I. TRIBUNAL
13. [2019-TIOL-3177-CESTAT-Kol.] M/s. Amit Metaliks Ltd. vs.
Commissioner, CGST Date of order: 25th October,
2019
Development
of land is a benefit arising out of land and not a service. Compensation
received by way of settlement for revoking development agreement is not a
service, hence not even declared service u/s 66E(e) of the Finance Act, 1994
dealing with toleration of an Act, etc. Further, ‘taxable event’ was time of
entering development agreement and settlement agreement and not date of payment
FACTS
The appellant had entered
into an agreement in May, 2010 as developer with 31 different
landowner-companies whereunder he was to develop the land. However, pieces of
land owned by the landowners did not make up one piece of land for development.
Hence, the landowners assured the appellant that the remaining intermittent
pieces of land would be acquired by them in a specific time frame and would be
handed over to the developer-appellant to make a contiguous piece of land for
development. Since the landowners could not provide this, the appellant became
entitled to compensation as per the said agreement. The landowners eventually
terminated all the development agreements by May, 2012 and agreed for a full
and final settlement for a sum payable by each individual owner of land.
The issue therefore arose
as to whether the compensation received against the settlement amounted to
consideration for any service provided chargeable u/s 65B(44) and it was paid
in lieu of admission of any party’s liability and therefore a declared service
as per section 66E(e), viz., ‘agreeing to obligation to refrain from an act
or to tolerate an act or a situation or to do an act’. The Department,
while alleging this, also scrutinised ST-3 returns and accounts of the
appellant in addition to the development agreement and the settlement
agreement, including compensation reflected in the books.
The Department’s case that
it is a declared service inter alia relied on Rule 5 of the Point of
Taxation Rules, 2011 stating that the date of receipt of money for compensation
in January, 2013 was the time of provision of a new service and the fact was
that the development agreement and the settlement agreement were not registered
and hence could not be relied upon. The Department also advanced the argument
that under the current GST law, liquidated damages attract GST and relied on
AAAR’s ruling in the case of GST Maharashtra State Power Generation Co.
Ltd. [2018 (17) GSTL 451 (APP-AAR-GST)].
The appellant, on the other
hand, pleaded inter alia that:
(a) the compensation was
not against any service by the appellant as cancellation of development
agreement did not amount to service; nor was it a declared service u/s 66E(e)
of the Finance Act, 1994;
(b) further, the agreements
were made in the period prior to 1st July, 2012, the date of
introduction of declared service and therefore the taxable event, if any, was
rendition of service and which took place prior to this date. In this context,
reliance was placed on Vistar Construction P Ltd. vs. UOI [2013 (31) STR
129 (Del.)]. Thus the date of payment of receipt did not determine the
taxable event.
(c) Relying on the decision
in DLF Commercial Projects Corporation (DCPC) Gurugram, Haryana vs. CST
2019-TIOL-1514-CESTAT-Chd., it was prayed by the appellant that development
of land does not amount to service.
In response to rival
claims, the Bench examined the definition of ‘service’ in the Finance Act, 1994
vis-à-vis the clauses in the development agreement and also the settlement
agreement and examined the decision in DCPC (Supra) and noted, inter
alia, the decision in the case of Premium Real Estate Developers vs.
CST 2019-TIOL-725-CESTAT-Del. which was relied upon in the case of DCPC
(Supra).
HELD
Development
right is not a service but it is a benefit arising out of immovable property.
Compensation received out of settlement claim is not liable for service tax. It
was further noted that compensation received by the appellant was the debt in
present and future for the landowners which, as per Transfer of Property Act,
is in the nature of actionable claim while placing reliance after a detailed
examination of the decision of Kesoram Industries & Cotton Mills Ltd.
vs. CWT 2002-TIOL-1062-SC-IT-LB and Sunrise Associates vs. Govt.
of NCT of Delhi 2006-TIOL-40-SC-CT-LB.
Citing the settlement
agreement, it was also observed that the landowners paid an ascertained amount
to resolve the entire claim of settlement and thus the said settlement
agreement resulted in creation of a debt and so would be in the scope of
actionable claim in terms of section 3 of the Transfer of Property Act, 1892,
and hence not liable for service tax under the 1994 Act, it being beyond
section 65B(44)(iii) of the Finance Act. It was further held that when the
development agreement, settlement agreement and the compensation were outside
the scope of service under the Finance Act, section 66E(e) could not be
applied.
Lastly, it was also noted
that the Revenue’s contention that liquidated damages were liable for CGST as
held as per AAR in the case of Maharashtra State Power General Company
(Supra) as Finance Act and CGST Act are different enactments, besides
the distinguishable fact that in that case, the issue related to performance of
service agreement and not development of land as per development agreement, and
thus the appeal was dismissed.
14. [2019-TIOL-3147-CESTAT-Del.] M/s. Manan Infra Development Pvt. Ltd. vs. Commissioner of Central
Goods and Services Tax, Custom and Central Excise Date of order: 13th May, 2019
Show
cause notice has not invoked section 73(1) and there is no such proviso u/s 75
and hence the notice is defective and no amount could be recovered
FACTS
The appellant deposited
service tax quarterly and filed the returns with the Department. Subsequently,
while scrutinising them and the documents evidencing the payment of service
tax, it appeared that since it was a private limited company, it was required
to deposit service tax on monthly basis. Thus, on re-calculation on monthly
basis, interest was payable. Show cause notice dated 16th
January, 2015 was issued for the period
October, 2011 to March, 2013 invoking extended period of limitation demanding
interest u/s 75 of the Act for delay in deposit of service tax. Further, a
penalty was also proposed.
It was primarily argued
that the show cause notice has not invoked section 73(1) and there is no such
proviso u/s 75 and hence the show cause notice is defective and no amount could
be recovered.
HELD
The Tribunal held that the
show cause notice was bad, both for invocation of extended period of limitation
and also for non-invocation or non-mentioning of proper section 73(1) with
proviso. Accordingly, the show cause notice was held to be non-maintainable.
The appeal was allowed.
15. [2019-TIOL-3185-CESTAT-All.] Commissioner of Central Tax vs. Viami Business Solution Pvt. Ltd. Date of order: 22nd April, 2019
Service
tax demanded under reverse charge available as CENVAT credit leads to a
revenue-neutral situation and therefore the demand is set aside
FACTS
The assessee has failed to
discharge tax under reverse charge mechanism which is available as CENVAT
credit against their output services. Revenue contends that it is a statutory
requirement to first discharge the said service tax on reverse charge basis.
Without payment of service tax, they were not in a position to avail CENVAT
credit. Since the Commissioner (Appeals) set aside the demand on the ground of
Revenue neutrality, the Revenue is in appeal.
HELD
The Tribunal primarily
noted that the service tax required to be paid by the assessee was available to
them as credit. During the period they paid service tax on output services by
way of cash. Had they paid service tax on the input services received by them,
they could have taken the credit and utilised that credit for payment of duty,
instead of paying service tax in cash. Thus, there definitely exists a case of
Revenue neutrality. Further, the Tribunal noted that the reliance placed on the
decision in the case of Jet Airways (I) Ltd. vs. Commissioner of Service
Tax, Mumbai 2016 (44) S.T.R. 465 (Tri.-Mum.) [2016-TIOL-2072-CESTAT-Mum.]
is also upheld by the Supreme Court and thus the appeal of the Revenue
is rejected.
