TaxTMI 
TaxTMI 
2026 (7) TMI 589
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.... Works contract 6,15,987/- (u/s 78) 2. Briefly the facts are that the Appellant is a partnership firm registered under the Indian Partnership Act, 1932 and are engaged in the activities of real estate development such as purchase and sale of land, development of residential layouts and other incidental activities such as conversion of agricultural land(s) to non-agricultural purposes, etc. During the period of dispute, the Appellant had entered into Agreement on 15.09.2005 with M/s. The Jnanaganga House Building Cooperative Society Limited, a society registered under the Karnataka Cooperatives Act, to purchase, develop and sale of land, which was amended subsequently to increase the extent of land to be procured, developed and sold to the society. The Revenue in all these appeals, raised 3 issues; one being that the appellant had not paid service tax on the services rendered by them as 'Real Estate Agency Services'; secondly that the appellant had paid service tax on 30% of the value on 'Works Contract Services' claiming 70% as abatement. However, objecting to it, the Revenue in terms of Rule 2A(i) of Service Tax (Determination of Value) Rules, 2006 alleged that appellant is ....
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....dated 25.11.2006 between the appellant and the individual (Sri B. Sathisha) is in the nature of Power of Attorney (PoA) by which it has created an agency between the appellant and the individual (Sri B. Sathisha) whereby the appellant (grantor) has authorised the grantee (Sri B. Sathisha) to do the acts specified therein, on behalf of the grantor viz., (i) to purchase agricultural lands for and on behalf of the appellant, (ii) to get the agricultural lands converted from agricultural purposes to residential purposes for and on behalf of the appellant and (iii) subsequent sale of converted lands to the Society for and on behalf of the appellant (through PoA, Sri B. Sathisha). It is also submitted that it is the appellant who had paid land conversion charges directly to the MUDA authorities which is also recorded in the Sale Deed duly registered and stamped. 3.2. The Learned Counsel also submits that the appellant had taken all necessary steps for preparation of layout plan and obtain necessary permission/approvals from the municipal authorities and it is the Appellant who incurred expenditure for the same. All the payments are made by the appellant o....
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....on'ble Apex Court while affirming the decision of this Tribunal in Elegant Developers v. CST: 2019 (29) GSTL 477 (Tri-Del.) held as under - "38. Thus, for a person to be covered under the definition of 'Real Estate Agent', there must be attributable to such person, an act of rendering service. The section does not cover a direct transaction of sale and/or purchase inter se between two individuals or entities, as the case may be. Likewise, 'Real Estate Consultant' is a person who renders services in form of advice, consultancy or technical assistance for the purposes as set out in Section 65(89) of the Finance Act, 1994. The common thread passing through both the provisions is that the person concerned must be engaged in rendering of services, advice, consultancy or technical assistance for sale and purchase of land or for development, construction, evaluation, conception, etc. of real estate. 39. It is only the contract of agency inter se between the service provider or the consultant, as covered under Sections 65(88) and 65(89) of the Finance Act, 1994, and the principal engaging such service provider or the consultant, for the purpose specified i....
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.... is not sustainable. 3.7 He further submits that the Revenue has not appreciated the scheme of taxation of "works contract" as per 46th Constitutional Amendment vide Article 366(29A)(b) of the Constitution read with two judgments of the Hon'ble Supreme Court in Builders Association of India v. State of Karnataka, [1993] 88 STC 248 (SC)=(1993) 1 SCC 409 and in Gannon Dunkerley & Co v. State of Rajasthan, [1993] 88 STC 204 (SC)=(1993) 1 SCC 364. It is submitted that as per the aforesaid scheme of taxation of "works contract", - (a) Levy of service tax on works contract and determination of value as per rule 2A is a concept adopted from the Sales Tax provisions. (b) 70%:30% ratio between value of goods and labour and service charges is as per section 4(1)(c) of the KVAT Act, 2003 read with Rule 3(2)(m) of the KVAT Rules, 2005. (c) 70% value determined towards value of goods is nothing but "taxable turnover" as defined in section 2(34) of the KVAT Act, 2003 which is nothing but the turnover on which a dealer shall be liable to pay VAT/tax after making such deductions from his total turnover in the manner prescribed. (d) Appellant has indeed paid V....
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....of the gross value. Hence, the said 70% of the value of goods cannot be construed as "service" as per Section 65B(44) read with Section 66E(h) of the Act and once VAT has been paid on 70% of the value as per VAT provisions, then the Revenue is not justified in invoking residuary Rule 2A(ii) of the Service Tax (Determination of Value) Rules of 2006. Referring to various decisions, it is submitted that the issue is no longer res integra and is settled in favour of the Appellant as per the following decisions, - (a) Santech Engineers Pvt Ltd v. CST - F.O.No.21783/2025 dtd.14.08.2025 passed in appeal in ST/21367/2015 (b) Safety Retreading Co (P) Ltd v. CCE: 2017 (48) STR 97 (SC) (c) Gokul Tyre Re-treaders v. CCE: F.O.No.20283/2025 dtd.18.02.2025 rendered by this Bench of the Tribunal. (d) Imagic Creative Pvt Ltd v. CCT: 2008 (9) STR 337 (SC) (e) Tyresoles India Pvt Ltd v. UOI: 2019 (367) ELT 537 (Bom.) (f) Ocean Interior Ltd v. CGST: (2023) 10 Centax 208 (TriMad.) affirmed by Apex Court in CGST v. Ocean Interior Ltd.: (2023) 10 Centax 209 (SC) (g) CST v. Trio Elevators Co India Ltd: (2025) 31 Centax 215 (Tri-Ahmd.) ....
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....hase, leasing or renting of real estate and includes real estate consultant and 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. 6.1. With effect from 01.07.2012 onwards, 'Real Estate Agent Service' was covered under Section 65B(44) of the Finance Act, 1994. From the records placed before us, we find that it is an admitted fact that the appellant cannot buy agricultural lands or hold the agricultural lands in their names in terms of the Karnataka Land Reforms Act, simply for the fact that only an agricultural land holder can purchase agricultural land. In view of the above, the appellant had purchased the agricultural lands in the name of Sri. B. Sathisha and it is on record that a Memorandum of Understanding (MoU) dated 01.06.2006 was signed by the appellant and Sri. B. Sathisha, the MoU referring to the above Karnataka Land Reforms Act, clearly states that land is acquired on behalf of the appellant in the name of Sri. B....
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....:- (i) Value of service portion in the execution of a works contract shall be equivalent to the gross amount charged for the works contract less the value of property in goods transferred in the execution of the said works contract. Explanation: For the purposes of this clause,- (a) gross amount charged for the works contract shall not include value added tax or sales tax, as the case may be, paid or payable, if any, on transfer of property in goods involved in the execution of the said works contract; (b) value of works contract service shall include, - (i) labour charges for execution of the works, (ii) amount paid to a sub-contractor for labour and services; (iii) charges for planning, designing and architect's fees; (iv) charges for obtaining on hire or otherwise, machinery and tools used for the execution of the works contract; (v) cost of consumables such as water, electricity, fuel used in the execution of the works contract; (vi) cost of establishment of the contractor relatable to supply of labour and services; (vii) other similar expenses relatable to supply of labour an....
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....ce tax on the gross value since they could not determine the value under clause (i) of Rule 2A. We also find that in Appeal No. ST/21454/2015, the demand is calculated as shown in the table below: Invoice no. dated Amount percentage Tax paid Total (Inv. A + B) 40% 12.36% Diff 11A 28.9.12 5643954 70 VAT 11B 28.9.12 2418837 30 298968 8062791 3225116 398624 99656 12A 28.9.12 2754253 60 VAT 12B 28.9.12 1836169 40 226950 4590422 1836169 226950 0 13A 26.2.13 3379143 70 VAT 13B 26.2.13 7884667 30 974545 11263810 4505524 556883 -417662 15B 17.3.13 8978318 30 1109720 15A 17.3.13 20949410 70 VAT 29927728 11971091 1479627 369907 16A 17.3.13 7168120 70 VAT 16B 17.3.13 3072052 30 379706 10240172 4096069 506274 126568 19A 17.5.13 11962283 70 VAT &nb....