2026-VIL-1204-CESTAT-BLR-ST
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SERVICE TAX CESTAT Cases

Service Tax - Real Estate Agency Services - Exclusion of Direct Property Sales – Appellant entered into an agreement with a cooperative society to purchase, develop and sell converted agricultural land. The appellant purchased agricultural land through an individual, subsequently converted it from agricultural to residential purposes, and sold the converted land to the society. The revenue authorities levied service tax on the transaction, treating it as real estate agency services - Whether the direct transaction of purchase and sale of converted immovable property between the appellant and the society constitutes real estate agency services attracting service tax liability – HELD - For a person to be covered under the definition of real estate agent, there must be an attributable act of rendering service. The Section 65B(44) of the Finance Act, 1994 does not cover direct transaction of sale or purchase inter se between two entities - In the present case, the appellant acted as principal-to-principal seller of the converted land and not as an agent. The transaction involved transfer of property in land from the appellant to the society with no service rendered. The mere difference between consideration received and cost of land cannot be construed as service charges. The entire process of purchasing agricultural land through an individual was undertaken only to satisfy the statutory restrictions under the Karnataka Land Reforms Act, and the use of an individual as nominal purchaser does not alter the nature of the transaction from a direct sale - Additionally, the books of accounts maintained by the appellant, audited by statutory auditors and filed with income tax authorities, clearly show income from transfer and sale of land assessed under income tax law with no commission income earned or accounted, further confirming the absence of agency relationship. Therefore, the demand for service tax on real estate agency services is not sustainable. The appeal is partly allowed to the extent of setting aside the real estate agent service tax demand - Works Contract Services - Valuation Under Rule 2A - The appellant executed works contracts for development and formation of residential layouts involving supply of goods and materials as well as labour - Whether the appellant is liable to pay service tax on 40% of the total amount charged for works contracts under Rule 2A(ii) when the appellant has determined the actual service portion under Rule 2A(i) with selective invocation by revenue authority only on certain invoices – HELD - Rule 2A(i) applies when the value of service portion is determined after excluding the value of property in goods transferred in the execution of works contract, with such value adopted for purposes of payment of sales tax or value added tax. Rule 2A(ii) operates only when the value cannot be determined under Rule 2A(i). The revenue authority cannot segregate and calculate differential tax based on percentages of value without determining the service portion consistently. The selective acceptance of calculations where service tax exceeds 40% while demanding differential tax only on invoices where 30% was charged constitutes arbitrary and discriminatory application of the rules. The appellant's determination of service portion based on actual labour charges recorded in books of accounts and registered invoices, with corresponding payment of value added tax on 70% as goods value, follows the statutory scheme of taxation under the Karnataka VAT. The revenue cannot pick and choose applying Rule 2A(i) selectively according to convenience. No material on record establishes why Rule 2A(i) was rejected or why the actual values determined by the appellant through documented accounts were inaccurate. Therefore, the demand for differential service tax is not sustainable - GTA Services - Confirmation of Demand – The appellant incurred charges for goods transport agency services, and the revenue authority raised a demand for service tax on such services, which the appellant subsequently paid during audit - Whether the demand for service tax on goods transport agency services requires confirmation - HELD - The demand for service tax on goods transport agency services is confirmed as the appellant has already paid the service tax at the time of audit and the same is not being contested before the Tribunal. The appeal is partly allowed to the extent of confirming the service tax demand on goods transport agency services.
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