Summary
| Category | Data |
|---|---|
| Court | Supreme Court of India |
| Case Number | C.A. No.-011744-011745 – 2025 |
| Diary Number | 18734/2021 |
| Judge Name | HON’BLE MR. JUSTICE SANDEEP MEHTA |
| Bench |
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| Precedent Value | Binding authority |
| Overrules / Affirms | Affirms Appellate Tribunal; reaffirms existing precedent on service exceptions |
| Type of Law | Service Tax / Indirect Tax |
| Questions of Law |
|
| Ratio Decidendi |
The Supreme Court held that (1) Sections 65(88)/(89) target service relationships—agency or consultancy—distinct from direct transfers of immovable property, and (2) the exception under Section 65B(44)(a)(i) bars service tax on pure sale/conveyance agreements. The respondent’s profit-loss margin arose from price spread, not service fees or commission, and risks of loss confirm absence of agency. Moreover, extended limitation requires active concealment, which was not shown. |
| Judgments Relied Upon |
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| Logic / Jurisprudence / Authorities Relied Upon by the Court |
|
| Facts as Summarised by the Court |
The respondent—a land-deal partnership—entered MOUs fixing per-acre acquisition and development rates with Sahara India. It procured contiguous land blocks, handled title documentation, approvals, registration, and bore upliftment risk; any margin over fixed rate accrued to it. Revenue issued a show-cause for alleged unregistered “Real Estate Agent” services and invoked extended limitation to demand service tax and penalties. |
Practical Impact
| Category | Impact |
|---|---|
| Binding On | All subordinate courts and service-tax authorities under the Finance Act, 1994 |
| Persuasive For | High Courts, CESTATs, tribunals dealing with service-tax classification of land-related transactions |
| Overrules | None |
| Distinguishes | Revenue’s broad interpretation of “Real Estate Agent” services in revenue-department orders |
| Follows |
|
What’s New / What Lawyers Should Note
- Fixed-rate land-sale MOUs—combining land cost and development expenses—are direct immovable‐property transfers, excluded from service-tax under Section 65B(44)(a)(i).
- Profit-loss margins tied to price differentials confirm principal status; absence of a separate commission/service fee negates agency.
- Extended limitation under Section 73(1) proviso applies only upon proof of active, intentional concealment or misstatement—mere non-payment is insufficient.
- This ruling binds subordinate courts and clarifies that no obligation exists to seek pre-emptive clarification where transactions clearly fall under the sale exception.
Summary of Legal Reasoning
-
Statutory Definitions
- Examined Sections 65(88) (Real Estate Agent) and 65(89) (Real Estate Consultant): both require rendering services in relation to real estate.
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Contractual Analysis
- MOUs fixed an all-inclusive per-acre price and allocated profit/loss risk to the respondent—no separate service or commission element.
- Clauses governed land procurement, title documentation, approvals, registration, and payments through bank instruments.
-
Exception to “Service”
- Section 65B(44)(a)(i) excludes mere transfers of immovable property from service taxation.
- Direct sale under MOUs thus falls outside taxable services.
-
Agency Relationship Absent
- Lack of principal–agent contract; respondent bore procurement risk—hallmark of principal, not agent.
-
Extended Limitation
- Proviso to Section 73(1) invoked only upon deliberate suppression (Stemcyte).
- No evidence of concealment; transactions were recorded and channeled properly.
Arguments by the Parties
Petitioner (Commissioner of Service Tax)
- Respondent never took title; acted as facilitator via POAs and earned a commission over fixed rate.
- Activities fall squarely within Section 65(88) “Real Estate Agent” and taxable under Section 65(105)(v).
- Wilful suppression justifies invoking extended five-year limitation.
Respondent (M/s Elegant Developers)
- Transactions are outright land sales with risk–reward, not service or consultancy.
- Profit-loss margin structure confirms principal status; no separate service fee.
- No deliberate suppression; bona fide belief of non-taxability precluded extended limitation.
Factual Background
The respondent, a partnership firm, entered three MOUs (December 2002, 2004, August 2005) with Sahara India for fixed-rate land acquisition and development at Vadodara, Sri Ganganagar, and Kurukshetra. It procured titles, approvals, and handled registration, receiving a per-acre price including all costs and retaining any margin. The DGCEI issued a show-cause (April 2010) alleging unregistered “Real Estate Agent” services and invoked extended limitation for service-tax demand of over ₹10 crore. The Commissioner confirmed demand (September 2013); the CESTAT allowed the respondent’s appeal (June 2019).
Statutory Analysis
- Section 65(88): Defines “Real Estate Agent” as one rendering services in sale/purchase/leasing/renting of real estate.
- Section 65(89): Defines “Real Estate Consultant” as providing advice, consultancy, or technical assistance in real‐estate activities.
- Section 65(105)(v): Taxable event for “Real Estate Agent” services.
- Section 65B(44)(a)(i): Excludes mere transfers of immovable property by sale or other modes from “service” definition.
- Section 73(1) proviso: Extends limitation beyond 18 months only upon deliberate suppression or misstatement.
Alert Indicators
- ✔ Precedent Followed