CESTAT Allows Suwalka & Suwalka Properties’ Appeal, Sets Aside Service Tax Demand on Land Sale Advances and Extended Period Invocation.

Headnote:

CESTAT, Principal Bench, allowed the appeal of M/s Suwalka & Suwalka Properties and Builders Pvt. Ltd., setting aside the service tax demand of Rs. 52,84,96,200/- on advances received. The Tribunal held that the advances were for sale of land to four companies and not for booking of flats in residential complexes. The appellant had returned the advances after failure to obtain Commercial Land Use (CLU). The Department’s presumption that the advances were for construction services was unsubstantiated. The extended period of limitation and penalties under Section 78 were also held inapplicable as no positive act of suppression or intent to evade tax was established. The impugned order and show cause notice were set aside.

Background:

1. Appellant: M/s Suwalka & Suwalka Properties and Builders Pvt. Ltd., engaged in construction, works contract, manpower supply, and GTA services.
2. Project: Residential Township “Riddhi Siddhi Nagari” including villas, roads, utilities.
3. Issue: Alleged non-payment of service tax on advances for booking flats, totaling Rs. 52,84,96,200/-.
4. SCN issued: 25.01.2018, proposing service tax with interest and penalties.
5. Order-in-Original: 04.09.2018 – confirmed demand.
6. Order-in-Appeal: 20.06.2019 – dismissed appeal.

Appellant’s Contentions:

1. Advances received were for sale of land, not booking of flats; not liable for service tax.
2. Agreements with four companies depended on CLU approval; failure to get CLU led to refund of advances.
3. Letters from companies corroborated the sale and refund of advances.
4. Extended period, penalties, and interest are unjustified.
5. Order violated principles of natural justice.

Revenue Contentions:

1. Advances treated as payments for booking flats in residential project.
2. Letters from companies alleged fabricated due to same date and appearance.
3. Appellant under self-assessment failed to correctly disclose service tax liability.
4. Extended period and penalty under Section 78 applicable for suppression of facts.

Tribunal Findings:

1. Advances received were for sale of land to four companies, not for booking flats.
2. Agreements and corroborating letters submitted by appellant are valid; Department failed to disprove them.
3. No evidence of positive act to evade tax; Department’s presumption based solely on balance sheet entries.
4. Show cause notice for 2012-16 period is barred by limitation.
5. Extended period invocation and penalty under Section 78 not sustainable.

Decision:

1. Impugned order set aside.
2. Appeal allowed.
3. Service tax demand, interest, and penalties on advances received for land sale are canceled.
4. Extended period invocation held invalid.

Legal Provisions Discussed:

1. Sections 66, 66B, 67, 68, 78 – Finance Act, 1994
2. Rule 6 – Service Tax Rules, 1994
3. Principles of natural justice
4. Extended period of limitation
5. Applicability of service tax on land sale vs. construction services
6. Anand Nishikawa Co. Ltd. Vs. CCE, Meerut (SC)

Case Name:

M/s Suwalka & Suwalka Properties and Builders Pvt. Ltd. vs. Commissioner of Central Goods & Service Tax, Jodhpur

Court / Tribunal:

CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL, NEW DELHI, Principal Bench – Court No. 4

Service Tax Appeal No.:

52874 of 2019