TMI Blog2023 (8) TMI 474X X X X Extracts X X X X X X X X Extracts X X X X ..... e by the seller so that the buyer can enjoy a vacant land which is ready for use. The land development charge paid for such site formation carried out when such land was owned by the developer/ promoter will be liable to service tax - When land is purchased outright by the appellant from the landowners and where it is self-developed by site formation etc. after purchasing the land but before selling it, and the development work is not done for or on behalf of any person involving a consideration being collected, service tax is not payable by the landowner. Whether on the land sold by the appellant as per the GPA obtained from the landowners and where site formation etc. is done after obtaining GPA but before selling the land, service tax is payable under the classification heading Site formation and clearance service? - HELD THAT:- The sale price of the land has been fixed separately at Rs 4,35,000/- per acre. Ground leveling, earth filling, laying roads on the land, fixing of boundary stones etc. are part of site formation and clearance which are clearly covered by the inclusive definition of Section 65(97a) that defines site formation and clearance, excavation and earthmo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ir obligations under the Finance Act 1994. What prompted them to believe that service tax on the development charges were not tenable is not forth coming from their pleadings. Hence their bonafide s cannot be accepted since as per the Agreement they have collected service tax from MRF - There is no complication in the definition of the service or the taxability of the activity as per the Finance Act 1994. It was clearly a suppression of fact from the department with the intention to fraudulently evade payment of duty. These facts would not have come to light without the investigation done by the Survey, Intelligence and Research Unit of the Service Tax Commissionerate, Chennai. It is now well settled that fraud vitiates all solemn acts. Any advantage obtained by practicing fraud is a nullity. Hence the extended period of time has been rightly invoked in this case - The penalty is also justified. Appeal dismissed. - Shri P. Dinesha, Member (Judicial) and Shri M. Ajit Kumar, Member (Technical) Smt. Radhika Chandrasekar, Advocate for the Appellant Shri N. Satyanarayanan, AC (AR) for the Respondent ORDER This appeal is filed by the appellant against Order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... andrasekar submitted that the appellant is engaged in construction services and real estate business. The appellant is not engaged in providing site formation and clearance services. They purchase lands from various individuals by executing valid sale deeds or by way of Irrevocable General Power of Attorney (GPA). The transaction is recognized as a valid transfer of property under Section 53A of the Transfer of Property Act. Appellant has the absolute possession and right of enjoyment over the land so purchased. Hence anything done on this land is only a self-service. The appellant developed these lands by putting layout, clearing unwanted vegetation etc. before selling the land in order to enhance the sale value of land. These activities are activities which are incidental to sale and cannot be considered as a different activity. The nature of transaction is nothing but sale of immovable property which is outside the ambit of Service Tax and development is only incidental to the sale of land. A similar pattern was followed in the sale of land to MRF Ltd (MRF). MRF entered into an agreement with the appellant for purchasing land for their new projects in Tamil Nadu. The total price ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd sold by the appellant as per the GPA obtained from the landowners and where site formation etc. is done after obtaining GPA but before selling the land, service tax is payable under the classification heading Site formation and clearance service. 8.1 The issue of time bar will be examined separately, if need be, after examining the issue on merits. 8.2 Before examining the above issues it would be beneficial to extract the relevant provisions of the Finance Act 1994 and also the activities of site formation performed by the appellant, which is under dispute. 8.2.1 Section 65(97a) defines site formation and clearance, excavation and earthmoving and demolition as under site formation and clearance, excavation and earthmoving and demolition includes (i) drilling, boring and core extraction services for construction, geophysical, geological or similar purposes; or (ii) soil stabilization; or (iii) horizontal drilling for the passage of cables or drain pipes; or (iv) land reclamation work; or (v) contaminated top soil stripping work; or (vi) demolition and wrecking of building, structure or road, but does not include such services provided ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... now examine the two issues listed above. 9. Whether on the land purchased outright by the appellant from the landowners and where site formation etc. is done after purchasing the land but before selling it, service tax is payable under the classification heading Site formation and clearance service. 9.1 The appellant has stated that they are not engaged in providing site formation and clearance services, they have, in certain cases, purchased lands directly from landowners and developed the same to enhance its value before re-sale to customers. They have also produced some agreements/ sale deeds before us for perusal. It is their view that since the activity of site development in this case is self-service, no tax is payable. How site formation and clearance services is different from developing the land is not explained. They further state that the issue is squarely covered by the decision in the case of Hallmark Infrastructure Pvt Ltd Vs Commr. of GST CE Final Order No. 43116 of 2018 wherein it was held that the activity of land development which took place prior to the sale of land cannot be liable for Service Tax demand as the service was a self-service and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o any person, by any other person and not a self-service. It is also seen that land developers and promoters are a dominant party and dictates their own terms, leaving it upon the buyers, either to take it or leave it. These contracts / sale deeds signed at the time of sale to buyers may apart from the sale value of land, include a consideration for land development or the charge may be paid separately under a receipt. Such contracts/ agreements involving the said separate consideration, although obviously one sided and perhaps grossly in favour of the land developer/ promoter due to the weak bargaining power of the land buyer, continue to be a document with a service provider service receiver relationship. The development charges in the present case is paid by the buyer of land for site formation done by the seller by way of levelling, plotting, boundary marking, road layout, clearance of the area etc done by the seller so that the buyer can enjoy a vacant land which is ready for use. The land development charge paid for such site formation carried out when such land was owned by the developer/ promoter will be liable to service tax. This aspect was not a part of the discussion ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... valid transfer of property under Section 53A of the Transfer of Property Act. these activities are activities which are incidental to sale and cannot be considered as a different activity. even though there is a clause in the agreement for development, with MRF the Appellant has sold the land as it is and they have not done any development work. the activity done by the appellant does not amount to Site Formation and Clearance service. 10.2 A plain reading of the Agreement entered into by the appellant with MRF will show that the appellant is engaged in the procurement and development of land. There is no reference to the appellant selling land as a principle to MRF. Relevant portions are extracted below; AND WHEREAS the Second Party has represented that it is a Private Limited Company formed in 2004 which is engaged in procurement and development of land, construction of commercial, residential and industrial land / property in the State of Tamil Nadu, Karnataka and Andhra Pradesh and has the necessary expertise and infrastructure for the performance of its obligations under this Agreement. ***** ******* ******* AND WHEREAS the Second party has further ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt of the landowners and not an independent party who has purchased land from the landowners and sold it to MRF. 10.3 The appellant has referred to Section 53A of the Transfer of Property Act, to assert that once the possession of the land is granted to the Appellant by landowners who execute a GPA in the appellants favour, then for all legal purposes the transaction is recognized as purchase of immovable property. The transaction without the execution of the sale deed is recognized as a valid transfer of property under the Transfer of Property Act. To examine this view it is necessary to extract Section 53A of the Transfer of Property Act, which is done below; Section 53A of the Transfer of Property Act Part performance .-- Where any person contracts to transfer for consideration any immoveable property by writing signed by him or on his behalf from which the terms necessary to constitute the transfer can be ascertained with reasonable certainty, and the transferee has in part performance of the contract, taken possession of the property or any part thereof, or the transferee, being already in possession, continues in possession in part performance of the contract and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Radius Corporation Ltd Vs CCE 2014 (33) STR 416 . The Appellant also relied upon the following decisions wherein it has been held that the Site Formation and Clearance, Excavation and Earth Moving services done before mining of ores is incidental to the mining activity. The essential character of work under taken is mining and the same is classifiable under mining services and not under Site Formation. a) CCE Vs Vijay Leasing Company 2011 (22) STR 553 b) Associated Soap Stone Distributing Company Pvt Ltd Vs CST 2014 (34) STR 865 c) Ramakrishna Reddy Vs CCE 2009 (13) STR 661 All these decisions are based on a bundle of similar services of the service provider and not between an activity of service and sale. Further the appellants are only service providers and not the owners of land. Sale and service are two distinct activities. In the instant case too sale of land is by the landowners and the service of land development is an independent action performed by the appellant. To cite a similar example, it cannot be said that manufacture of goods is an activity incidental to the sale of goods and hence there cannot be a separate tax on manufacture and on sale of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of damages by MRF, but the Agreement for sale would remain valid on its own terms. Hence the land development activities are independent and not incidental to sale. The appellant is liable to pay service tax on the development activity undertaken on the land belonging to other landowners and for which activity he has received a consideration. 10.5 The appellant states that even though there is a clause in the agreement for development, the Appellant has sold the land as it is and they have not done any development work and this is evident from the statement of their Director which is referred to in the SCN. We find that this assertion is contrary to the agreement entered into with MRF for which a sizeable amount has been fixed as development charge per acre. Further MRF vide their letter date 12/10.2011, reproduced in the impugned order, have accepted to having paid development charges in furtherance of the Agreement and also submitted the details of the debit note raised by the appellant on MRF towards development charges. On the face of it huge payments made by a company to another for no work done fails the test of something which a prudent and reasonable man would do. In the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 39; for short) defines `transfer of property' as under: 5. Transfer of Property defined : In the following sections transfer of property means an act by which a living person conveys property, in present or in future, to one or more other living persons, or to himself [or to himself] and one or more other living persons; and to transfer property is to perform such act. xxx xxx Section 54 of the TP Act defines `sales' thus: Sale is a transfer of ownership in exchange for a price paid or promised or part-paid and part-promised. Sale how made. Such transfer, in the case of tangible immoveable property of the value of one hundred rupees and upwards, or in the case of a reversion or other intangible thing, can be made only by a registered instrument. In the case of tangible immoveable property of a value less than one hundred rupees, such transfer may be made either by a registered instrument or by delivery of the property. Delivery of tangible immoveable property takes place when the seller places the buyer, or such person as he directs, in possession of the property. Contract for sale.-A contract for the sale of immovable property is a contract that a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion is compulsory- (1) The following documents shall be registered, namely:-- xxxxx (b) other non-testamentary instruments which purport or operate to create, declare, assign, limit or extinguish, whether in present or in future, any right, title or interest, whether vested or contingent, of the value of one hundred rupees and upwards, to or in immovable property. xxxxx (1A) The documents containing contracts to transfer for consideration, any immovable property for the purpose of section 53A of the Transfer of Property Act, 1882 (4 of 1882) shall be registered if they have been executed on or after the commencement of the Registration and Other Related laws (Amendment) Act, 2001 and if such documents are not registered on or after such commencement, then, they shall have no effect for the purposes of the said section 53A. Advantages of Registration 10. In the earlier order dated 15.5.2009, the objects and benefits of registration were explained and we extract them for ready reference : The Registration Act, 1908, was enacted with the intention of providing orderliness, discipline and public notice in regard to transactions relating to immovable property and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clear that a contract of sale, that is, an agreement of sale does not, of itself, create any interest in or charge on such property. This Court in Narandas Karsondas v. S.A. Kamtam and Anr. (1977) 3 SCC 247, observed: A contract of sale does not of itself create any interest in, or charge on, the property. This is expressly declared in Section 54 of the Transfer of Property Act. See Rambaran Prosad v. Ram Mohit Hazra [1967]1 SCR 293. The fiduciary character of the personal obligation created by a contract for sale is recognised in Section 3 of the Specific Relief Act, 1963, and in Section 91 of the Trusts Act. The personal obligation created by a contract of sale is described in Section 40 of the Transfer of Property Act as an obligation arising out of contract and annexed to the ownership of property, but not amounting to an interest or easement therein. In India, the word `transfer' is defined with reference to the word `convey'. The word `conveys' in section 5 of Transfer of Property Act is used in the wider sense of conveying ownership... ...that only on execution of conveyance ownership passes from one party to another.... In Rambhau Namdeo Gajre v. Nar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an agent is formally appointed to act for the principal in one transaction or a series of transactions or to manage the affairs of the principal generally conferring necessary authority upon another person. A deed of power of attorney is executed by the principal in favour of the agent. The agent derives a right to use his name and all acts, deeds and things done by him and subject to the limitations contained in the said deed, the same shall be read as if done by the donor. A power of attorney is, as is well known, a document of convenience. Execution of a power of attorney in terms of the provisions of the Contract Act as also the Powers-of-Attorney Act is valid. A power of attorney, we have noticed hereinbefore, is executed by the donor so as to enable the donee to act on his behalf. Except in cases where power of attorney is coupled with interest, it is revocable. The donee in exercise of his power under such power of attorney only acts in place of the donor subject of course to the powers granted to him by reason thereof. He cannot use the power of attorney for his own benefit. He acts in a fiduciary capacity. Any act of infidelity or breach of trust is a matter between th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by him. Even an irrevocable attorney does not have the effect of transferring title to the grantee. Hence the averment of the appellant that Section 53A of Transfer of Property Act envisages situations where under the contract of transfer of immovable property the transferee has paid the consideration and taken possession of the property even without the execution of the sale deed the transfer takes place and the transaction is recognized as a valid transfer of property, is incorrect and not sustainable in law. Their entire argument of self-service hence falls through. The activity of land development as rendered by them for a consideration is hence liable to Service Tax as per the taxable service Site Formation and Clearance Service under section 65(105)(zzza) of the Finance Act, 1994. 10.8 Based on the discussions above it is held that, even on the land sold by the appellant as per the GPA obtained from the landowners and where site formation etc. is done after obtaining GPA but before selling the land, service tax is payable under the classification heading Site formation and clearance service. 11. The appellant states that the invocation of extended period is not just ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... done on the land, just to escape from the levy of Service Tax. There is no complication in the definition of the service or the taxability of the activity as per the Finance Act 1994. It was clearly a suppression of fact from the department with the intention to fraudulently evade payment of duty. These facts would not have come to light without the investigation done by the Survey, Intelligence and Research Unit of the Service Tax Commissionerate, Chennai. In Commissioner of Customs, Kandla Vs M/s Essar Oil Limited Ors. [2004 (172) E.L.T. 433 (S.C.)] it was held; Fraud in relation to statute must be a colourable transaction to evade the provisions of a statute. If a statute has been passed for some one particular purpose, a court of law will not countenance any attempt which may be made to extend the operation of the Act to something else which is quite foreign to its object and beyond its scope. It is now well settled that fraud vitiates all solemn acts. Any advantage obtained by practicing fraud is a nullity. Hence the extended period of time has been rightly invoked in this case. Moreso the very process of using GPA to claim principle-to-principle sale is a fraudul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f attorney sale and then threaten the previous `Power of Attorney Sale' purchasers from asserting their rights. Either way, such power of attorney sales indirectly lead to growth of real estate mafia and criminalization of real estate transactions. It also makes title verification and certification of title, which is an integral part of orderly conduct of transactions relating to immovable property, difficult, if not impossible, giving nightmares to bonafide purchasers wanting to own a property with an assurance of good and marketable title. (emphasis added) Hence not only has the extended period been correctly invoked so also has penalty been correctly imposed. In an apt quotation which also applies to this case, the Patna High Court in Syed Askari Hadi Ali Augustine vs Union Of India And Ors. [1994 (42) BLJR 1389] at para 20 mentioned the following quote with approval; 20. In Howard De Walden (Lord) v. IRC [1942] 1 All ER 287 (CA) at page 289, Lord Greene observed : For years a battle of manoeuvre has been waged between the Legislature and those who are minded to throw the burden of taxation off their own shoulders on to those of their fellow-subjects. In t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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