TaxTMI 
TaxTMI 
2024 (8) TMI 207
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....ng taxable services like construction of residential complex services, architect service, construction services other than residential complex namely commercial/industrial buildings or civil structures. During the course of Audit of one M/s. Bhisma Realty Ltd., providing similar kind of service, it was noticed that there exist one 'joint development agreement' dated 31.07.2009 (Annexure B to show-cause notice) between the said M/s. Bhisma Realty Ltd. and the Appellant for construction of premium residential building at Dadar, Mumbai to be named as DB Crown on 60:40% sharing basis with major share @60% going to M/s. Bhisma Realty Ltd. who would share the land exclusively and 40% to the Appellant who would bear the expenditure for construction and development. It was also noticed by the Auditor that between the period referred above Appellant had received Rs.80,17,30,712/- from M/s. Bhisma Realty Ltd. as reimbursement of expenses and the same was to be added to the gross taxable value of services rendered by the Appellant and Service Tax was to be paid thereon. Accordingly E.A. Audit team conducting audit in M/s. Bhisma Realty Ltd. wrote a letter to the Jurisdictional Commissioner of....
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....res, that was preferred before the Hon'ble Supreme Court in several Civil Appeals, got disposed of with nomenclature Union of India Vs. M/s. Intercontinental Consultants and Technocrats Pvt. Ltd., reported in 2018 (4) SCC 669 wherein they concurred with the findings of the High Court while observing that reimbursable expenditure can only be included with prospective application of statute and not retrospectively. 2.3 Marching ahead with the development of law as propounded by the Hon'ble Supreme Court, in reproducing para 29 of the said order passed in M/s. Intercontinental Consultants and Technocrats Pvt. Ltd. cited supra, that deals with reimbursable expenditure or cost incurred to form part of valuation of taxable service for charging Service Tax w.e.f. May 14, 2015, Respondent-Department issued show-cause notice to the Appellant and proceeded in confirming the demand on reimbursement expenses received by Appellant from its joint venture unit namely M/s. Bhisma Realty Ltd., who both developed premium residential building and parking space in the name of DB Crown situated at Dadar, Mumbai on the basis of joint development agreement entered between them on 31.07.2009. Lea....
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....yable though was demanded against reimbursement of expenses. 3.2 His further submission is that the entire activity was of the service providers inter se carried out by two service providers jointly and there is plethora of decision starting from Saturday Club Vs. Assistant Commissioner of Service Tax Cell, Calcutta, reported in 2005 (180) ELT 437 (Cal.) to B.G. Exploration and Production India Ltd. Vs. Commissioner of Service Tax-VII, reported in (2023) 12 CENTAX 202 (Tri.-Bom), wherein it has been clearly held that activities carried out in a co-venture to reap the benefit out of the venture namely share of profit cannot be said that one party is providing service to another and fulfilment of obligation to contribute to the capital of joint venture is beyond the scope of taxation under Finance Act, 1994 for which the order passed by the Principal Commissioner is unsustainable both in law and facts. His further submission is that the fact of receiving payment from M/s. Bhisma Realty Ltd. was well known to the jurisdictional Commissioner that was also brought to his knowledge by the letter dated 27.03.2017 of the Auditor, after which also the activity continued up to June 20, 2017....
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....n 67 of the Finance Act, 1994 dealing with valuation of taxable services for charging Service Tax, it reads: "Explanation.-For the purposes of this section,- (a) "consideration" includes- (i) any amount that is payable for the taxable services provided or to be provided; (ii) any reimbursable expenditure or cost incurred by the service provider and charged, in the course of providing or agreeing to provide a taxable service, except in such circumstances, and subject to such conditions, as may be prescribed; (iii) ..." Going by the above definition taxable service would include any amount that is payable for the said service and additionally if any expenditure or cost incurred by the service provider was reimbursed, the said amount is to be included with certain contingencies/conditions/circumstances. In the instant case, as revealed from para 3 of the letter of the Audit Commissioner dated 27.03.2017, that forms the basis for initiation of proceeding against the Appellant, the entire expenditure towards construction cost of the flat as per development agreement was made by the Appellant and M/s. Bhisma Realty Ltd. reimbursed @33.33% of the construction cost to the A....
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....ent of the said 33.33% of the construction cost commenced from October, 2016 and ended on June 2017, during which period provision of service must have been completed since re-imbursement started after 100% of expenditure made by the Appellant. However, in the absence of concrete data and any submission of the party on the applicability of the provision, we are not in a position to give our finding that Appellant's case is covered under non-inclusion of reimbursement cost since service was rendered prior to 14.05.2015 but we must place it on record that in M/s. Intercontinental Consultants and Technocrats Pvt. Ltd., cited supra judgement reimbursement of expenditure that occurred on some extraneous activities like expenses incurred in Air travel, Hotel stay etc. were dealt with which is different from the actual service rendered to its client by M/s. Intercontinental Consultants and Technocrats Pvt. Ltd. cited supra, who got it reimbursed from its client namely the service recipient. In the present case the said reimbursement amount, as claimed by the Department is 33.33% though erroneously, is part of the 100% component cost against which Service Tax liability was discharged and i....
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....but in the absence of copy of disputed debit note and the payment voucher it would be difficult to ascertain as to if that disputed amount of Rs.80,17,30,712/- was repayment amount or a reimbursement amount! 9. Drawing inference from the judgment of the Hon'ble Supreme Court passed in the case of Faqir Chand Gulati, cited supra learned Principal Commissioner had given his finding that the agreement which was called as collaborative agreement or joint venture agreement was not so and it was, in fact, availment of service of the builder by the land owner for house construction (flats). But going by the said decision one can notice that the facts of these two cases are quite dissimilar as in Faqir Chand Gulati case, builder had constructed the upper floor of the said house for the land owner for his use (para 15, sub-para at page 28 of appeal memo), against which it had received consideration but in no event, in the instant case, Appellant had provided any service to its collaborator referred in the joint development agreement and the very basis of reimbursement of 33.33% is a complete misnomer, in view of our finding noted above supported by the narration made in JDA. 10. At th....
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....unit and opened one bank account in which sale proceeds were deposited and from where their respective shares were disbursed. Drawing inference apparently from this learned Counsel for the Appellant had argued that apart from the fact that there was no provision of service between the developer and owner as principle of mutuality exist between the two and in view of decision of this Tribunal rendered on dated 17.07.2023 in the case of B.G. Exploration and Production India Ltd. Vs. Commissioner of Service Tax-VII, reported in (2023) 12 CENTAX 202 (Tri.-Mum), both being party to the joint venture, obligations and responsibilities discharged by co-venturer can't be brought under the levy of Service Tax. We are in agreement to this view for the reason that the said principle is settled by this Tribunal in 2017 in the case of Mormugao Port Trust Vs. Commissioner of Central Excise, reported in 2017 (48) STR 69 (Tri. Mum.) that was found approval by the Hon'ble Supreme Court by way of dismissal of appeal of Revenue. It would be worthwhile to reproduce para 15 and relevant portion of para 17 of the said order:- "15. It is incumbent upon participants in collaborative undertaking to co....