CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL,

BANGALORE

REGIONAL BENCH - COURT NO. 01

Service Tax Appeal No. 21032 of 2017

(Arising out of Order-in-Original No. MYS-EXCUS-000-COM-GVK-16-2016-17 ST ADJN

dated 30.03.2017 passed by Commissioner of Customs, Central Excise & Service Tax,
Mysore)
.
M/s. Adithya Builders and ....Appellant
Developers
No. 912, 1st Main Road,
Near Canara Bank,
Ramakrishnanagara,
Mysore-570023
VERSUS

Commissioner of Central Tax, …..Respondent

Mysuru
S1-S2, Vinaya Marga,
Siddhartha Nagar, Mysore,
Karnataka-570011

Appearance:
Shri R. Subramanya, Advocate for the Appellant
Shri Rama Holla, Authorized Representative for the Respondent

CORAM:

HON’BLE MR. S.K. MOHANTY, MEMBER (JUDICIAL)

HON’BLE MR. P. ANJANI KUMAR, MEMBER (TECHNICAL)
FINAL ORDER NO. 20852/2021

Date of Hearing: 09.11.2021

Date of Decision: 16.12.2021

PER : S.K. MOHANTY

Briefly stated, the facts of the case are that the appellant
herein is engaged in selling of land, upon providing adequate
infrastructure facilities; in this case, the appellant had entered into an
agreement dated 28.03.2007 with the Government Employees House
Building Co-operative Society Ltd., Mysore for carrying out various
activities namely, procurement for land from farmers, getting land thus
procured converted from agricultural land to non-agricultural land,
 Service Tax Appeal No. 21032 of 2017

seeking various government permissions and approvals, necessary till

formation of residential layouts etc. The scope of work and the time
limit for completion of the project under the said agreement were
further extended by two more agreements dated 27.02.2009 and
05.11.2011. The scope of work as per the agreements was distributed
into three phases. For carrying out the assigned task, the appellant was
paid the amount as per the norms prescribed in the agreements. The
Service Tax Department gathered the information regarding the
agreement entered into between the parties for carrying out the above
activities. Upon investigation into the matter, the department concluded
that the activities undertaken by the appellant in pursuance of the
agreements, should fall under the taxable category of “site formation
and clearance, excavation and earth moving and demolition” service
defined under Section 65 (97a) of the Finance Act, 1994 (up to
30.06.012) and thereafter, from 01.07.2012 under the category of
“Services”, as defined under Section 65 B (44) ibid. Since, the appellant
did not get itself registered with the Service Tax Department and did not
discharge the service tax liability on such defined categories of taxable
services, the department initiated show cause proceedings against the
appellant, which culminated into the adjudication order dated
30.03.2017 (for short, referred to as the “impugned order”). Vide the
said order, learned Commissioner of Service Tax has confirmed service
tax demand of Rs.3,92,11,460/- along with interest under Section 73
(2) ibid and 75 ibid respectively. Besides, penalties were also imposed
on the appellant under Section 77 ibid and 78 ibid. Feeling aggrieved
with the impugned order, the appellant has preferred this appeal before
the Tribunal.

2. The learned Advocate appearing for the appellant submitted that

during the period from April 2011 to March 2016 (period in dispute), the
appellant had only received the amount from the society, which pertains
to the phase – I activities and that the entire amount received was
spent by them for the purchase of land and payment government fees.
He further submitted that during the disputed period, the appellant did
not provide any service nor done any physical activity on the agricultural
 Service Tax Appeal No. 21032 of 2017

land either before or after conversion into non-agricultural land.

Learned Advocate also submitted that the activities undertaken by the
appellant relate to sale and purchase of land and that since no physical
activities were undertaken in relation to phase – II and phase – III, the
appellant should not be liable to pay service tax under Section 68 ibid.
Further, he also submitted that the amount received by the appellant
from the society have been properly accounted for in the books of
accounts and also reflected in the income tax returns. The learned
Advocate has relied upon the decision of this Tribunal in the case of
Assotech Ltd. Vs. CCE, 2020 (43) G.S.T.L 198 (Tri. - All) and Ess Gee
Real Estate Developers Pvt. Ltd. Vs. CCE, 2020 (34) G.S.T.L. 486 (Tri.-
Del.) to strengthen the case of the appellant that the adjudged demands
confirmed on them should not stand for judicial scrutiny.

3. On the other hand, the learned AR appearing for the Revenue

reiterated the findings recorded in the impugned order. He further
submitted that the residential layout designed by the appellant is in
ready to use condition for construction of houses and accordingly, such
activities undertaken by the appellant should appropriately be
categorized as a taxable service under Section 65 (97a) for the period
from 01.04.2011 to 30.06.2012 and for the period from 01.07.2012
onwards, the same should termed as taxable service in the definition
provided under Section 65 B (44) ibid. The learned AR has relied upon
the judgment of Allahabad High Court in the case NKG Infrastructure
Ltd. Vs. Commissioner of Cus., C.Ex. & Service Tax, 2017 47 S.T.R. 113
(All.) to support the case of Revenue that confirmation of the adjudged
demands on the appellant is in conformity with the statutory provisions.

4. Heard both sides and examined the case records, including the
written submissions filed during the course of hearing of the appeal.

5. Clause (97a), defining the term “site formation and clearance,

excavation and earth moving and demolition” was inserted in Section 65
ibid vide Finance Act, 2005 dated 13.05.2005 w.e.f 16.06.2005. Such
definition was in vogue till introduction of the negative list concept,
effective from 01.07.2012. Under the amended provisions, Section 65B
 Service Tax Appeal No. 21032 of 2017

was inserted in the statute book, providing for interpretation of various

clauses contained therein. Clause (44) in the said section has assigned
the meaning of the phrase ‘service’ for the purpose of levy and
collection of service tax. The said definitions relevant for consideration
of the present dispute are quoted herein below:

Section 65(97a) : “site formation and clearance, excavation and

earthmoving and demolition” includes, -

(i) drilling, boring and core extraction services for construction,

geophysical, geological or similar purposes; or
(ii) soil stabilization; or
(iii) horizontal drilling for the passage of cables or drain pipes; or
(iv) land reclamation work; or
(v) contaminated top soil stripping work; or
(vi) demolition and wrecking of building, structure or road,

but does not include such services provided in relation to agriculture,

irrigation, watershed development and drilling, digging, repairing,
renovating or restoring of water sources or water bodies.

65B (44) : “service” means any activity carried out by a person for
another for consideration, and includes a declared service, but shall
not include—

(a) an activity which constitutes merely,—

(i) a transfer of title in goods or immovable property, by

way of sale, gift or in any other manner; or

(ii) such transfer, delivery or supply of any goods which is

deemed to be a sale within the meaning of clause (29A)
of article 366 of the Constitution; or

(iii) a transaction in money or actionable claim;

……………………………………………………………………………

6. On perusal of the above referred agreements, we find that the

scope of work assigned to the appellant for performance under the
Phase-I project were limited for the purpose of purchasing of land from
the farmers; signing of agreements of the proposed land in favour of the
members of society; processing of papers with the Government and
other statutory bodies for getting the land in favour of such members
 Service Tax Appeal No. 21032 of 2017

and for ensuring that the in-principle approval has been obtained for the
layout plan from the concerned statutory authorities. Further, it is
observed from the case records that the Partner of the appellant has
sworn an affidavit dated 15.11.2021, confirming inter alia, that the
appellant is still in the Phase I stage and had completed only purchasing
of the land, seeking various permissions and that no physical activity
has been started/undertaken for carrying out the work under the Phase
II and Phase III projects. We have also perused the letter dated
27.11.2013 addressed by the Secretary of the housing society to the
appellant, confirming payments made for the phase I in different heads
of accounts. On examination of the available records, we find that the
appellant had only undertook the activities for completion of phase I of
the project and did not undertake any activities concerning phase II
and phase III.

7. On careful consideration of the above extracted definitions, vis a vis,

the facts of the case, we find that the appellant had merely procured
land, paid Government fees etc. This activity, in no way, can be
considered as a taxable service under the category of “site formation
and clearance, excavation and earthmoving and demolition service’’
inasmuch as the work assigned under the agreement for completion of
the phase I project do not attract any of the clauses itemized in the
definition provided under Section 65(97a) ibid. Thus, in our considered
view, the activities undertaken by the appellant pursuant to the
agreements entered into with the society will not fall under the taxing
net for levy of service tax up to the period 01.07.2012. Similarly, the
services provided by the appellant would also not fall under the purview
and scope of the definition of “service” as per Section 65B (44) ibid
for the period post 01.07.2012, onwards inasmuch as such definition
clause has specifically excluded the activity of transfer of title in goods
or immoveable property by way of sale etc. Hence, mere procurement
of land from the farmers and getting necessary approval from the
government authorities will not create a tax liability under the taxable
category of “service”, as defined (supra). We find support from the
judgments relied upon by the appellant that under similar set of facts
 Service Tax Appeal No. 21032 of 2017

and circumstances, the provisions contained in the Service Tax statute

shall not be attracted, calling for levy of service tax on activities
undertaken by the appellant, which are restricted to buying land; selling
of the same and payment of Government fees etc., in as much as the
Phase I activity is concerned. It is not the contention of Revenue that
the appellant has undertaken works as required in other phases, in
terms of the agreements. No evidence whatsoever has been also
adduced for the same. It is a settled legal position that levy of service
tax depends on the service rendered, but not on the basis of
agreements which were never fulfilled and no payment was received by
the service provider. The ratio of judgments relied upon by the learned
AR for revenue, were delivered in the context of entirely different set of
facts than of the present case. Thus, the same cannot be relied upon for
taking a contrary view.

8. In view of the foregoing discussions, we do not find any merits in

the impugned order and as such, confirmation of service tax demand,
interest thereon and imposition of penalties cannot be sustained.
Therefore, by setting aside the impugned order, the appeal is allowed in
favour of the appellant.

(Order pronounced in the open court on 16/12/2021)

(S.K. Mohanty)
Member (Judicial)

(P. Anjani Kumar)

Member (Technical)

HK