The New Delhi Bench of Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has stated that the amount of advance received by the assessee with respect to the sale of land is out of the scope of applicability of the provisions of the Finance Act, and hence, no service tax is leviable. Dr. Rachna Gupta (Judicial Member) and A.K. Jyotishi (Technical Member) stated that the...
The New Delhi Bench of Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has stated that the amount of advance received by the assessee with respect to the sale of land is out of the scope of applicability of the provisions of the Finance Act, and hence, no service tax is leviable.
Dr. Rachna Gupta (Judicial Member) and A.K. Jyotishi (Technical Member) stated that the assessee has successfully established that the activity undertaken with reference to the amount in question pertains to the sale of immovable property, and as such, he was not liable to pay any service tax on the amount received as an advance towards that sale.
The assessee/appellant is engaged in the Construction of Residential complexes as well as Residential Townships by way of purchasing the land to develop the same.
They take advances for booking of Residential Accommodation and get approval for the layout plan from the UIT (Local Body) for developing and building the Complete Residential Townships.
As per the revenue, the assessee has neither declared such advance receipt amount in the ST-3 Returns filed for the said period nor paid service tax on the advance payments received by them as advance for booking of flats but they have not paid service tax which is due on the said amount, thereby contravening the provisions of Section 66, 66B, 67 and 68 of the Finance Act, 1994 read with Rule 6 of the Service Tax Rules, 1994.
Accordingly, a show-cause notice was issued to the assessee, and the demand was confirmed through an order.
The assessee submitted that the subject advance has not been received towards the booking of residential units (to be constructed by the assessee). But it was received towards the sale of land, hence same is not the subject matter of service tax liability.
The Tribunal noted that the department has presumed the said amount of advances to have been received for the purpose of booking flats solely on the appearance of these advances in the balance sheet under “advance from the customer”. There is no evidence on record that the customers were the flat buyers.
Further, the bench observed that the customers were four companies with whom the assessee had entered into a memorandum of agreement; the copies of four of those agreements were also produced by the assessee. The said agreement was not with respect to any housing project but with respect to some portion of land in the housing project for which the assessee had undertaken to convert the same into commercial land, and the agreement was subject to the said obligation of the assessee.
The Tribunal held that the amount of advance received by the assessee was with respect to the sale of land, which is absolutely out of the scope of applicability of the provisions of the Finance Act.
The findings of the adjudicating authority that the amount paid by those companies was with respect to the booking of flats in the residential complex to be constructed by the assessee are without any evidence, added the bench.
In view of the above, the Tribunal allowed the appeal.
Case Title: Suwalka & Suwalka Properties and Builders Pvt. Ltd. v. Commissioner of Central Goods & Service Tax, Jodhpur
Case Number: Service Tax Appeal No. 52874 of 2019
Counsel for Appellant/Assessee: Shri Rahul Lakhwani and Ms. Diksha Khandal, Chartered Accountants
Counsel for Respondent/Department: Shri S.K. Meena