2022 (12) TMI 602 - AT - Service Tax

Tribunal rules in favor of appellant on service tax issue, penalties not applicable.

JP Infrastructure Pvt Ltd Versus Commissioner of Central Excise & ST, Ahmedabad

JP Infrastructure Pvt Ltd Versus Commissioner of Central Excise & ST, Ahmedabad - TMI Issues Involved:1. Classification of services provided by the appellant.2. Applicability of service tax under the category of 'Real Estate Agent' services.3. Timeliness and validity of the Show Cause Notice (SCN).4. Imposition of penalties under Sections 76 and 78 of the Finance Act.5. Applicability of cum tax benefit under Section 67.Issue-wise Detailed Analysis:1. Classification of Services Provided by the Appellant:The appellant argued that the services provided were those of a developer of commercial construction projects and not merely advisory services. The appellant contended that their role involved comprehensive development activities, which should not be classified under 'Real Estate Agent' services. The Tribunal examined the development agreements and found that the appellant was consistently referred to as a 'Developer' and not as an agent, confirming that the services rendered were indeed developmental in nature.2. Applicability of Service Tax under the Category of 'Real Estate Agent' Services:The Revenue contended that the appellant received development charges related to services provided as a 'Real Estate Agent,' thus liable to service tax under Sections 65(88) and 65(89) of the Finance Act, 1994. However, the Tribunal found no evidence in the show cause notice or related documents indicating that the appellant acted as a 'real estate agent.' The agreements reviewed showed that the appellant's role was that of a project developer, not a real estate agent, and the development charges received were in the form of profit, not consultancy fees. Therefore, the Tribunal concluded that the services provided did not fall under the 'Real Estate Agent' category.3. Timeliness and Validity of the Show Cause Notice (SCN):The appellant argued that the SCN issued on 08.02.2010 was time-barred as the department was aware of the activities since 09.01.2007, and the relevant period was 2007-08. According to Section 73(1) of the Finance Act, the SCN should be issued within one year from the date of knowledge. The Tribunal noted that the SCN was issued more than two years after the department became aware of the activities, rendering it time-barred.4. Imposition of Penalties under Sections 76 and 78 of the Finance Act:The appellant contended that penalties under Sections 76 and 78 should not be imposed since the service tax along with interest was paid before the issuance of the SCN. The Tribunal agreed, citing that if the tax and interest are paid before the SCN, penalties should not be imposed, aligning with the CBEC letter No. 137/167/2006-CX.4 dated 03.10.2007. Additionally, if a penalty under Section 78 is imposed, a separate penalty under Section 76 is not applicable.5. Applicability of Cum Tax Benefit under Section 67:The appellant argued that they had not collected service tax from the service receivers, making them eligible for the cum tax benefit under Section 67. The Tribunal acknowledged this argument, implying that the taxable value should be recomputed to reflect the cum tax benefit.Conclusion:The Tribunal concluded that the services provided by the appellant did not qualify as 'Real Estate Agent' services and thus were not subject to service tax under that category. The SCN was deemed time-barred, and the penalties were not applicable due to the pre-SCN payment of tax and interest. The appeal was allowed with consequential relief, setting aside the impugned order on merits.