Is Service Tax payable on services rendered by developer to land owner?

PJ/CASE LAW/2014-15/2463

Case:-M/s GSR HOTELS & ESTATES PVT LTD Vs COMMISSIONER OF CENTRAL EXCISE, CUSTOMS AND SERVICE TAX, HYDERABAD-II

Citation:-2014-TIOL-2119-CESTAT-BANG

Brief Facts:-The appellant is an estate developer engaged in the business of developing properties, civil construction works, etc. The appellant is registered with Hyderabad-II Commissionerate on 6.2.2006 for the service "Construction Services in respect of Commercial or Industrial Buildings and Civil Structures". The appellant constructed a commercial complex by name "Mid Town" in Hyderabad on development basis before introduction of service tax on 'Commercial and Industrial Construction'. The terms of joint development agreement dated 20.11.2003 with land owners stipulated sharing of constructed area and land in the ratio of 51.58% (land owner) and 48.42% (for the appellant). 10% of the land was also absolutely transferred to the appellant vide this agreement. The appellant paid Rs.1,50,00,000/- as deposit with the landowners in 2003 itself. The construction was started in January 2004 and completed by March 2007. In the instant case, the appellants were service providers rendering services to the land owners of 'Mid Town' i.e., M/s. SOL Hospitals Ltd., M/s. Girija Investments Pvt. Ltd. and Chillakuru Investments Pvt. Ltd. who were service recipients. As per letter dated 27.7.2010 submitted by the appellant the total cost of construction of the property was arrived at Rs.17,87,32,046/- and the proportionate share of 51.58% of the venture came to Rs. 9,21,89,989/-. In the instant case the consideration received by the appellant was 2370 sq. yards or 48.42% sq. yards of the land at premises No.6-3-348, Punjagutta and the value of the land had been received at by the appellants vide their above dated letter was Rs.8,72,45,000/-.

Appellant contention:N/A

Respondent Contention:N/A

Reasoning of Judgment:

After hearing both the sides, the tribunal found that the appeal has been rejected for non-compliance with the stay order passed by the Commissioner (A). After hearing both the sides, it was found that appeal itself can be decided. According the appeal was taken up for final decision.

2.1 The facts enumerated above would show that appellants sold the property on the basis of Power of Attorney executed in their favour by the landowners and further in respect of the portion of the land meant for the landowners and sold after construction, it can be clearly said the at the appellants have provided service to the landowners. We are unable to agree with the submissions made by the learned counsel that what appellants have rendered is self-service. The decision in the case of LCS City Makers Pvt. Ltd.: 2013 (30) S.T.R. 33(Tri.-Chennai) relied upon by the learned AR is applicable to the facts of this case. Therefore it cannot be said that appellants have made out a prima facie case for waiver.

The Commissioner (A) had ordered pre-deposit of Rs.37,60,244/- which is the entire demand against the appellant in this case. Since we have not found any prima facie against the appellant and the amount of Rs.3,36,000/- claimed as paid by appellant may not even make the interest liability. We find that the direction of the Commissioner (A) requiring the appellant to deposit the entire amount of service tax is reasonable and does not require any interference. However, in the interest of justice, we give another opportunity to the appellant to deposit the amount ordered by the Commissioner (A) within 10 weeks and report compliance. After noting compliance, the learned Commissioner (A) is requested to consider the issue and pass in order on merits after giving reasonable opportunity to the appellants to present their case. Early hearing application also gets disposed of.

Decision:Appeal disposed off

Comment:
If the assessee have entered into joint development agreement with land owners & they constructed their portion and sold the property on the basis of Power of Attorney executed in their favour by the landowners then assessee have clearly provided service to the landowners for which service tax has to be paid by him and it will not construe self service.

PREPARED BY:MEET JAIN

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PJ/CASE LAW/2014-15/2463

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