Flat buyers' payments in landowner-linked housing project: only developer's retained share taxable; abatement allowed, demand dismissed.

The dominant issue was whether the entire gross amount collected from flat buyers, including sums paid onward to a landowner, constituted consideration for taxable construction/project management services, negating abatement under N/N. 26/2012-ST. The Tribunal held that only the amount retained by the assessee was consideration for its service; the balance represented value attributable to immovable property/transfer components not chargeable under the Finance Act, 1994, consistent with SC authority on works contracts and Tribunal precedent on development rights. As the assessee satisfied the notification conditions (accounting of gross receipts and non-availment of CENVAT credit) and paid service tax on the retained amount, the demand was unsustainable; Revenue's appeal was dismissed.

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Issues: Whether the demand of service tax raised on the gross amounts received by the respondent from flat buyers (including amounts passed on to the landowner) by treating the same as consideration for project management and co-ordination services is sustainable.

Analysis: The dispute concerns characterization of receipts in a joint development/contractual arrangement and whether service tax can be imposed on the gross billed amount including amounts attributable to land/transferable development rights. Relevant legal framework includes the definition and charging provisions of taxable service under the Finance Act, 1994 (including Sections 65B(44), 66B and Section 67 on taxable value), the abatement/exemption conditions in Notification No.26/2012-S.T., and the treatment of transferrable development rights as immovable property under Section 3(26) of the General Clauses Act, 1897. Precedents require segregation of service element from transfer of property in works contracts and preclude levy of service tax on the non-service (immovable property) element; where the service provider has accounted for and discharged service tax on the amount retained as consideration for construction services and fulfilled conditions of the abatement notification (including non-availment of CENVAT credit and accounting of gross receipts), further demand on the same gross receipts would amount to double taxation and is unsustainable. The factual finding that the respondent retained the portion attributable to construction services, paid service tax on that retained amount, did not avail CENVAT, and accounted for receipts aligns with the statutory scheme and precedents cited.

Conclusion: Demand of service tax on the gross amounts including sums passed on to the landowner is not sustainable; the impugned demand is rejected and the appeal by the Revenue is dismissed in favour of the respondent.

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