Custom, Excise & Service Tax Tribunal
Ms Shri Krishna Builders And Property ... vs Commissioner Of Gst&Cce (Chennai ... on 11 November, 2025
CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
CHENNAI
REGIONAL BENCH - COURT No. III
Service Tax Appeal No. 42060 of 2018
(Arising out of Order-in-Appeal No. 257/2018(CTA-II) dated 25.05.2018 passed by
Commissioner of CGST and Central Excise (Appeals-II), Newry Towers, 2nd Floor, Plot No.
2054, I Block, II Avenue, Anna Nagar, Chennai - 600 040)
Shri Krishna Builders and Property Developers
Private Limited ...Appellant
Devaprakasam Trade Centre,
Madura Garden,
No. 15, Poonamallee High Road,
Maduravoyal,
Chennai - 600 095.
Versus
Commissioner of GST and Central Excise ...Respondent
Chennai Outer Commissionerate, Newry Towers, No. 2054-I, 2nd Avenue, 12th Main Road, Anna Nagar, Chennai - 600 040.
APPEARANCE:
For the Appellant : Mr. S. Satish Chandrasekaran, Advocate For the Respondent : Mr. M. Selvakumar, Authorised Representative CORAM:
HON'BLE MR. P. DINESHA, MEMBER (JUDICIAL) HON'BLE MR. VASA SESHAGIRI RAO, MEMBER (TECHNICAL) FINAL ORDER No. 41299 / 2025 DATE OF HEARING : 12.08.2025 DATE OF DECISION : 11.11.2025 Per Mr. VASA SESHAGIRI RAO This Service Tax Appeal No. ST/42060/2018 has been filed by M/s. Shri Krishna Builders and Property Developers Private Limited, Chennai (hereinafter referred to 2 as 'Appellant') against the Order-in-Appeal No. 257/2018(CTA-II) dated 25.05.2018 ('Impugned Order' for short) passed by the Commissioner of CGST and Central Excise (Appeals-II), Chennai.
2.1 Brief facts of the case as taken from the Appeal records are that the Appellant is engaged in providing Construction of Residential Complex Service and Works Contract Service having Registration No. AAKCS8914QSD001. During the course of scrutiny of records, it was noticed that they had entered into a Joint Venture Agreement on 07.01.2010 and Supplementary Joint Venture Agreement entered on 23.05.2011. Out of 80 Nos. flats measuring a total area of 84,628 sq. ft., constructed by the appellant, developer would retain 47 flats totally measuring 50517 sq. ft. and 33 flats measuring 34111 sq. ft. would be landowner's share. The appellant agreed to construct and hand over 33 apartments to the landowners who, in turn handed over their land as consideration for the above construction activity and the consideration offered was landowners 60% of undivided share of land. As it was seen that consideration for the service was given on 23.5.2011 and completion certificate was issued on 28.11.2014, the service tax is required to be paid by the appellant. Board's Circular No. 151/2/2012-ST 3 dated 10.02.2012 has clarified that the value of these flats would be equal to the value of similar flats charged by the builder/developer from the second category of service receivers. The relevant portion of the Circular cited supra is extracted below for ready reference: -
"(A) Taxability of the construction service:
(i) For the period prior to 01/07/2010: construction service provided by the builder/developer will not be taxable, in terms of Board's Circular No.108/02/2009-ST dated 29.01.2009.
(ii) For the period after 01/07/2010, construction service provided by the builder/developer is taxable in case any part of the payment/development rights of the land was received by the builder/ developer before the issuance of completion certificate and the service tax would be required to be paid by builder/developers even for the flats given to the land owner. (B) Valuation:
(i) Value, in the case of flats given to first category of service receiver, is determinable in terms of section 67(1)(iii) read with rule 3(a) of Service Tax (Determination of Value) Rules, 2006, as the consideration for these flats i.e., value of land / development rights in the land may not be ascertainable ordinarily. Accordingly, the value of these flats would be equal to the value of similar flats charged by the builder/developer from the second category of service receivers. In case the prices of flats/houses undergo a change over the period of sale (from the first sale of flat/house in the residential complex to the last sale of the flat/house), the value of similar flats as are sold nearer to the date on which land is being made available for construction should be used for arriving at the value for the purpose of tax. Service tax is liable to be paid by the builder/developer on the 'construction service' involved in the flats to be given to the land owner, at the time when the possession or right in the property of the said flats are transferred to the land owner by entering into a conveyance deed or similar instrument (eg. allotment letter).
(ii) Value, in the case of flats given to the second category of service receivers, shall be determined in terms of section 67 of the Finance Act, 1994."4
2.2 As the Appellant failed to pay service tax on the 33 flats constructed and handed to the landowners, the Show Cause Notice No. 3/2017 (ADC) dated 10.02.2017 was issued.
2.3 After due process of law, the demand of Rs.51,67,276/- was confirmed under section 73(2) of Finance Act, 1994 read with proviso to Section 73(1) of Finance Act, 1994 and Interest was demanded under Section 75 of Finance Act, 1994. Equal penalty of Rs.51,67,276/- was imposed under Section 78 of Finance Act, 1994. 2.4 Being aggrieved, the appellant filed an Appeal before the Commissioner (Appeals) which was rejected vide Order-in-Appeal No. 257/2018(CTA-II) dated 25.05.2018. 2.5 Once again, being aggrieved, the Appellant is in appeal before this forum.
3. The Ld. Counsel Mr. Sathish Chandrasekaran, for the Appellant and the Ld. Authorized Representative Mr. M. Selvakumar, appeared for the Respondent and both have made their submissions.
4.1 The Ld. Counsel has contended that: -
5
i. There has been no wilful suppression or fraud or collusion with regard the facts of the case and hence there was no contravention of any of the provisions of the act or the rules made hereunder. Hence the Show Cause Notice is barred by limitation, as none of the ingredients set out in the provision to section 73(1) of the Finance Act, 1994, to invoke the extended period of limitation is present in the current case. ii. The bonafides of the Assessee are proved by the fact that they have paid service tax on the flats constructed by them and sold to third parties and the construction was not carried out by them for the land owner since it was more of a self-construction as 33 flats were allotted by the Assessees to the land owner in lieu of 60% undivided share in the land. Therefore section 73 (1) of the Finance Act, 1994 is not applicable and hence invoking the extended period is incorrect.
iii. Even assuming invoking the extended period of limitation is justified, still the show cause notice has been issued beyond the five year period taking into consideration of relevant agreement entered into between the parties on 25.07.2011 and hence, the five year period expired on 25.07.2016, which is clearly much before the Show Cause Notice issued on 10.02.2017.
6iv. The intention of the parties to the agreement was to only develop the property jointly and jointly enjoy the benefits of the same and hence it is absolutely wrong to assume that the Assessee had agreed to construct 33 flats for the land owners.
v. When the property has been jointly developed, the Assessee is not liable for service tax on the portion that has fallen to the share of one of the parties to the joint ventures, that is the land owners as no service of any nature has been rendered.
vi. Reliance on the clarification issued by the Central board of excise and customs vide circular No. 151/2/2012 ST (F.No. 332/13/2011/TRU) dated 10.02.2012 stating that after the period 01.07.2010 construction services provided by the developer is also taxable, is not applicable in the current case since, in the absence of any provision, in the statue to levy tax on the share of a party to a joint venture agreement the clarification cannot be the basis for the levy of service tax. vii. The computation made by the department by taking into consideration the comparable construction charges available for independent client as the consideration liable to service tax is absolutely wrong. 7 viii. As per Notification No. 1/2006 - ST dated 01.03.2006 service taxes leviable only on 33% of the value and this abatement has not been considered by the department. ix. The proposal to levy interest under section 75 and penalty under section 78 of the Finance Act 1994 and delayed payment is not applicable in the current case. 4.2 The Ld. Advocate has further submitted that: -
i. Whether works contract service is applicable as the contract is before the said service concept introduced and taxability of the service and applicability of provisions of 6 and 67 (l)(iii).
ii. The comparable price between the owners and the buyers arrived for calculating service tax is wrong as the same may differ since the buyers pay for both the land and the construction which is not the same in the case of the owners since the said price for the buyers would also include other expenses incurred by the Appellant.
iii. Rule 3(a) is incorrect and ultra vires the Act and the same cannot be relied upon to demand Service Tax from the Appellant, Rule 3(a) should be applied only when the consideration is non-monetary and where the consideration is not ascertainable.8
iv. The Joint Venture Agreement and the subsequent supplementary agreement were signed during the period 2011 which forms the basis for the issue to determine the intention of the parties and hence issuing the Show cause notice in 2017 which even beyond the period of invoking the permissible extended period of limitation is not maintainable in the present case.
v. The cost of construction of Flats sold by the Appellant to an independent buyer nearest in point of time as consideration to determine the value by placing reliance on the circular dated 10.02.2012 is invalid since the same is not applicable in the current case. vi. The finding that the consideration was received by the Appellant before the issuance of the Completion certificate is factually incorrect.
vii. Service tax is leviable only on 33% of the value as per Notification No. 1/2006 -- ST dated 01.03.2006 vide Sl.No. 10 for construction of complex service and this abatement has not been considered by the learned lower authorities.
viii. The activities of the Appellant are well within the knowledge of the department since they have been paying service tax for the consideration received for 9 other flats which were sold to other buyers towards construction service.
4.3 The Ld. Advocate has argued that it can be concluded on the basis of above submissions as follows: -
i. No consideration has been received by the Appellant either monetary or non-monetary towards the development of the property.
ii. The amount arrived at by the original authority is not correct in the facts of the case as Rule 3(a) is not applicable since the value was determinable in the current case.
iii. Assuming that the appellant is liable to pay service tax, they are eligible for abatement as per Notification No. 01/2006- ST dated 01.03.2006.
iv. Since the Joint Venture agreement and the supplementary agreements were entered in 2011, the Show Cause Notice is barred on the point of extended period of limitation.
v. Since the department was aware of the nature of business of the Appellant herein, allegations of fraud, misrepresentation and collusion is not applicable. Hence extended period cannot be invoked vi. Since no fraud or misrepresentation is established penalty and interest would not arise. 10
5. The Ld. Authorized Representative Mr. M. Selvakumar have affirmed the findings in the impugned Order-in-Appeal No. 257/2018(CTA-II) dated 25.05.2018.
6. We have considered the rival submissions and evidence available on appeal records.
7. The questions for our consideration are: -
i. Whether the Developer has provided any construction service to the land‑owner under the JVA and whether service tax is exigible on the Owner's Share (40%)? ii. If taxable, what is the correct valuation of the Owner's Share for levy of service tax?
iii. Whether the transaction falls under 'works contract' or 'construction of complex' (for abatement/valuation purposes)? and, iv. Whether the Department is entitled to invoke extended period of limitation and impose penalty for suppression or fraud or misrepresentation in the facts of the appeal?
8. We take up the issues in seriatim.
8.1 As both the first and second questions are intertwined, we take up both for decision together. We find that the Developer has constructed the complex, sold part of the built‑up area to third‑party buyers and allotted the Owner's share to the land‑owner. The Department issued the 11 Show Cause Notice demanding service tax on the Owner's Share on the ground that the Developer had rendered taxable construction service to the land‑owner and had not discharged due service tax on the value of the Owner's Share. The Department also invoked extended period and proposed penalties under the relevant provisions on the ground of alleged suppression/concealment. 8.2 But, the Developer challenged the demand raising issues as to (i) existence of taxable service, (ii) valuation of the Owner's Share, (iii) classification (works contract v. construction of complex), and (iv) Justification for extended period and imposition of penalty. 8.3 We find that the Respondent in Para 10.3 of the impugned order has held that: -
"10.3 The contention of the appellant that in joint development agreement the distinction of service provider and service recipient doesn't exist is not correct as in the case, I find that the parties were neither taking risks jointly nor doing any common activity and there was no participation by the Land Owners in organizing or carrying out the activity. In the Joint Development Agreement, the land owner transfers part of his rights in the land and gets the value of such rights transferred, in the form of constructed flats which consist of value of material used and services rendered by the Developer. After the Land Owner transfers a part of his rights through the agreement, he is like any other prospective buyer for whom construction of complex is carried out under an agreement for construction of flats. The contention of the appellant that the joint development venture is only between partners and hence landowners is not receiving any service from the appellant, is not correct as 'service' means any activity carried out by a person for another person for consideration and includes a declared service 12 and construction of a complex is very much a declared service leviable to service tax and hence the contention of the appellant is rejected. There is no force in the argument of the appellant."
8.4 We find that prior to 01.07.2010 there is no leviability of Tax on the owner's share of the Apartments. CBEC Circular No. 151/2/2012‑ST dated 10.02.2012 (hereinafter 'Circular 151') deals specifically with taxation under Joint Venture Agreements and prescribes the point of taxation and valuation approach. In particular after 01.07.2010, it advises that the Developer is liable to pay service tax on the construction service provided to the land‑owner and that the value of such flats should ordinarily be taken as the price of similar flats charged to independent buyers at the nearest point of time.
8.5 We note that the JVA was executed on 23.05.2011, the completion certificate was issued on 28.11.2014 by the CMDA and flats were handed over to buyers on 05.08.2014 i.e., before issuance of the completion certificate by the competent authority. 8.6 Here we find that the exchange of construction services for development rights was considered a taxable service and the "consideration" was the value of the land or development rights received by the developer, which could include the value of the flats built for the landowner. The 13 value of the flats given to the landowner, which was the consideration for the development rights, was used to determine the service tax liability. The Appellant/builder or developer was the party responsible for paying the service tax on the construction services provided to the landowner. 8.7 The contentions of the Department in this regard are that: -
(a) The Developer has rendered construction service to the land‑owner and has not discharged service tax on the Owner's Share; therefore, tax is leviable on the value of the flats allotted to the land‑owner.
(b) Board's Circular No. 151/2/2012-ST dated 10.02.2012 supports Department's position on liability and valuation.
(c) Extended period and penalty are invocable due to suppression and non‑disclosure in the returns filed. 8.8 The question whether service tax is exigible on the Owner's Share under a JVA is fact‑sensitive and depends upon documentary evidence; terms of the JVA, timing and manner of allotment, whether the Developer has included the Owner's Share value in prices to buyers and paid tax thereon, and the specific classification opted for by the 14 Developer in the relevant period. We proceed to address each issue based on the records before us. 8.9 The relevant date for discharging the service tax liability was clarified by the Central Board of Excise and Customs (CBEC) through Circular No. 151/2/2012-ST, dated February 10, 2012 as discussed supra.
According to the clarification, the service tax is payable by the builder at the time when possession or the right in the property was transferred to the landowner. a. The taxable event was not the signing of the JVA itself, but the formal transfer of the flat to the landowner through a conveyance deed, allotment letter, or other similar instrument.
b. The builder is required to pay the service tax for the flats allocated to the landowner at the time of transfer, provided the builder had received some part of the consideration (the development rights) before the issuance of the completion certificate. 8.9.1 We find from para 4 & 5 of the Order-in-Original that: -
"4. In this case. the assessee has agreed to construct and hand over 33 Apartments to the landowners who, in turn, handed over their land as above construction activity. Since consideration for the service (construction of residential apartments) agreed to be provided was given on 23.05.2011 before the issue of completion certificate by the competent authority i.e 28.11.2014, the assessee is liable to pay service tax for the 33 residential units constructed and handed over to 10 landowners in respect of service portion. 15
5. In this case, consideration offered by the landowners 60% of undivided share (UDS) of land in the Schedule Property. Therefore, the determination of value in this case is to be done In terms of Clause (iii) of Section 67 (1) of the Act read with Rule 3 (a) of the STDVR. As the land for use by the assessee was executed on 23.05.2011, construction cost of flat sold by the assessee to an independent buyer nearest in point of time to the said date is to be adopted."
8.10 We also find from Para 7 of Order-in-Original the methodology used for valuation used on the date of sale of the said flat is nearest in point of time to 23.05.2011 i.e. on 05.12.2012, the construction cost of the said flat is adopted to arrive at the taxable value of service rendered for the said 33 flats. Here, we find that the Appellant/Developer is providing construction services to the land‑owner for a consideration (the Owner's Share). We also find from the records that the Appellant/Developer has not established on the basis of contemporaneous records (invoices to buyers, accounting entries, returns and bank flows) that the land component/Owner's Share value was effectively included in the price charged to independent buyers and that service tax has been discharged on the gross consideration so as entire economic incidence has been taxed.
8.11 As no evidence has been adduced on the gross consideration by the Appellant, the valuation of the Owner's Share must follow Section 67 of Finance Act, 1994 read with Rule 3(a) of Service Tax (Determination of Value) Rules, 2006 and in terms of the instructions vide Board's Circular 16 No. 151/2/2012-ST dated 10.02.2012. The value of the allocated flats is to be ascertained by reference to the price of similar flats charged to independent buyers near the date when the Owner's right is made available (allotment/ possession/ conveyance). This method is expected to prevent artificial undervaluation. We find that the department has adopted this guideline which is well documented and elaborately explained in Para 7 of the OIO which has been upheld in the impugned Order and only the construction cost is taken for computation of Tax and not the land value. We have perused the same and do not find any ground to differ with the findings of Lower Adjudicating Authorities.
8.12 We find that the Appellant had relied upon several case Laws said to be in his favour wherein it was held that the service tax was not payable on the owners share of Apartments allotted.
i. KRISHNA HOMES v. COMMISSIONER OF CENTRAL EXCISE, BHOPAL in 2014 (34) S.T.R. 881 (Tri. - Del.) ii. VIJAY SHANTHI BUILDERS LTD. v. COMMISSIONER OF SERVICE TAX, CHENNAI in 2018 (9) G.S.T.L. 257 (Tri. Chennai) iii. VINAYAGAR PROMOTERS & BUILDERS v. C.C.E., C. & S.T., VISAKHAPATNAM-I in 2016 (44) S.T.R. 307 (Tri. - Bang.) iv. VASANTHA GREEN PROJECTS v. CCT, RANGAREDDY GST in 2018 (5) TMI 889 v. RAMANIYAM RELA ESTATE V. COMMISSIONER OF SERVICE TAX IN FINAL ORDER NO 41465/2018 DATED 09.05.2018 17 We have perused all the above decisions and find the case Laws cited at Sl.Nos i),ii), iii) and v) related to the period prior to 01.07.2010 and so not relevant to the present Appeal. In this appeal, the demand pertains to the period from 2011 to 2014. We also further note that in respect of case law at Sl.No. iv) the appellant has not placed any evidence on record that how the cost of the land is included in the cost of the flats constructed on land owner's account. Thus, the facts in the appeal are distinguishable. 8.13 We also agree with the finding that the Appellant is not eligible for Abatement as there is transfer of property involved as held in the Order-in-Original and Order-in-Appeal and the value of construction service was only considered after granting abatement of 40% of the consideration of one of the flats sold.
Therefore, the question of taxability and the valuation of the land owner's share of apartments is answered in favour of Respondent.
9.1 We find that Rule 3 of the Point of Taxation Rules, 2011 (India), determines the point of taxation i.e., the date on which service tax is payable for services. It mandates that the tax is payable on the earliest of three 18 events: issuing of an invoice, receiving payment, or completing the service.
If payment is received before the date of issue of invoice or completion of service, then it is the date of receipt of payment.
In case of transactions between landlord and developer, usually there is no system of issuance of invoices. Therefore, out of the above three events, the date of receipt of consideration or date of completion of service would be relevant in case of JVA. The date of JVA notifies an agreement for provision of service whereas the date of handing over of owner's share of flats not only indicates completion of service but also the date for levy of service tax. In this case, the flats constructed were handed over to the landowner on 05.08.2014.
9.2 We further find that the JVA between the appellant and the landowner got executed on 23.05.2011. In this regard, the contention of the Department is that consideration for service being provided is "Construction of 33 residential apartments" on account of the landowner's share whereby the development rights in land were transferred to the Appellant. Service Tax levy will arise only if the flats are handed over / assigned / allotted before the issue of completion certificate by the competent authority 19 which was on 28.11.2014. In view of the above, the appellant is liable to pay service tax for the 33 residential units constructed and handed over to landowners in respect of the construction service provided from 23.05.2011 to 05.08.2014.
10. Now having ascertained the relevant date, we proceed to examine the issue of limitation. The Appellant has submitted that 23.05.2011, i.e. the date on which the development rights for development of land in lieu of consideration was transferred should be treated as the relevant date, whereas according to Respondent Department, the relevant date is the date of handing over the flats constructed i.e. on 05.08.2014. According to the Appellant, the demand has been issued beyond the maximum prescribed period of 5 years under Proviso to Section 73(1) of FA 1994 and on the contrary, we find that the Department contends that the demand is within the prescribed period of limitation. Here we have to note that the Development rights were offered to the Appellant in lieu of the 33 Flats to be constructed and handed over to them. The date on which the flats of land owner's share are allotted i.e., the date of completion of service will be the relevant date for computation of the tax liability and its payment. As such, we 20 are of the view that the demand is not hit by limitation and the contention of the appellant in this regard is not tenable.
11. However, during the disputed period there is a lot of uncertainty as to the Service Tax liability and also for its quantification by a Developer in respect of JVAs. As such, attributing any malafide to the appellant that there is suppression or intention to evade tax is not justified. As above, though it is held that the appellant is liable to pay service tax on the owner's share of flats constructed, imposing penalty is not justified.
12. In view of the above, the impugned Order-in- Appeal No. 257/2018(CTA-II) dated 25.05.2018 passed by the Commissioner of CGST and Central Excise, Chennai is modified to the extent of setting aside the penalty imposed but upholding demand of service tax along with interest due thereon.
13. Thus, the appeal is partly allowed.
(Order pronounced in open court on 11.11.2025) Sd/- Sd/-
(VASA SESHAGIRI RAO) (P. DINESHA) MEMBER (TECHNICAL) MEMBER (JUDICIAL) MK