Site Formation and Clearance Services provided as Self-Service before Sale of Land not subject to Service Tax: CESTAT [Read Order]

The Chennai bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that the site formation and clearance services provided before the sale of land are not subject to service tax if the same amount to self-service.

The appellants were providing construction services and site formation services, constructed residential complex in respect of Golden Country Project at Maraimalai Nagar, Kanchipuram. They also engaged in providing site formation and clearance service with respect to their real estate projects at Silver County, Platinum County, and other projects.

The department held that the appellants are liable to pay service tax for the services rendered on site formation and clearance.

The appellants contended that the said activities were undertaken before the sale of land took place, hence the service was a self-service and there is no service provider and service recipient relationship and therefore they are not liable for service tax demand. The adjudicating authority rejected the argument and held that through site formation and clearance activity took place before the sale of land, as the assessee collected consideration from the buyers of flats as land development charges. It was also held that even if appellant had entered into an agreement for sale of flats, it is a composite agreement wherein element of sale and service are clearly discernible and therefore the value of service portion is chargeable to service tax.

The Tribunal held that “We are unable to appreciate such a line of argument. It is not disputed that the land in question belonged to the appellants themselves. It is also not disputed that site formation and clearance activity has taken place before they affected the sale of land. Ostensibly, such activity would have been done by the appellants to enhance the saleability quotient of the land in question. It clearly appears to reason that a piece of land where site formation and clearing activity has already been carried out, the plotting of the land with various parcels will naturally fetch a higher price for the land. This being so, the site formation and clearance activity have obviously been done by the appellant by themselves, for themselves. Further neither the agreement for sale had not seen the light of the day, nor were the buyers visible on the horizon, at the time when the site formation etc of the land was carried out by the appellant.”