Principal-to-principal land transactions with indeterminate margin do not create taxable real estate agent service liability.

Amounts received under memoranda of understanding for identification, verification, procurement and transfer of land were held not to constitute consideration for taxable real estate agent service under the Finance Act, 1994, because the arrangement was on a principal-to-principal basis and the remuneration was an indeterminate margin rather than a quantified fee for a specific service. The extended period of limitation was also found unsustainable, since the transaction was disclosed in the books and the dispute depended on interpretation, with no established suppression or intent to evade tax. On that basis, the demand for service tax, interest and penalties was set aside.

---

---

Issues: (i) whether the amounts received by the appellant under the memoranda of understanding for procurement and transfer of land amounted to consideration for taxable service as a real estate agent under the Finance Act, 1994; (ii) whether invocation of the extended period of limitation and the consequential penalties were sustainable.

Issue (i): whether the amounts received by the appellant under the memoranda of understanding for procurement and transfer of land amounted to consideration for taxable service as a real estate agent under the Finance Act, 1994.

Analysis: The arrangement showed trading in land on a principal to principal basis, with the appellant arranging identification, verification, procurement and transfer of land for a lump sum advance and a variable margin. The remuneration was not specifically quantified in the memoranda and depended on the difference, if any, between the agreed average rate and the actual land cost. In the absence of a defined consideration for a specific service, a contract of service could not be presumed. The transaction was not established as a taxable real estate agent service merely because the appellant facilitated acquisition and transfer of land.

Conclusion: The amounts were not liable to service tax as consideration for real estate agent service.

Issue (ii): whether invocation of the extended period of limitation and the consequential penalties were sustainable.

Analysis: The transaction was fully reflected in the books, the dispute turned on interpretation of the arrangement, and the appellant had a bona fide belief that no service tax was payable. The record did not establish suppression of facts with intent to evade tax. As the demand itself was unsustainable, the penal consequences also could not survive.

Conclusion: The extended period of limitation and the penalties were not sustainable.

Final Conclusion: The demand of service tax, interest and penalties was set aside and the appeals were allowed with consequential relief.

Ratio Decidendi: Service tax cannot be levied unless the revenue establishes a clear and quantified consideration for a specific taxable service; a principal to principal land transaction with an indeterminate margin does not, by itself, constitute taxable service.

---