section 65A (2) (a) provides that when a taxable service is prima facie classifiable under two or more sub-clauses, than the sub-clause which provides the most specific description shall be preferred to sub-clauses providing a more general description. Section 65A(2) (b) provides that if the composite service cannot be classified in clause (a), they shall be classified as if they con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion (1) of Section 65A provides classification of cluster of services under a specific taxing entry which gives the essential character of the services. Such an exercise was not carried out by the adjudicating authority and also there is no whisper the show cause notice in this regard. Such legal infirmity in the show cause notice is incurable at the appellate stage. Unless the show cause notice exhibits the activity carried out, and the service which has essential character to embrace the cluster of service to its fold, it is difficult to comprehend to classify such services under an appropriate taxing entry. 10. In view of the aforesaid observation, without finding any foundation in the show cause notice, we painfully allow the appeal for the short comings in the show cause notice and the adjudication order failing to appreciate law relating to classification. 11. At this stage, both sides agree that on the similar situation, where a final order was passed by Tribunal in the assessee s own case reported in 2007 (7) STR 369 (Tri. Chennai) = 2007-TIOL-892-CETAT-MAD holding no taxability has been upheld by the Hon ble High Court of Madras as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esaid Circular notices that some international reality concerns are providing services to real estate developers and promoters in respect of evaluation of a proposed real estate scheme/ project by conducting techno economic study, providing feasibility report and even helping in marketing real estate projects. Such services attract service tax. The Circular clarifies that the activity of actual construction of any building carried out by builder/ developer does not attract service tax levy as it is not a service within the meaning of the term real estate agent or real estate consultant . The said Circular containing a clarification regarding service tax on real estate agents and real estate consultants is as follows; CLARIFICATION REGARDING SERVICE TAX ON REAL ESTATE AGENTS AND REAL ESTATE CONSULTANTS EXTRACTS OF CBEC CIRCULAR F.NO.B-11/3/98-TRU, DATED 7-10-1998/ TRADE NOTICE NO. 7/98-ST, DATED 13-10-1998, MUMBAI COMMISSIONERATE 8.1 (i) As per Section 65(35), real estate agent means a person who is engaged in rendering any service in relation to sale, purchase, leasing or renting, of real estate an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s and the agreement entered into by the appellant with various entities, we find that the appellant is liable for the profit or the loss of the said project despite the said project was executed in the name of special purpose vehicle. It is also seen that the entire project was financed by the appellant herein. The said facts are not denied or disputed by the lower authorities. It is to be seen on this factual matrix whether there was any service rendered by the appellant in the category of real estate agent for receiving development charges. It is common knowledge that the real estate agent transacts the business of sale or purchase of the property, leasing or renting of the property and gets an amount as a commission. Though the definition of real estate consultant talks about evaluation, construction, design, development, construction, implementation, supervision, maintenance, marketing, acquisition or management of real estate, it has to be borne out of the record that such services are rendered. As already stated hereinabove that the appellant herein has not rendered any of the services. On the contrary, he envisaged conceptualized developed, implemented and marketed the sch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fall under the category of site formation services since it has been contended by the learned Authorized Representative that the category of service for the activity undertaken by the Appellant would be real estate agent . However, as learned counsel for the Appellant has made extensive submissions, this submission can be examined. 32. Site formation service is defined in Section 65 (97a) of the Act. It includes services for preparation of site for further development. This is apparent from the Circular dated 27 July 2005 issued by the Government of India, Ministry of Finance for the year 2005-2006 when this service was added. It is reproduced; 6.1. Any service provided or to be provided to any person, by any other person, in relation to site formation and clearance, excavation and earthmoving and demolition and such other similar activities is leviable to service tax under sub-clause (zzza) of section 65 (105) of the Finance Act, 1994. Site formation and clearance, excavation and earthmoving and demolition has been defined in clause (97a) of Section 65 of the Finance Act, 1994. 6.2. The definition of site formation an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rvoir. Activities undertaken in relation to these contracts neither fir in the definition of site formation and clearance, excavation and earthmoving and demolition service nor these relate to repairing/ renovating water sources as water sources in present case is river. Some part of site formation, excavation and earthmoving done by the appellant was for preparing of further construction of reservoir and other civil works. We therefore are of the view that these activities undertaken by the appellant are out of purview of Site Formation, and Clearance Excavation and Earthmoving and Demolition Service as defined under Section 65(97a) of the Act . (emphasis supplied) 34. The activity carried out by the Appellant would, therefore, not fall under site formation . 35. Thus, all the reasons stated above, the impugned order dated 29 February 2012 passed by the Commissioner of Central Excise, Jaipur cannot be sustained and is set aside. 36. It is, therefore, not necessary to deal with the other submissions advanced by learned Counsel for the Appellant relating to co-venture or extended period of limitation. The ..... X X X X Extracts X X X X X X X X Extracts X X X X
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