Custom, Excise & Service Tax Tribunal
M/S Jaipuria Infrastructure ... vs Cst, New Delhi on 22 December, 2016
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL West Block No. 2, R.K. Puram, New Delhi 110 066. Principal Bench, New Delhi COURT NO. IV DATE OF HEARING : 03/11/2016. DATE OF DECISION : 22/12/2016. Service Tax Appeals No. 1685 of 2010 and 1107 of 2011 [Arising out of the Order-in-Original No. 19/JM/2009 dated 16/09/2009 passed by The Commissioner (Adjudication), Service Tax, New Delhi and Order-in-Original No. 13-15/RDN/2011 dated 28/04/2011 passed by The Commissioner, Service Tax, New Delhi.] For Approval and signature : Honble Ms. Archana Wadhwa, Member (Judicial) Honble Shri V. Padmanabhan, Member (Technical) 1. Whether Press Reporters may be allowed to see :No the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982? 2. Whether it would be released under Rule 27 of : the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not? 3. Whether their Lordships wish to see the fair :Seen copy of the order? 4. Whether order is to be circulated to the :Yes Department Authorities? M/s Jaipuria Infrastructure Developers Pvt. Ltd. ] Appellants M/s Ansal Housing & Construction Ltd. ] Versus CST, New Delhi Respondent
Appearance Ms. Priyanka Goel, Advocate for the appellant.
Shri Sanjay Jain, Authorized Representative (DR) for the Respondent.
CORAM : Honble Ms. Archana Wadhwa, Member (Judicial) Honble Shri V. Padmanabhan, Member (Technical) Final Order No. 56031-56032/2016 Dated : 22/12/2016 Per. V. Padmanabhan :-
These two appeals have been filed against orders passed by the Adjudicating Authority. Since the issues involved are common, the two are being disposed by this common order. Both the appellants are engaged in the development of immovable property. The dispute in appeal No. ST/1685/2010, is with reference to certain amounts charged by the appellants which are described as administrative charges, restoration charges and transfer charges from their clients. In appeal No. ST/1107/2011 the dispute is with reference to administration charges which are in the nature of transfer charges in the first appeal. Revenue has taken the view that these charges have been recovered in connection with the sale of real estate and hence, are liable to service tax under the category of Real Estate Agent Services defined under Section 65 (88) of the Finance Act, 1994, which has been introduced w.e.f. 16/10/1998. After issue of show cause notice, the service tax demands stand confirmed alongwith levy of interest and penalties. The appeals have been filed against such orders mainly on the following grounds :-
(a) the administrative charges in appeal No. 1685 of 2010 have been recovered from the allottes when the flats are to be registered in the name of the original allottes. Their contention is that the appellant is acting on his own behalf and not as agent of anybody else. Accordingly, they have submitted that the service tax demand on such charges, are not sustainable under the category of Real Estate Agents ;
(b) the appellants have recovered restoration charges when an allottee defaults in their payment schedule and for that reason the allotment is cancelled. Thereafter when the allottee comes for restoration of allotment, a penalty is levied to compensate for damages caused by default. It is argued that this cannot be considered as service for the levied by a Real Estate Agent ;
(c) transfer charges in appeal No. 1685 of 2010 and administration charges in appeal No. 1107 of 2011 are levied for changing the name of the owner (last allottee) in their records, whenever any sale take place prior to execution of sale deed in favour of the buyer. Their submission is that such charges are also recovered in the nature of administration charges as at (a) above.
2. We have heard Ms. Priyanka Goel, learned Advocate for the appellant as well as Shri Sanjay Jain, learned DR for the Revenue.
3. The main submission of the learned Counsel was that till the date of completion of construction and full payment of the agreed sum and execution of sale deed in favour of the buyer of the property, the ownership of the property continues to remain with the developer. He submits that any amounts recovered till this date would be in the nature of self-service and consequently would not attract service tax. He relied upon the following case laws :-
(a) CST vs. Sujal Developers reported in 2013 (31) S.T.R. 523 (Guj.) ;
(b) Monsanto Manufacturer Pvt. Ltd. vs. CCE & ST reported in 2014 TIOL 550 HC ALL ST.
4. Learned DR on the other hand supports the order passed by the Adjudicating Authority. He submits that all these charges recovered are towards the sale of Real Estate and, hence, are liable for service tax under the entry for Real Estate Agent Service. He also relied upon the Tribunal decision in the case of Ajay Enterprises Pvt. Ltd. vs. CST, Delhi reported in 2016 (42) S.T.R. 471 (Tri. Del.).
5. The Real Estate Agent Service has been defined under Section 65 (88) of the Finance Act, 1994 is as follows :-
Real estate agent means a person who is engaged in rendering any service in relation to sale, purchase, leasing or renting of any real estate and includes a real estate consultant.
Therefore, the real estate agent must satisfy the following conditions :
(i) Real Estate agent should be a person. The term person has been defined in clause (42) of Section 3 of General Clauses Act, 1987, as person shall include any company or association or body of individual, whether incorporated or not.
(ii) Real estate agent should be engaged in rendering services in relation to sale, purchase, leasing or renting of real estate. The term sale refers to transfer or agreement to transfer for a price. The word purchase refers to acquire or buy for price, which gives the absolute rights in the property.
Further, sub-clause (v) of clause (105) of Section 65 of the said Act, as amended, defines the taxable service provided by a real estate agent, as any service provided or to be provided, to a client, by a real estate agent in relation to real estate.
The term sale in connection of immovable property has been fined in Section 54 of the Transfer of Property Act, 1882 as follows :-
Sale is defined :- sale is a transfer of ownership in interest for a price paid or promised or part paid or part promises.
6. The administration charge has been recovered by the appellant from all original allottes of flats to cover expenses in connection with registration etc. It is fairly obvious that such charges are not covered within the definition of Real Estate Agent, in as much as it has been collected by the appellant directly from the allottes. In such a transaction there are only two parties the buyer and seller (appellant) of the flat. Since no service has been rendered, the demand for service tax is not sustainable.
7. Next we turn to the restoration charges, which have been recovered when an allottee defaults in his payment schedule and for that reason allotment is cancelled. In such cases, if the allottee approaches for restoring the allotment, restoration charges are levied. We find that such charges are in the nature of a penalty imposed on the allottee to cover damages caused by his default in payment. We agree with the contention of the appellant that such charges cannot be considered as a service charge liable for levy of service tax.
8. The transfer charges are recovered when the original allottee gives up his allotment even before the flat is fully constructed, ready for transferred. At this stage, if a new buyer approaches for taking over the allotment of the flat, the appellant transfers the original allotment of the flat from the initial allottee to the new buyer. In such cases, the transfer charges are levied on the new buyer on which service tax has been levied under the category of Real Estate Agent Services. The transfer charges are the consideration recovered by the appellant in connection with re-allotment of the apartment to the new buyer. In terms of the definition of the term sale under the Transfer of Property Act, 1882, the transfer of title from one buyer to another is covered within sale when a builder allots a flat to a buyer. Even if it is not completed a right gets vested in the allottee to the extent of a portion of the undivided share of the land as well as in the form of entitlement to get the flat when completed. During the process of transfer of the allotment to the new buyer, this right vested in the original allottee gets transferred to the new allottee. The consideration payable for such transfer, will be the amount of installments already paid so far by the original allottee which needs to be paid up by the new allottee to the original allottee. The appellant, has recovered transfer charges which becomes the consideration for facilitating such sale.
A person who is engaged in rendering any service in relation to sale of real estate is liable to pay service tax under the Real Estate Agent Services. As discussed above, the transfer charges would be liable for payment of service tax under the above category.
9. The learned DR has relied upon the decision of the Tribunal in the case of Ajay Enterprises Pvt. Ltd. (supra), in which an identical issue stands decided against the assessee. However, in the said decision of the Tribunal the demand for service tax stands upheld only for the normal period of limitation. Further, the benefit of cum-tax also stands extended. For convenience, the relevant findings are reproduced below :-
4.? We have considered the contentions of both sides. As per Section 65 (88) of Finance Act, 1994 Real Estate Agent means a person who is engaged in rendering any service in relation to say purchase and leasing or renting of real estate and includes a real estate consultant. It is an admitted fact that the appellant was a real estate agent and registered under Real Estate Agent service. It was providing service in relation to sale, purchase, leasing or renting of real estate and paying Service Tax for rendering real estate agent service. The related taxable service is defined in Section 65(105) (v) ibid as under :-
Taxable service means any service provided or to be provided to any person by real estate agent in relation to real estate. It is evident that the administrative/transfer charges were recovered for rendering service in relation to real estate. Thus, we are of the view that the service rendered clearly fell within the purview of Real Estate Agent service and these charges constituted part of the assessable value of Real Estate Agent service.
5.? The appellant has strongly contended that it was under bona fide belief that these charges being administrative in nature did not constitute part of the Real Estate Agent service. It is seen that the primary adjudicating authority in the impugned order has clearly noted that the appellant undoubtedly accounted for all the transactions in the statutory records. But the primary adjudicating authority held that the appellant was guilty of wilful misstatement/suppression of facts with intention to evade Service Tax as it never approached the Department to ascertain the details of their liability to pay Service Tax and the evasion would have gone undetected but for the investigation by the Department. In this regard it is pertinent to mention that in case of a bona fide belief about the non-taxability of certain transactions, the appellant would not approach Revenue for any clarification because clarification is sought only when there is some confusion/doubt. In case of CCE v. Chemphar Drugs & Liniments [2002-TIOL-266-SC-CX = 1989 (40) E.L.T. 276 (S.C.)] Supreme Court held that something positive other than mere inaction or failure on the assessees part or conscious withholding of information when assessee knew otherwise is required for invoking extended period. In the case of Continental Foundation Joint Venture v. CCE [2007 (216) E.L.T. 177 (S.C.)] Supreme Court went to the extent of saying that any incorrect statement by itself cannot be equated with wilful mis-statement. Indeed the fact that even the adjudicating authority [Commissioner (Adjudication), Service Tax, New Delhi] in its Order No. 49/AKM/CST (Adj)/2012, dated 28-6-2012 in the case of M/s. Vatika Ltd. has held that no Service Tax is payable under Real Estate Agent service on such administrative/transfer charges is a clear evidence that it was in no way unreasonable on the part of the appellant to entertain such a bona fide belief.
6.? As regards the contention that cum-tax benefit should be extended to the appellant, we find that in the given circumstances, the cum-tax benefit can be extended in terms of Explanation 2 to Section 67 ibid as it existed prior to 18-4-2006 and in terms of sub-section (2) of Section 67 ibid as it exists w.e.f. 18-4-2006.
7.?In the light of the foregoing analysis we allow the appeal by way of remand to the primary adjudicating authority for de novo adjudication with our following directions/findings :-
(i) Extended period in this case is not invocable and therefore penalty under Section 78 ibid is also not sustainable.
(ii) The appellant is eligible for the cum-tax benefit.
(iii) The demand is to be accordingly re-computed. Needless to say that the penalty under Section 76 ibid will also have to be recomputed.
(iv) The appellant should be given an opportunity of being heard before the de novo adjudication.
10. By following the above decision, we modify the impugned order on similar lines and remand the matter to the Adjudicating Authority to re-compute the demand within the normal period of limitation. We also make it clear that no penalty will be leviable under Section 78 and the penalty under Section 76 needs to be re-computed alongwith the demand of service tax. The appeals are decided accordingly. Needless to mention here that an opportunity will be given to the appellant to hear his side before taking a decision in this matter.
(Order pronounced in the open court on 22/12/2016.) (Archana Wadhwa) Member (Judicial) (V. Padmanabhan) Member (Technical) PK ??
??
??
??
10