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Mercury Estates Versus Commissioner of Service Tax, Delhi

2015 (9) TMI 1039 - DELHI HIGH COURT

Waiver of pre-deposit - construction of residential complex - Valuation - Inclusion in the assessable value - the profit/loss on account of purchase and sale of the land - Held that:- The AA has in the order dated 29th November 2013 come to the conclusion, on an analysis of the two MOUs entered into between the Appellant and SI, that the Appellant was working as an agent for SICCL and further that it had rendered two kinds of taxable services: one as a real estate agent/real estate consultant un .....

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. The Appellant's explanation that it returned the said sum to SICCL in the form of shares of 2 of its group companies does not appear to have been considered.

A further question that would arise is whether the entire profit generated from the purchase of land in Jodhpur can be taken to be value of the taxable services, if any, rendered by the Appellant. Those questions cannot obviously be examined at this stage but will have to await the final determination in the appeal before the .....

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r Satish Kumar, Senior Standing counsel ORDER 1. This appeal by M/s. Mercury Estates, under Section 35G of the Central Excises Act, 1944 ('Act') is directed against the impugned order dated 31st March 2015 passed by the Customs, Excise & Service Tax Appellate Tribunal ('CESTAT') in the stay application filed by the Appellant in its appeal being Appeal No. ST/51507/2015-CU (DB) which in turn is directed against the order-in-original dated 29th November, 2013 passed by the Adju .....

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wo separate MOUs dated 20th June 2006 and 20thAugust 2003 respectively for purchase of land in Allahabad and Jodhpur. The MOUs specified the extent of land to be purchased and the rate of land per acre at which SI would purchase land at each of the cities. The Appellant was entitled to difference, if any, of the amount actually paid for purchase of land to the original owners of land and the "agreed rate" between the Appellant and SI. In other words, the Appellant was entitled to the p .....

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f payment made under land purchase account till date (in Rs.) Area of land transferred/ registered till date (in acres) Amount per sale deed (in Rs.) Under development head 1. M/s. Mercury Estates Allahabad 4,00,00,000 Nil Nil Nil Jodhpur 7,95,63,500 92.01 5,16,13,400 3,68,41,500 4. The case of the Appellant has been that while it made a profit as regards the purchase of land at Jodhpur, the sum of ₹ 4 crores received by it for the purchase of land at Allahabad was not utilised to purchase .....

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that in the absence of the Appellant providing the necessary details, the entire sum received by it would be considered as the taxable value for the purpose of computation of service tax. In other words the taxable value was taken as ₹ 9,62,98,304 and service tax liability, interest and penalty were determined on that basis for the period 1st January 2004 to 31st March 2008. It may be noted here that in the said adjudication order the AA recorded that for the purchase of land in Jodhpur th .....

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T observed that as per the definition of "real estate agent" under Section 65(88) of the Finance Act, 1994 (FA) read with Section 65 (89) thereof any advice, consultancy or technical assistance in relation to design, development construction acquisition of real estate was covered by the expression "Real Estate Agent Service" under Section 65 (105) (v) of the FA. The CESTAT ordered that the Appellant should make a pre-deposit of 25% of the service tax demand along with proport .....

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nted out that the SCN itself sets out the fact that while the Appellant made a profit as regards the purchase of land in Jodhpur, the amount received for the purchase of land in Allahabad was returned by it in the form of allotment of shares in 2 group companies in favour of SICCL. He submitted that with the AA having agreed with the Appellant that the entire sum received by the Appellant for purchase of land could not form the basis for computation of the service tax, there was no logic in the .....

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al submitted that even assuming that the Appellant had provided any taxable service, the tax at 10% could be levied only on the commission/profit earned and not on the entire sum received by it for purchase of the lands. Mr. Sabharwal handed over a calculation sheet which showed that a profit of ₹ 1,62,40,700 was made in respect of the purchase of land at Jodhpur. Lastly, he pointed out that an application was filed by the Appellant before the CESTAT for bringing on record certain relevant .....

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ove submissions. The AA has in the order dated 29th November 2013 come to the conclusion, on an analysis of the two MOUs entered into between the Appellant and SI, that the Appellant was working as an agent for SICCL and further that it had rendered two kinds of taxable services: one as a real estate agent/real estate consultant under Section 65 (89) of the FA and the other relating to levelling of soil including filling of gorges/nallah, removing of shrubs, grass and rubbish etc. classifiable u .....

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has made out a prima facie case on the aspect whether the entire amount received by it pursuant to the MoUs would be considered to be the 'gross' or 'taxable value' for the purposes of computation of service tax liability. Indeed it appears that the AA agreed with the Appellant that the entire sum received by the Appellant for purchase of land could not form the basis for computation of the service tax. Yet when the AA's order dated 29th November 2013 is examined carefully it .....

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ther prima facie appears that the AA overlooked the fact that even as per the SCN no land in Allahabad was purchased although the Appellant received ₹ 4 crores for that purpose. The Appellant's explanation that it returned the said sum to SICCL in the form of shares of 2 of its group companies does not appear to have been considered. A further question that would arise is whether the entire profit generated from the purchase of land in Jodhpur can be taken to be value of the taxable se .....

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