2026-VIL-1625-CESTAT-DEL-ST
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SERVICE TAX CESTAT Cases

Service Tax - Transfer of Development Rights, Nature of transaction, Immovable property, Service, CENVAT Credit, Input service, Extended period of limitation - Appellant engaged in trading of lubricants and motor vehicles, transferred development rights of land in return for specified share of built up area of project, marketed and sold share of flats and treated amount as consideration for construction services, paid service tax after availing 75% abatement under Notification No. 26/2012-ST, availed CENVAT credit on administrative charges and construction services provided by developer, Department contended that transfer of development rights was a service liable to service tax without abatement - Whether transfer of development rights constitutes a service liable to service tax or is a transaction in immovable property and whether CENVAT credit was rightly availed - HELD - Following Chheda Housing Development Corporation vs Bibijan Shaikh Farid, development rights are a benefit arising out of land and fall under the definition of immovable property under Section 3(26) of General Clauses Act 1897 - Transfer of development rights is a transaction in immovable property and not a service at all. It is neither construction service nor any other service. Therefore, no service tax is payable on transfer of development rights. Since the transfer of development rights was not an output service, the service tax paid by the developer on Works Contracts and Administrative charges were not input services at the hands of the appellant - Therefore, the appellant was not entitled to CENVAT credit on these amounts. The extended period of limitation cannot be invoked in this case because the appellant was of the view that it was liable to pay service tax on the transfer as construction services and for that reason availed the CENVAT credit. The appellant's position was based on a reasonable interpretation of law and there was no wilful suppression or fraud. The demand of service tax and penalties under Sections 77 and 78 and Rule 15 are liable to be set aside. The appellant can claim refund of the service tax wrongly paid on transfer of development rights with effect from the date of this order - Demand of service tax under Section 73 set aside - Penalties under Sections 77 and 78 and Rule 15 set aside - Denial and recovery of CENVAT credit upheld for normal period of limitation only - Appellant entitled to claim refund of service tax paid - Appeal partly allowed
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