2024 (12) TMI 675 - AT - Service Tax

Service tax case remanded due to invalid MoU lacking proper registration and insufficient documentation for advance payments

CESTAT New Delhi remanded a service tax case involving interest-free advances received against property back to the original adjudicating authority. The ... Levy of service tax - Interest free advances received against property - Advances received against Projects, viz., Advances received for sale of plot - Other advances and rectification entries - Extended period of limitation. Interest free advances received against property - HELD THAT:- In the instant case, it has been observed in the impugned order that the MoU is not registered with any competent authority. However, it has been noted that the said MoU does not have any signature and date. This is required as both the parties have to understand and accept the duties & responsibilities cast on the First & Second party as per the clauses in each page of the MoU. The termination date has also not been mentioned, due to which also MOU cannot be accepted as a legal document/arrangement between two parties. There is no mention of payment of any amount as advance to the appellant. In this context, it is noted that the Ld Counsel has submitted that it was a preliminary understanding between the two parties, prior to entering into a contract - the appellant has not submitted any other evidence before this Tribunal to substantiate the veracity of the said MoU. Further, it is noted that there is a percentage of the purchase consideration which is paid as fee to the appellant, which in the impugned order has been held to be in the nature of consideration for the taxable service provided by them - it is found appropriate to remand this matter to the original authority to examine the contentions of the appellant, regarding revenue recognition and adjustment from advances received for projects. Advances received against Projects, viz., Advances received for sale of plot - HELD THAT:- The impugned order has taken note of the documents submitted by the appellant during the course of hearing. It has been noted that the appellant has submitted documents only for ₹ 36,41,336/- and could not produce the documents for the remaining amount. In this context, appellant has submitted the indication of service tax/Sales tax in the agreement is not evidence that service tax has been collected. It is agreed that this would have to be substantiated by documents. Consequently, this aspect of the case also requires to be remanded back to the original authority for verification. Other advances and rectification entries - HELD THAT:- The impugned order has stated that the appellant has not submitted any averments in this regard, and has concluded the same to exigible to service tax. This is not acceptable. Service tax can be charged only when the amount is received as consideration for service rendered by a service provider to a service recipient. Consequently, this issue also requires to be remanded to the adjudicating authority to examine relevant documents and consider the submissions of the appellant before passing the order. Invocation of extended period - HELD THAT:- Since it is held that the matter need to be remanded for re-consideration as discussed above, it is not deemed necessary to consider these submissions. Matter remanded back to the original adjudicating authority for reconsidering the submissions made by the appellant before this Tribunal - appeal allowed by way of remand. Issues Involved:1. Interest-free advances received against property.2. Advances received against projects, specifically for the sale of plots.3. Other advances and rectification entries.4. Invocation of the extended period for service tax demands.Issue-wise Detailed Analysis:1. Interest-Free Advances Received Against Property:The appellant contended that the interest-free advances were received from M/s Aerens Goldsouk International Ltd. (AGIL) to acquire land in rural areas, supported by a Memorandum of Understanding (MoU). The adjudicating authority rejected the MoU on several grounds: it was not registered, lacked signatures and witness attestation, did not specify the amount of advance, and failed to mention a validity period. The MoU was deemed fabricated and not legally valid. The Tribunal noted that a valid MoU should clearly outline the intent, responsibilities, financial terms, and termination clauses. The deficiencies in the MoU led to doubts about its authenticity. The Tribunal agreed that the appellant was providing taxable services, as indicated by the fee structure in the MoU. The matter was remanded to the original authority to reassess the appellant's claims about revenue recognition and adjustments from advances.2. Advances Received Against Projects:The appellant provided documents for only a portion of the claimed advances, specifically Rs. 36,41,336, failing to substantiate the remaining amount. The appellant argued that indicating service tax in agreements does not prove its collection. The Tribunal agreed that documentary evidence is necessary to substantiate such claims. This issue was also remanded to the original authority for further verification and assessment.3. Other Advances and Rectification Entries:The adjudicating authority concluded these amounts were subject to service tax due to a lack of submissions from the appellant. The Tribunal found this conclusion unacceptable, emphasizing that service tax applies only to amounts received as consideration for services rendered. This issue was remanded to the adjudicating authority to examine relevant documents and consider the appellant's submissions.4. Invocation of Extended Period:The Tribunal did not address the invocation of the extended period for service tax demands, as the matter was remanded for reconsideration on other grounds.Conclusion:The Tribunal set aside the impugned order and remanded the matter back to the original adjudicating authority. The authority is instructed to reconsider the appellant's submissions, allowing the appellant to present all relevant documents to substantiate their claims. The appeal was allowed by way of remand.