TaxTMI 
TaxTMI 
TaxTMI 
2014 (6) TMI 555
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....ential Complex services', with interest, has been demanded and penalty under Sections 76, 77 & 78 has been imposed. Besides the above, Cenvat credit amounting to Rs. 4,87,782/- has been demanded and equal amount has been imposed as penalty. 2. Heard both sides. 3. The Learned Senior Counsel on behalf of the appellant submitted that the appellant is carrying on business of development and construction etc. as a builder and sell the same to the public at large for profit. Whether it is a residential scheme or a commercial scheme, the entire profit and loss are borne by the appellant and from conception of the scheme to the completion, it is carried out by the appellant only. It was his submission that to administer the scheme, a Special Purpose Vehicle is normally created in the form of Society/Non-Trading Association etc. Such Special Purpose Vehicle is a creation of the appellants, fully financed by them and the land is purchased in the name of the society/non-trading association (NTA). The society or NTA are entirely controlled by the persons associated with the builder - till the same is taken over by the members of the scheme. 3.1 Explaining the process, the ld....
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....ciety, then there would be no need to execute a separate sale deed in favour of the members, thus avoiding stamp duty; however, though this was originally started as a means to save stamp duty, this proved to be a structure which had various administrative advantages whereby the builders could correctly reflect the profits made by them from the scheme over a period of years of implementation of the scheme; even from the perspective of tax, the builders found it possible to correctly spread over their profits over a period of years of the scheme; thus, this manner of implementation of projects which has been going on since decades has been continued even subsequently. 3.3 Once having thus negotiated purchase of relevant land, the builder creates a Society or a NTA. Both entities are controlled by the persons associated with the builder himself and are fully financed by the builder. Now the full amount necessary to purchase land in the name of the Society or the NTA is brought in by SCPL as a loan to the society. At the same time, a sale deed is executed in favour of society by using these very monies. The society now enters into agreement with the builder (Emphasis added). Thi....
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....ncements. 4. The ld. A.R. submits that it is not correct to say that the builder himself is carrying out all the activities. He draws our attention to one of the projects as an example. He submits that in Akashganga Enclave project, initially it was a construction project for commercial purpose and there was an agreement between M/s. Pushpa Commercial and Housing Co-operative Society and the appellant. Later on one M/s. Elephant Enterprises P. Ltd. replaced the appellant on the basis of tripartite agreement between the Housing Co-operative Society, the appellant and M/s. Elephant Enterprises P. Ltd. compensation of Rs. 100 lakh claim was raised by the appellant, accepted by the Housing Society and paid by M/s. Elephant Enterprises P. Ltd. to the appellant. According to him the very fact that to recover the expenses incurred to transfer the project to M/s. Elephant Enterprises P. Ltd. there was a need for repatriate agreement, would show clearly that society is not a dummy unit or a unit without any powers. In the eyes of law, it is the housing society which is getting the construction done and development done and builder is, in reality, executing the projects till its comple....
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....ective of the project and demand service tax on the development charges collected by the dealer under Real Estate service category. From the above submissions, it can be seen that what the appellants want is that the Revenue authorities should ignore the legal status recognized and accepted by the State authorities for the purpose of stamp duty (Emphasis added). Appellants want Revenue to treat Housing Society/NTA in acting as a receiver of payment for construction and development activities from the purchasers and transfer the same to the appellant without retaining any profit as a dummy, ignoring the legal position of the appellant receiving payments for the activities of construction and development separately from the Society/NTA and not from the purchasers who ultimately become part of the Society/NTA; the Special Purpose Vehicle. The appellant would like the Revenue to ignore the fact that eventually the sale transaction at the first instance would take place between the Housing Society/NTA and not between the member and the builder. The appellant would also like the Revenue to ensure that the steps taken by them to avoid/reduce stamp duty should not result in levy of Service....
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....ted from the society and all other expenses relating to the project are calculated under the head 'development charges' which includes the builders profit also. In this factual background, we have to consider the applicability of Service Tax to the activities of the appellants. 9. According to Section 65 of the Finance Act, 1994, "Real Estate Agent" means "a person who is engaged in rendering any service in relation to sale, purchase, leasing or renting of real estate, and includes a real estate consultant." "Real Estate Consultant" means, "a person who renders, in any manner, either directly or indirectly, advice, consultancy or technical assistance, in relation to evaluation, conception, design, development, construction, implementation, supervision, maintenance, marketing, acquisition or management, of real estate". "Taxable Service" means "any services provided or to be provided to any person by a Real Estate Agent in relation to Real Estate". 10. We have already considered the nature of transactions between the Housing Society/NTA, purchaser or the house/property and the developer earlier. In this case, the appellants have chosen to create a legal entity between th....
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....ial or Industrial Construction Service or construction of residential complex service, once we recognize the fact that the Housing Society/NTA is not a dummy and has to be recognized as a juristic person, the appellant are covered by the relevant definition as can be seen below : Definition as per Section 65 of Finance Act, 1994 : "Construction of complex" means - (a) construction of a new residential complex or a part thereof; or (b) completion and finishing services in relation to residential complex such as glazing, plastering, painting, floor and wall tiling, wall covering and wall papering, wood and metal joinery and carpentry, fencing and railing, construction of swimming pools, acoustic applications or fittings and other similar services; or (c) repair, alteration, renovation or restoration of, or similar services in relation to, residential complex. [Sec. 65(30a)] "Residential complex" means any complex comprising of - (i) a building or buildings, having more than twelve residential units; (ii) a common area; and (iii) any ....
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....cient detail. 16. The learned Senior Counsel relied upon the decision of the Hon'ble High Court of Gujarat in the case of M/s. Sujal Developers dated 22-4-2011 in Appeal No. 1550/2010 [2013 (31) S.T.R. 523 (Guj.)]. In this case as submitted by the learned Counsel, the Hon'ble High Court has considered whether construction activities being performed were undertaken by M/s. Sujal Developers as a service to M/s. Saket-III Co-operative Housing Society and its members, is a taxable activity or not. In this case, it was the submission of M/s. Sujal Developers that according to the agreement between the society and the developer, the developer has not been engaged as a contractor for constructing residential complex for the society and under the said agreement, the respondent had been assigned all the rights to develop the land and sell the residential complex. It was the submission that the Society had not engaged the developer for construction work, but the developer had undertaken the work on his own without engaging any person, and therefore, there was absence of service receiver and the service provider. The Hon'ble High Court in paragraph 13 observed that "here the developer i....
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....Hon'ble High Court of Andhra Pradesh in the case of Nagarjuna Construction Co. Ltd. reported in 2010 (19) S.T.R. 321 (A.P.). In this case it was held that entitlement to benefits of composition scheme arises only after exercise of option as per rules. For the period prior to 2007, no such option would be available for the services. Moreover, it was also submitted that it was a clear understanding of the legislature that many of the services which were included prior to works contract service which has come from 1-6-2007 were, in fact, covered under some other category of service especially relating to construction activity. Therefore, it can not be said that prior to 1-6-2007, the appellant was not liable to payment of Service Tax even if service was classifiable and liable to Service Tax earlier. As regards Real Estate Agent, learned D.R. relied upon the decision in the case of Ajay Enterprises Ltd. reported in 2010 (20) S.T.R. 804 (Tri.-Del.) which we find is relevant. In that case also appellant claimed that appellant was engaged in the Real Estate development and purchased land for development thereof and constructing buildings. The potential buyers of the property are register....