A Division Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), quashed service tax demand on consideration received by developers from co-development agreement.
The appellant Safal Construction Pvt Limited (SCPL) have made a development agreement with one land owner Sameet (Bodakdev) Owners Association, a non-trading corporation and Shri Samprat Co-operative Housing Society Limited to develop and build residential scheme in the name and style of Samprat Residency-II.
Accordingly, the appellant developed and built residential scheme on the land owned by Sameet and Samprat. Subsequently they made a co-development agreement between the appellant SCPL and M/s. Pegasus Commercial Co-op Society Limited for joint development of Pegasus Commercial Complex. The appellant has not paid service tax in relation to the joint development under the agreement.
The case of the department is that in terms of agreement, the appellant carried out a limited activity of marketing and liasoning for the project with the government departments and follow-up with sanctioning authorities and obtaining all licenses, approvals, permissions, consents, no objection certificates etc. for implementing the Pegasus Commercial Complex.
The contention of the Revenue is that the appellant has provided Business Support Service to the joint developer therefore, they are liable to pay service tax under the category of Support Service for Business and Commerce as defined under the Finance Act, 1994. Therefore, show cause notice was issued demanding service tax, interest thereon and proposing penalties.
The said show cause notice was adjudicated by the learned Commissioner of Service Tax whereby the service tax demand, interest and penalties as proposed in the show cause notice were confirmed. Being aggrieved by the order the appellant filed the present appeal.
Hardik Modh, counsel appearing on behalf of the appellant submitted that the appellant is one of the parties to joint venture for development of Pegasus Commercial Complex. Referring to the co-development agreement the counsel submitted that the activities was assigned as part of overall work of development of property in the capacity of co-developer. Therefore, there is no service exist among equally placed co-developers in joint venture therefore, no service tax is payable.
Quashing the demand of service tax the Bench consisting of Ramesh Nair, Judicial Member and Raju, Technical Member observed that “In the present case it is nowhere mentioned that appellant is a service provider to some service recipient. As per the agreement, all the parties to co-development agreement have been assigned to their respective jobs and all have performed in favour of the joint venture in which again all the three parties are participants. Therefore, it is clear that the appellant has not provided any service to the joint venture.”
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