CESTAT Allows Service Tax Appeal of Suwalka & Suwalka Properties; Confirms Advance Received Was for Sale of Land, Not Flat Booking.

Headnote:

The Customs, Excise & Service Tax Appellate Tribunal (CESTAT), Principal Bench, New Delhi, allowed the appeal of M/s Suwalka & Suwalka Properties and Builders Pvt. Ltd., holding that advances received from four companies pertained to the sale of land and not booking of flats in residential complexes. The Tribunal observed that the Department failed to provide evidence that the advances were received for construction services. The extended period of limitation invoked by the Department was held to be wrongly applied. Consequently, the service tax demand of Rs. 52.84 crore was set aside.

Background:

1. Appellant engaged in construction of residential complexes, townships, works contract services, manpower supply, and transport of goods by road.
2. Alleged non-payment of service tax on advances received up to March 2014 for booking residential units, totaling Rs. 52,84,96,200/-.
3. Show Cause Notice No. 24/2017/367 dated 26.01.2018 proposed demand under Sections 66, 66B, 67, 68 of Finance Act, 1994 read with Rule 6 of Service Tax Rules, 1994.
4. Original Order confirmed demand of service tax, interest, and penalties; appeal before Commissioner (Appeals) was dismissed.

Contentions of the Appellant:

1. The advances were received for sale of land to four companies, not booking of flats.
2. Agreements with companies specified that sale was contingent upon land conversion to commercial use.
3. Amounts were subsequently refunded when conversion was not obtained.
4. Claimed violations by Department included ignoring evidence, misapplication of extended limitation period, and wrongful imposition of penalties.

Department’s Contentions:

1. Alleged that advances were for booking flats under residential construction.
2. Claimed appellant provided fabricated letters to mislead the authorities.
3. Argued that appellant failed to disclose facts under self-assessment obligations, justifying extended period and penalty under Section 78 of Finance Act, 1994.

Tribunal’s Observations:

1. Verified agreements and letters indicated advances were for sale of land, not flats.
2. Department failed to provide evidence that funds were for construction services.
3. Extended period of limitation was wrongly invoked.
4. No positive act of evasion by appellant; no suppression with intent to evade service tax.

Decision:

1. Order-in-appeal and original order set aside.
2. Appeal allowed in favor of M/s Suwalka & Suwalka Properties and Builders Pvt. Ltd.

Citation:

CESTAT, Principal Bench, New Delhi; Service Tax Appeal No. 52874 of 2019; Final Order No. 51559/2025; Decision dated 13.10.2025

Coram:

Hon’ble Dr. Rachna Gupta, Member (Judicial)

Hon’ble Mr. A.K. Jyotishi, Member (Technical)