2022 (8) TMI 989 - AT - Service Tax

Land Purchase Agreements Exempt from Service Tax under Finance Act 1994

M/s Bhaskar Steel and Ferro Alloys Pvt. Ltd., Shri Nikunj Beriwal, Director Versus Commissioner of CGST & Excise, Rourkela

M/s Bhaskar Steel and Ferro Alloys Pvt. Ltd., Shri Nikunj Beriwal, Director Versus Commissioner of CGST & Excise, Rourkela - TMI Issues Involved:1. Liability of payments received from various companies/firms to service tax.2. Applicability of extended period of limitation.3. Imposition of interest and penalty.Analysis of the Judgment:A. BGB Spintex Pvt Ltd and CFM Infratex Ltd:The appellants entered into an agreement for purchasing agricultural land, which was later sold to CFM Infratex Ltd. The department viewed this as an agreement to refrain from an act or tolerate a situation, liable to service tax under Section 66E(e) of the Finance Act, 1994. However, the tribunal found that the right to purchase the land was a benefit arising out of immovable property, excluded from the definition of 'service' under Section 65B(44) of the Finance Act, 1994, and hence not liable to service tax.B. Shivshankar Logitex Pvt Ltd:Similar to the previous case, the appellants released their agreement rights to purchase agricultural land to Shivshankar Logitex Pvt Ltd. The tribunal held that the rights or benefits arose out of immovable property and were outside the scope of 'service' and hence not liable to service tax.C. M/s Shanti Enterprise:The appellants surrendered their agreement rights to purchase non-agricultural land to M/s Shanti Enterprise. The tribunal held that this transaction did not relate to any 'service' and hence no service tax was leviable.D. Excelsior Services Pvt Ltd:The appellants entered into an agreement to purchase a built-up area but received compensation when the seller could not fulfill the agreement. The tribunal held that such compensation could not be considered as agreeing to refrain from an act or tolerate a situation under Section 66E(e) and hence not liable to service tax.E. M/s Autocare Services:The appellants canceled agreements for purchasing office premises and received compensation. The tribunal held that this amount was received in connection with the surrender of rights relating to immovable property, outside the scope of 'service' and hence not liable to service tax.F. Vijay Kumar Dalmia and STB Exports Pvt Ltd:The appellants sold a portion of land and earned a profit. The tribunal held that this was a clear case of sale and purchase of immovable property, outside the scope of 'service' and hence not liable to service tax.G. M/s Thermax Ltd:The appellants reimbursed M/s Ensol Power Pvt Ltd for manpower supplied on behalf of M/s Thermax Ltd. The tribunal held that this reimbursement could not be considered a 'service' provided by the appellants and hence not liable to service tax.H. Nilu Construction Pvt Ltd:The appellants vacated a rented godown space and received compensation. The tribunal held that the surrender of tenancy rights could not be considered a 'service' and hence no tax was payable.I. M/s Siddhartha Land and Building Pvt Ltd:The appellants vacated rented space and received compensation. The tribunal held that surrender of tenancy rights is not covered under Section 66E(e) and hence not liable to service tax.J. M/s Madanlal Brijlal Pvt Ltd:The appellants vacated rented premises and received compensation. The tribunal held that surrender of tenancy rights is not covered under Section 66E(e) and hence not liable to service tax.K. Jasmine Commercials Pvt Ltd:The appellants received damages due to the seller's failure to fulfill an agreement. The tribunal held that these damages could not be considered as agreeing to refrain from an act or tolerate a situation under Section 66E(e) and hence not liable to service tax.Limitation:The show cause notice was issued on 28.09.2018 for the period from 01.04.2013 to 31.03.2015, invoking the extended period of limitation. The tribunal found that the appellants had declared all transactions in their records and paid capital gains tax, indicating no intent to evade service tax. Hence, the extended period of limitation was not justified, and the demand was barred by limitation.Interest & Penalty:Since the demand itself was not sustainable, the tribunal held that there was no question of charging interest or imposing any penalty on the appellant company or the Director, Shri Nikunj Beriwal.Conclusion:The appeals were allowed on merits as well as on the ground of limitation, and the demand for service tax, interest, and penalties were set aside.