TMI Blog2014 (6) TMI 555X X X X Extracts X X X X X X X X Extracts X X X X ..... ellants are asking the Revenue to do is to ignore the legal and statutory documents executed for the purpose of construction/development and transfer of property between the Society/NTA and members. It has to be noted that it is the Housing Society/NTA which purchases the land even though the builder pays to the society to facilitate the payment for the land. Similarly even though the builder identifies the customer/purchaser, the customer/purchaser pay for the land and the constructed building to the Society/NTA and not to the builder. Demand in respect of Real Estate Agent Service - Held that:- The definitions of Real Estate and Consultant would clearly show that the definition covers any service in relation to sale, purchase, leasing or renting of real estate. The Consultant covers a person who renders in any manner various types of activities which include all the activities undertaken by appellant in this case. We have to note that the words used are rendering any service in relation to Real Estate. In the case of Real Estate Consultant, it means rendering advice, consultancy etc. in any manner of Real Estate. Under the circumstances, any services rendered in relation to Re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it can be said to be engaged in the business of providing taxable services of Real Estate Agent, commercial or industrial service and construction of Residential Complex. Investigation was carried out and on the basis of investigation proceedings/show-cause notice was issued which has culminated in the impugned order, whereby an amount of Rs. 6,79,56,212/- under the head of Real Estate Service Agent , Rs. 36,91,789/- under the head of Commercial or Industrial Service and Rs. 2,10,57,697/- under Construction of Residential 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 app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... most schemes go in the entire country, the builder creates a special purpose vehicle in the form of a Society or a non-trading association to administer the scheme; this, as a matter of fact, was an old practice started in order to avoid payment of stamp duty over again prior to 2001; if the land is purchased in the name of society and the society eventually sells its land to the members without entering into a registered sale deed and its members are taken as members of the society having control of the society, 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provide service to himself. Whenever the appellant had entrusted the work of construction to others, Service Tax has been discharged by the service provider. In this case, Revenue proposes to charge Service Tax on construction and development under the category of construction service and real estate agent service on the ground that NTA or housing society is the service receiver and it cannot be said that the builder/appellant is providing service to the members. He relies upon several judicial pronouncements. 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 Hou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eparated from other activities such as promotion of the scheme, development of the scheme, getting of various statutory approvals, water connection, electricity connection, etc. These items became a separate part of the agreement and the builder was paid under two heads namely construction and development . What the department has done is to demand Service Tax on the construction activity under commercial or industrial construction/construction of residential complex, depending upon the objective 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 de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ars of the implementation of the scheme in the books of the appellants. The appellants themselves say that primarily show-cause notice sought to charge construction income under the head construction of the residential complex service or commercial or industrial service and development charges under the head of Real Estate Agent Service . Obviously, after going through the submissions made and the hearing of Senior Counsel, it emerges that the construction cost is separately calculated 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the words used are rendering any service in relation to Real Estate. In the case of Real Estate Consultant, it means rendering advice, consultancy etc. in any manner of Real Estate. Under the circumstances, any services rendered in relation to Real Estate and any advice or activity undertaking in relation to Real Estate for a service receiver would be covered under this category and unfortunately for the appellant the definition clearly cover them. 12. As regards Commercial 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, acoust ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ame before coming to a conclusion, since we have heard both the sides in sufficient 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. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rd on 24-8-2010 bearing No. 128/10/2010-S.T. and the decision of the 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 cons ..... X X X X Extracts X X X X X X X X Extracts X X X X
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