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TMI Blog2018 (11) TMI 1472X X X X Extracts X X X X X X X X Extracts X X X X ..... ith and incidental thereto. 3. Sahara India Commercial Corporation Ltd. ('Sahara India' for short) was interested in acquiring large parcels of land for setting up townships. Accordingly Sahara India entered into three separate but similar memorandum of understanding with the appellant firm for acquiring three large parcels of land at three different locations as follows; Name of the Associate Place/Sites Date of the MOU Area of the land(in acre) Intended to acquire Average rate per acre(in Rs.) M/s Premium Real Estate Developers Kanpur 09.08.2003 100 8,50,000/- Lalitpur 15.11.2003 100 5,75,000/- Raeberalli 16.05.2005 125 7,50,000/- 4. Under the MOU, Sahara India, had agreed to pay an average rate per acre of land to be purchased by Sahara India, which land would be identified, divided and demarcated by the appellant firm together with necessary documents and other formalities. The MOU for each site specifically provided the obligations of both the parties. It specifies that Sahara India had agreed to procure land at the aformentioned locations, at the fixed average rate per acre, which included all the cost of land, development expenses (items). The obligations ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... herein Sahara India was interested to purchase 100 acres of land for developing residential township in and around the city of Lalitpur. The appellant assured to make available 100 acres of land situated in the village Rora, Distt. Lalitpur U.P., with direct opening or acess of at least 1000 feet on the National highway. The salient features of the agreement are; 6.1 The process of land purchase shall be in a compact contiguous, adjacent and plot wise or block wise manner starting from the roadside. 6.2 The appellant shall furnish the title papers and all other necessary documents with reference to the land proposed, within 15 days from the date of signing of the MOU. 6.3 Thereafter the appellant shall obtain and furnish, each and every other necessary permission/ approval from the Government body/competent authority, or other regulatory authority, required for transfer of the land proposed, and further arrange for the purchase of land proposed under the MOU, at the average agreed rate per acre, within two months or within such further time at the discretion of Sahara India. 6.4 All expenses for obtaining proof of title and approval (except for ULC clearance) required for the t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ire land. In case, the appellant fails to fulfil its obligations as stipulated in the terms of the contract/MOU, the same can be terminated by Sahara India and the withheld amount is liable to be forfeited. All expenses for registration of documents relating to the transfer or agreement of sale, etc., shall be borne by Sahara India. Further all expenses of mutation of land in the office of the concerned Revenue authority shall be borne by Sahara India and the appellant shall be required to coordinate and to do the work of Pairvi in respect thereof in the concerned offices and shall provide to Sahara India all necessary help so as to get the work of mutation completed. 7. It appeared to Revenue that the appellant was liable to pay the service tax under the classification 'Real Estate Agent Service' (introduced with effect from 1st October,2004) under section 65(88) of the Finance Act which defines a 'real estate agent' as a person who is engaged in rendering any service in relation to sale, purchase, leasing and renting, of real estate and includes a real estate consultant. 8. Real Estate consultant is defined under section 65(89) of the Finance Act. 'Real Estate Consultant' means ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ave suppressed the facts of rendering the taxable service, during the said period. Further neither they obtained the service tax registration as 'Real estate agent/consultant' nor filed the service tax returns, as prescribed. Thus it appears that the appellant failed to disclose truly the material facts, like nature of service provided by them, the gross amount received by them for rendering of taxable service, necessary for their assessment to tax for the said period. It appeared that such act of omission was deliberate with intent to evade payment of service tax. Had the officers of Directorate General not initiated inquiry against the appellant, the none payment of service tax by the appellant would not have been unearthed. The SCN further proposed to impose penalty under Section 76,77 and 78 of the Act. Further personal penalty was proposed on Shri Rajat Yadav partner. 13. The SCN was adjudicated on contest, by the Ld. Commissioner, and the proposed demand was confirmed along with interest and equal amount of penalty was imposed under Section 78, along with further penalty under Section 77. The proposed penalty under Section 76 was dropped. Further personal penalty on Shri Raj ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... transaction of purchase and sale. The land being sold to Sahara India being not in the name of the appellant, is not the decisive factor. What is relevant is to see the transaction between the parties. As the transaction is for purchase and sale of land there is no element of service involved. The other incidental obligations of the appellant/seller to scrutinize all the documents, to ensure the actual owner's presence at the time of registry, et cetera, are for carrying out the objective of the MOU between the parties. It is further submitted that sale/purchase the property or investment/booking of land, is the business on principal to principal basis and not a service as an agent. The learned counsel relied on the ruling of Hon'ble Delhi High Court in the case of Home Solution Retail India Ltd vs. Union of India 2009 (14) STR 433(Tri-Delhi), wherein it has been held as follows: - "On the other hand, the service referred to with section 65(105)(v) which refers to a service provided by real estate agent in relation to real estate, does not, obviously, include the subject matter as a service. This is so because the real estate by itself cannot by any stretch of imagination ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e nature and character of transaction is concerned, which is one of booking profit/loss in a transaction of sale and purchase of property. This is evident from the fact that, suppose appellant only makes a loss in the entire transaction, then obviously there would be no service tax, even as per the Department. It is further submitted that service tax is not dependent upon profit or loss in a transaction. A true consideration in a service contract is the consideration for the service rendered, which is irrespective of the fact whether the service provider earned profit or loss out of the transaction. In the present case, if the department's case is to be accepted, only in the event of appellant making profit out of the transaction, it would be liable to pay service tax and no service tax will be payable in case of there being a loss. This negates the rendition of any service, apart from showing lack of consideration. Mere sale and purchase of land against profit or loss does not involve any service. Sale and purchase can be outright, or can be upon booking, or in any other manner. Reliance is placed on the ruling of this Tribunal in the case of Commissioner of Service, New Delhi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndered in the context of indivisible works contract, the principal on the basis of which the said decision was rendered, is that the Finance act seeks to tax service contracts simplicitior and not other contracts. Applying the same principle in the facts of the present case it is evident that the Finance Act seeks to tax only such service, which are provided in relation to Real estate by a real estate agent. It does not contemplate taxing a transaction like the present one, which is for sale and purchase of immovable property and assuming without admitting, includes some alleged real estate service. In the absence of any statutory mechanism to tax the different element of an indivisible contract, in the aforementioned case, no service tax can be levied in the present case. The contention of the Ld. Commissioner that since the land cost is capable of being known, in the facts of the present case, the profit, if any, amounts to being the consideration for service, is completely erroneous. It have also been held in the said decision that when the Finance Act levies service tax, it only levy service tax on those activities which are for providing services simplicitor and it does not pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt have provided services to Sahara India relating to acquisition and development of real estate. Separate MOUs were executed with Sahara group in connection with the acquisition of land in the vicinity of three different cities. Under the MOU the appellant was to do several acts like to identify the land, to negotiate with the land owner, to examine the title paper, to confirm the title with the land records and thereafter to facilitate the transfer of land in favour of Sahara India. Also It was also required to obtain necessary permission/approval, if need be, from the appropriate authority for the transfer of the land. The expenses for search of the title of the prospective seller of land, was on the appellant. It was stipulated that Sahara India will enter into agreement for sale/purchase with the owner of the land after payment of advance, on advice of the appellant. The appellant also coordinated and provided necessary assistance in relation to mutation of land. As per the MOU, Sahara India gave the advance to the appellant and the appellant paid to the land owners and also incurred the other incidental expenditure. These activities are undoubtedly in relation to real estate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he impugned order, that the cost of land is not to be included the gross value for levy of service tax however the appellant failed to provide the details of the amounts retained by them in the said transaction. Further the contention of the appellant on the basis of the judgement of Larsen and Toubro of the apex court, that the contract is indivisible and the service tax on part of the contract value, which pertains to services provided cannot be taxed. This argument is completely baseless and factually incorrect. The reason for this is the price given to the land owners is definite, the amount received from Sahara India is definite. Thus the difference between the two amounts is a matter of simple calculation. The consideration received is workable. 26. So far the limitation is concerned it is urged that the case was booked by the DGCEI. The services rendered by the appellant are squarely covered under the definition of 'real estate agent service'. The belief of the appellant that they were not liable to pay service tax, cannot be termed as bonafide. 27. Having considered the rival contentions and on perusal of record, we find that there is no consideration defined and/or provi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... if any is not clear in this case. In this regard, we also take shelter of this Tribunal's decision in the case of Mormugao Port Trust vs. CC, CE&ST, Goa - 2017 (48) S.T.R. 69 (Tri. - Mumbai). The relevant extract is reproduced here below :- "18. In our view, in order to render a transaction liable for service tax, the nexus between the consideration agreed and the service activity to be undertaken should be direct and clear. Unless it can be established that a specific amount has been agreed upon as a quid pro quo for undertaking any particular activity by a partner, it cannot be assumed that there was a consideration agreed upon for any specific activity so as to constitute a service. In Cricket Club of India v. Commissioner of Service Tax, reported in 2015 (40) S.T.R. 973 it was held that mere money flow from one person to another cannot be considered as a consideration for a service. The relevant observations of the Tribunal in this regard are extracted below : "11. ...Consideration is, undoubtedly, an essential ingredient of all economic transactions and it is certainly consideration that forms the basis for computation of service tax. However, existence of consideration ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d for the purpose of stamp duty and registration. Thus, a total amount of Rs. 8,41,50,000/- have been remitted to the appellant out of which a total amount of Rs. 3,66,32,000/- have been spent by the appellant for procurement and registration of land. Thus, an amount of Rs. 4,75,18,000/- still remain unspent with the appellant. It is to be seen that out of the above amount though the MoU was for 100 acres of land till the issue of the show cause notice only 77.96 acres of land could only be acquired and thus the remaining amount still was to be used for procurement/acquisition of balance land. This indicates that firstly; the MoU has not been executed fully and therefore the actual remuneration to the appellant have not got finalized and therefore we feel that issuing the show cause notice in such a stage was premature and unwarranted. 31. As discussed above, since the exact amount of remuneration for providing any service, if any, has not been quantified at the same time since most of the MoU remained to be fully executed and therefore the exact amount of remuneration, which was the difference in amount paid to the seller of land and average price decided in MoU, could not be fin ..... X X X X Extracts X X X X X X X X Extracts X X X X
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