GST update /2026-27/0081

M/s Dynamic Infra Developers P Ltd & Various Ors v. Commissioner of CGST – Dehradun

GST UPDATE

Demand of tax, penalties and extended period of limitation cannot be invoked merely on the basis of allegations.

Service Tax Appeal No.:52282 of 2022

Tribunal: CESTAT (New Delhi)

Case Title: M/s Dynamic Infra Developers P Ltd & Various Ors v. Commissioner of CGST – Dehradun

Outcome:Appeal was allowed

Judgement Date: 14.07.2026

BRIEF FACTS OF THE CASE:

A search was conducted at the premises of M/s Dynamic Infra Developers Pvt ltd. (Appellant) on the basis of intelligence that evasion of service tax was conducted by the appellant. Statement of supervisor of the appellant was recorded and the summons were issued to the all the directors of the appellant. Documents as asked by the department were produced by the appellant. The examination of documents revealed that appellants had received Advance registration amount from the customers for flats and plots at 9 different projects during the F.Y. 2012-13 to 2013-14.The Department treated the advances received for flat registration as consideration towards “Site Formation and Clearance Service” and proposed service tax thereon. The taxable value was computed at 30% of the amount received in terms of SL. No. 12 of notification no. 02/2013- ST dated 01.03.2013 and 09/2013-ST dated 08.05.2013.Thus, service tax chargeable on the service portion was alleged to be recovered from the appellant along with applicable interest and penalties under Section 77 and 78 of the Finance Act 1994 on the appellant and penalty under Section 78A and 77(1)(c) on all the directors of the appellant. Furthermore, late fees for non-filing of ST-3 returns for the period 2012-13 to 2013-14 was also proposed to be recovered. The demand raised by show cause notice was confirmed by an order in original passed by the adjudicating authority. Being aggrieved by the order, appellant preferred appeal before Commissioner (Appeals) which was dismissed. Pursuant to which, appellant preferred appeal before Hon’ble Tribunal.

QUESTION BEFORE HON’BLE TRIBUNAL:

Whether service tax demand can be raised against the advance received for the sale of developed plots by treating a portion of the same as site formation and development service for development of flat without providing substantive evidence?
Whether penalties can be invoked on appellant and its directors and extended period of limitation be invoked for the tax not paid without any corroborative evidence?

BRIEF ARGUMENTS BY APPELLANT:
Appellant submitted following contentions: -
Period in dispute during which developed plots were sold were not liable to service tax

That the appellant sold developed plots during the period in which service tax not leviable on the same. Scheme was launched in 2007, against which advances were received from the customers and during such period, sale of flats were not chargeable to service tax. Furthermore, the scheme was closed before the taxability came into existence i.e. 2012 and then, introduced scheme for sale of fully developed plots. Hence, appellant was engaged in sale of developed plots in 2012 during which flats became taxable.

Amount received from the customers have been refunded or appropriated against sale of plots

Along with that, whatever amounts received from the customers by the appellant against sale of flats, were either refunded to them or were transferred towards the sale of plots.

In view of above, it was contended that department has wrongly treated the sale of plots as taxable service of “site formation and development” and penalty was wrongly imposed on appellant and its directors.Therefore, impugned order should be set aside.

BRIEF ARGUMENTS BY REVENUE DEPARTMENT:

Revenue Department contended that:

That the portion of advance received against registration of flats was for providing “Site Formation and Clearance Service” hence, same is chargeable to service tax under Section 65(105)(zzh) and is covered under Section 66E of the Finance Act 1994 read with Rule 3 of the Point of Taxation Rules 2011.
That value of service is 30% of the advance received as per the Notification No. 02/2013-ST dated 01.03.2013 and 09/2013-ST dated 08.05.2013.

FINDINGS & JUDGEMENT:

Following are the findings of the Tribunal in the instant case:
Based on the contentions of both the parties, following are the observations and judgment of the Tribunal:

Appellant undertook a project in 2007 and there is no denial to the fact that appellant purchased agricultural land and thereafter sold it to different buyers after developing the same. Furthermore, department failed to produce evidence to prove that appellant sold flats instead of developed plots. Service tax was chargeable @14% only on the services not on goods.
Section 65B(44) was referred and it was observed that it is apparent that transfer of title in goods or sale of goods would not be covered under ‘service’. Along with that, service tax is not chargeable on the value representing goods.
Also the concept of classification of service was done away after introduction of the concept of negative list with effect from 01.07.2012. The activities mentioned in said negative list/ section 66D of the Finance Act, 1994 are not subjected to service tax. As already observed above, as per subclause (e) of section 66D of the Act, there is no service tax liability in case of transfer of goods. Hence holding the impugned activity, post July 2012, as “Site Formation and Development Service” is held to be a wrong finding.
Furthermore, under Section 66B of the Finance Act, 1994 service tax was chargeable on services other than those covered by ‘negative list’. Hence, as the trading of goods was covered under Negative List, same cannot be chargeable to service tax.
Based on above observations, it was held that sale of developed plots/immovable property is not covered under the definition of “service” and thus, department has wrongly alleged the project to be “Site formation and development service”.

Thus, the appeal filed by the appellant was allowed and the impugned order was set aside.

Along with that, it was observed that Section 66D negative list was introduced w.e.f. 01.07.2012. Hence, treating the activity conducted by the appellant as “Site formation and Development service” was not valid . Hence, the advances cannot be equated to amount of consideration for rendering “Service”, instead, the same were received against sale of developed plots.
The contention of the Commissioner (Appeals) and Adjudicating authority that only a part of advance were charged to tax by treating the same as development charges was also set aside on the ground that appellant had developed the plots prior to selling them and department failed to produce any evidence against it.
With regard to the period of limitation, even though the appellant filed returns belatedly by few days, still the necessary information was already available with the department as the entire case is based on the information available in form of statutory records, balance sheet of the appellant. Furthermore, the department failed to produce evidence which proved clandestine activity. All these facts are self-sufficient to prove that there was no element of intention or deliberately act done on behalf of the appellant. Hence, extended period of limitation was wrongly invoked. Reliance was placed upon the Supreme Court judgement in the case of Stemcyte India Therapeutics Private Limited Vs CCE and ST [2025 (394) ELT 3 (SC)] which was later also followed by the Supreme Court in the case of Commissioner of Service Tax vs M/s. Elegant Developers [2025 (36) Centax 209 (SC ] in which it was held that where a developer acquires land and transfers title, the activity construes trading in land and transfers title, the activity constitutes trading in land and is not a taxable servicebased on which, invocation of extended period of limitation by department while issuing SCN is invalid and the same is barred by the limitation.
In view of above observations, it was held that the impugned order in was set aside and the penalties imposed upon the directors of the appellant were also set aside.

CA Pradeep Jain_

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GST update /2026-27/0081

GST UPDATE

BRIEF FACTS OF THE CASE:

QUESTION BEFORE HON’BLE TRIBUNAL:

BRIEF ARGUMENTS BY REVENUE DEPARTMENT:

FINDINGS & JUDGEMENT:

Opinion

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