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M/s Emaar Mgf Construction Pvt. Ltd. Versus Commissioner of Service Tax Delhi

2016 (5) TMI 1051 - CESTAT NEW DELHI

Waiver of pre-deposit - Business arrangement between DDA and applicant - Construction of residential complex - Service tax liability along with penalties - Section 77 and 78 of the Finance Act, 1994 - Held that:- the whole issue of tax liability and exact quantification requires a close scrutiny and detailed examination at the time of deciding the appeal, the discussion leads to the conclusion that the appellant could not make out a case for full waiver of pre-deposit of adjudicated dues for adm .....

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a stay of recovery of remaining dues as adjudicated by the original authority. - Waiver not granted, stay petition disposed of - Service Tax Stay Application No. 59787 of 2013, Service Tax Appeal No. 59109 of 2013 - Stay Order No. 50474/2016 - Dated:- 11-5-2016 - Ms. Archana Wadhwa, Member (Judicial) and Mr. B. Ravichandran, Member (Technical) Shri BL Narasimhan, Advocate for the Appellants Shri Satyaveer Singh, Chief Commissioner, AR for the Respondent ORDER This application for stay is for wai .....

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n with Commonwealth Games, 2010 held in Delhi, the applicant and Delhi Development Authority (DDA) entered into a Project Development Agreement on 14.9.2007. The agreement is for construction of residential facility for sportsman and officials participating in Commonwealth Games, 2010. The applicants were given exclusive development rights and have paid an amount of Rs.; 320 crores to DDA for the same. They have constructed 1168 flats on which 2/3rd are their share, the remaining were for DDA. 3 .....

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on value of 2/3rd share of total flats assigned to the applicant in terms of above agreement. The original authority after due process adjudicated the case resulting in confirmation of Service Tax and imposition of penalties as mentioned above. 4. The learned Counsel for the applicant submitted that the applicant is entitled for full waiver of pre-deposit both on merits as well as on time bar. He mainly contended on the following points : 1) The transaction between the appellant and the DDA had .....

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the value of service provided by the builder/developer to the land owner would be the value of development rights. In the present case, the applicant have paid an amount of ₹ 321 crores to DDA for such exclusive development right. Hence it cannot be said that the DDA paid for any services rendered by the applicant. 3) The Project Development agreement is based on public private partnership (PPP) model with mutuality of interest and with joint sharing of risks, efforts resources, and profit .....

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1) STR 523(Guj)] and Tribunal s decision in Bairathi Developers Pvt. Ltd. Vs. CCE [2012 STR 114 (Tri-Del)] which was finally decided vide Final Order No. 51003/2016 dated 4.3.2016 and Tribunal s Misc. order No. 23375/2014 dated 2.12.14 in Sobha Developers Ltd. 5. Learned AR opposed the submissions made by the applicant. He submitted that the amendment by way of insertion of explanation in the taxable service of construction of complex has no relevance to the facts of the present case. The explan .....

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ers. As per the arrangement between DDA and applicant, there is a transaction for provision of taxable service and as such the applicant should be directed to pre-deposit the confirmed dues. However, the learned AR accepted that the quantification of value of such taxable service as adopted by the original authority may not be fully correct in terms of agreement read with provisions of section 67 of the Finance Act, 1994. When asked specifically about the possible correct quantification of the v .....

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the prima facie merits of the case needs to be examined. The admitted facts of the case are that the business arrangement between DDA and the applicant is based on public private partnership model and is not a simple case of private land owner entering into a joint development of agreement with a builder/developer for construction of residential complex. We note that the applicant infact paid substantial amount for obtaining exclusive development rights from DDA. Regarding the tax liability the .....

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recipient in relation to the transaction in question no tax liability arises. 7. One more aspect to be considered is the nature of ProjectDevelopment Agreement. As already noted that the agreement is based on Public Private Partnership Model providing for joint sharing of risks, efforts, resources and profit/losses. The Board has clarified in the circular F. No. 137/186/2007-CX IV dated 23.2.2009 that transaction between two contract parties on a principal to principalbasis cannot be treated as .....

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it is a contentious issue to be gone through in detail at the time of regular hearing. 8. The Revenue s contention is that the amendment carried out in 2010 has no relevance to the facts of the case. The explanation deals with reference to sale of residential unit whereas in the present case the designated number of flats were transferred to DDA who may thereafter decide on sale of these units to third parties. The transaction between the appellant and DDA could not be considered as a sale tran .....

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onship of service provider and service recipient between the developer and the land owner. The argument was base on submission that it is a relationship in a joint venture for profit, both the parties have joined together in the business of construction of complex and land owner brings in the capital by way of his stay, the developer by way of his capital and services. The jointly constructed complex is for later sale for profit. The Tribunal after examining the issue with reference to the Board .....

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nd litigation with reference to construction of residential complex service and hence no suppression or fraud can be alleged against the appellant to invoke the extended period. The Revenue opposed the plea on the ground that appellant are an established organization undertaking huge project and the plea of time bar is taken to avoid the tax liability. The material facts of construction activity was never disclosed to the department. This aspect of time bar also requires to be examined with refe .....

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2/3rd of residential units allotted to the appellant is prima facie not convincing. Apart from the total base value taken for determining the tax liability, the original authority did not allow the abatement in value as available under notification No. 1/2006 dated 1.3.2006. The abatement was not allowed only on the ground that appellant has not come up with any evidence at any stage regarding fulfilment of two conditions mentioned therein. Without commenting on the merits of such observations, .....

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