2025-VIL-1094-CESTAT-DEL-ST
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SERVICE TAX CESTAT Cases

Service Tax - Business Support Services or Sale of Developmental Rights, Sale vs. Service - The appellants, being group companies floated by a parent entity engaged in manufacturing Wind Turbine Generators and providing end-to-end turnkey solutions for setting up wind farms – Appellant undertook various preparatory activities such as site identification, feasibility studies, wind monitoring, and obtaining necessary governmental approvals and allotments for potential wind power projects. These collected "Approvals and Allotments" were transferred to the parent entity under agreements styled as a sale of "Developmental Rights" for a "Purchase Consideration" - Whether the transfer of project "Approvals and Allotments" for setting up wind farms, which were the outcome of a series of preparatory activities, by group companies to their parent entity constitutes a sale of "Developmental Rights" as a benefit arising from immovable property or is it a taxable provision of 'Business Support Services' - HELD - The nomenclature of an agreement or a transaction is not the decisive factor; it is the it is the substance of the document that matters. While certain Developmental Rights can be considered a "benefit arising out of land" and thus immovable property, that principle applies to rights simpliciter, such as the right to develop land or Transferable Development Rights. In the present case, what was transferred was not merely the approvals and allotments, but the whole set of underlying activities including site identification, extensive studies, and project feasibility analysis – As per the turnkey contracts between the parent entity and its end customers, the parent entity itself was contractually obligated to perform these very activities. This demonstrates that the appellants were performing these activities on behalf of their parent entity, effectively acting as an outsourced service provider – Further, the Valuation Report explicitly stated that they were acting "on behalf of" the parent company to facilitate it by creating infrastructure and providing necessary support. Furthermore, evidence indicated that the underlying "Developer Permissions" were not transferable, which undermines the claim of a valid sale. The activities performed by the appellants were clearly in support of the main business of their parent company, fitting the definition of 'Business Support Services', and are not a transaction in immovable property excluded from the levy of service tax - The demand for service tax on the consideration received by the appellants under the taxable category of 'Business Support Services' is upheld and the appeal is dismissed - Extended Period of Limitation, Suppression of Facts - Whether the revenue department was justified in invoking the extended period of limitation on the grounds of wilful suppression of facts with an intent to evade tax - HELD - The act of structuring the transaction as a "sale of Developmental Rights" and consciously using nomenclature like "Purchase Consideration" in the agreements was an intentional act to hide the true colour and nature of the services being rendered. This was a deliberate stratagem to misguide government authorities, avoid scrutiny, and ultimately evade the service tax payable on what were taxable 'Support Services of Business & Commerce'. The entire arrangement was carried out in connivance with the recipient parent company to suppress the true nature of the services provided. Therefore, the essential ingredients for invoking the extended period, namely suppression of facts with a clear intent to evade the payment of tax, are conclusively established by the facts on record - The invocation of the extended period of limitation is upheld
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