2025-VIL-732-CESTAT-BLR-ST
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SERVICE TAX CESTAT Cases

Service Tax – Sale of flats after obtainment of Occupancy Certificate, Reversal of Cenvat credit, Exempted service, Service tax on consideration received towards construction of parking area in Housing project, Works contract service, Declared service under section 66E(e), Retention charges – appellant received consideration from prospective buyers of flats in the housing project who had booked and purchased the flats after obtainment of Partial Occupancy Certificate(s)/ Final Occupancy Certificate - Appellant availed credit on the input services on the construction of these flats which were sold without payment of service tax - Demand for reversal of Cenvat credit – HELD - The appellant had received consideration from prospective buyers of flats after obtainment of Partial Occupancy Certificate/ Final Occupancy Certificate, on which no service tax was payable as the same was considered as sale of immovable property under Section 65B(44) of the Finance Act, 1994. However, the appellant had availed Cenvat credit on the input services used in construction of these flats – Term ‘service’ as defined in Section 65B(44) of the Finance Act, 1994 w.e.f. 01.07.2012 does not include an activity which constitutes merely a transfer of title in goods or immovable property, by way of sale, gift or in any other manner. Since, the clearance of flats after the receipt of completion certificate are considered to be sale of immovable property, they are not liable to pay service tax. The Explanation (3) introduced under Rule 6 of the Cenvat Credit Rules, 2004 w.e.f. 01.04.2016 only explains that the above clearances under Section 65B(44) are deemed to be exempted services. Even without this Explanation, there is no doubt that the clearances under Section 65B(44) are not liable to service tax in view of the fact that Section 66E clearly held that the flats sold after the receipt of the Completion Certificate are not liable to service tax, hence, the question of availing cenvat credit on such services does not arise - The appellant has to reverse the proportionate credit availed on such flats which have been sold and consideration received on or after receipt of the Completion Certificate – The demand of reversal of Cenvat credit during the period from August 2012 to September 2015 is set aside but the reversal of proportionate credit is upheld. Matter remanded for limited purpose for re-quantification of proportionate credit – All the penalties imposed under Section 77 and 78 are set aside. The appeal is partly allowed - Non-payment of service tax on consideration received towards construction/development of parking area – HELD - The demand of service tax on the consideration received for ‘parking area’ service is accepted by the appellant and only penalty is being disputed. Hence, on merit this amount is confirmed along with interest - Non-payment of service tax on the consideration received towards development costs from M/s Promont Hilltop Private Ltd. as per the Development Agreement – HELD - the agreement between the appellant and M/s Promont Hilltop Private Ltd. was a works contract service and not a mere transfer of development rights - From the Clauses of the Agreement, it is clear that there is no sale of an ongoing concern as claimed by the appellant as there is nothing in the Agreement to deem it to be sale or transfer, instead it establishes the fact that the Agreement is based on sharing of gross proceeds. The actual consideration charged as development costs, which includes construction, marketing and sales of the project, which is in the nature of works contract, hence, the Commissioner after deducting the cost of land has rightly provided 40% abatement. However, the demand is upheld only for the normal period, hence, it is remanded for limited purpose for re-quantification - Non-payment of service tax on compensation received towards cancellation/termination of Joint Development Agreement under section 66E(e) – HELD - The compensation received for termination of JDA is in the nature of liquidated damages and not consideration for any service rendered, hence, not exigible to Service Tax - Non-payment of service tax on 'forfeiture income' on account of cancellation of bookings – HELD - the forfeiture money received from customers on cancellation of bookings was in the nature of liquidated damages and not consideration for any service – Demand on this ground is set aside - Short payment of service tax under 'Interior Design Consultancy Service' – HELD - The demand of short-payment of service tax on the on 'interior design consultancy' service is accepted by the appellant and paid along with interest and only penalty is being disputed hence, on merit these amounts are confirmed along with interest - Non-reversal of proportionate input service credit attributable to retention charges, in respect of the services received from contractors/sub-contractors – Since the appellant had not paid retention charges to the service providers within three months, as envisaged under Rule 4(7) of the CCR, 2004, the Revenue demanded reversal of cenvat credit availed on such input services - HELD - Rule 4(7) during the relevant period is linked with the invoice/bill/challan of input service and not with payment of invoice – Since the appellant had paid the service tax in full to the service providers and the retention of a part of the value was as per the understanding between the parties, the appellant was entitled to the Cenvat credit. Consequently, reversal of proportionate Cenvat credit is set aside.
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