fiogf49gjkf0d
High Court refused to interfere with Tribunal’s order directing
pre-deposit in respect of flats constructed by developer for landowner
under a development agreement, adopting the valuation based on price
charged by assessee builder on flats sold to other flat owners – No view
as to appropriate valuation rule is expressed.
Facts:
The
Appellant entered into a joint venture agreement with a land owner for
construction of flats according to which the appellant owned 48 flats
and land owner owned 24 flats as his share equivalent to the land. The
appellant paid service tax only in respect of 48 flats. Department
contended that construction of flats allotted to landowner would also
attract service tax. The adjudicating authority held that the
construction of flats for landowner constitutes a taxable service under
the category of “construction of residential complex” u/s. 65(105)(zzh)
and liable to service tax.
Before the Tribunal, the Appellant
contended that the appellant had not received any consideration in the
form of money in respect of 24 flats handed over to the landowner and
therefore tax should be demanded on the basis of the cost of land.
However, the Tribunal directed pre-deposit relying upon Rule 3 of the
Service Tax (Determination of Value) Rules, 2006, holding that the value
of taxable service should be equivalent to the value of taxable service
rendered in relation to the flats sold to independent persons.
Aggrieved by the said order of predeposit, the Appellant filed appeal
before High Court.
Held:
The High Court observed that
the Appellant has made specific admission before adjudicating authority
that its services would fall under the category of “construction of
residential complex service”’. Even otherwise, a prima facie view was
taken that the nature of the services provided by the appellant is
construction of flat to the land owner and the transfer of land is only
for the purpose of providing such taxable service. It further held that
where there is no monetary consideration in the transaction; then
section 65 of the Finance Act, 1994 provides for various methods for
valuation and it is for the appellant to establish its plea before the
Tribunal as to why the cost of land is to be considered for the purpose
of valuation. The High Court categorically refused to express any view
as to whether the transaction would fall under Rule 2 or Rule 3 of
Valuation Rules and left the matter open for consideration by the
Tribunal. The Appeal was accordingly dismissed without interfering with
the order of Tribunal ordering pre-deposit.
[Note:
Readers may note that in this appeal, it appears that dispute is only
with respect to the adoption of taxable value and not as to whether
allotment of flats by developer to landowner constitutes a taxable
service or not. The issue of taxability of service has not been
considered either by the High Court or by Tribunal in the present case.
For analysis of the Tribunal’s judgment, readers may refer to BCAJ April
2015 issue.]
