The Kolkata Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), observed that the compensation received for the cancellation of sale agreement not “Declared Service’ under Section 66E(e) of the Finance Act, 1994.
The instant appeal has been preferred by the assessee, M/s. M. N. Dastur & Co. Pvt Ltd, assailing Order-in-Original whereby the Ld. Commissioner, Service Tax, Kolkata, has confirmed demand of service tax of Rs. 74,46,900/- and imposed equivalent penalty for the period from July 2012 to March 2013.
The said demand has been raised under the category of ‘Declared Service’ under Section 66E(e) of the Finance Act 1994, on the amount received by the Appellant in excess of the purchase price paid for the immovable property, subsequent to cancellation of the agreement to Sale of the said property.
In pursuance to the said cancellation agreements the Appellant received a compensation of Rs. 6,02,50,000/- over and above the advance paid at the time of agreement to sell. The contention of the Revenue is that the appellant has agreed to an obligation to refrain from an act i.e. execution of the initial agreement, and/or agreeing to an obligation to tolerate an act, done by the first party i.e. delaying in execution of the initial agreements by agreeing to cancel the initial agreements in lieu of compensation amount.
The issue to be decided in this case is whether cancellation of the ‘Agreement to Sell’ and subsequent excess amount received over and above the payment made by the appellant for purchase of the immovable property is a ‘consideration’ against ‘declared service’ as per Section 66E(e) of the Finance Act, introduced w.e.f. 1stJuly 2012.
The counsel appearing for the appellant submitted that the appellant came to know that an out of court settlement has been reached between the disputing sellers and developers whereby the Confirming Party in terms of the compromise may assign its rights to the Developer for a consideration. The said act cannot be said to be covered under the provisions of Declared Service, as contended by the Revenue.
A Two-Member Bench of the Tribunal comprising PK Choudhary, Judicial Member and K Anpazhakan, Technical Member observed that “We are of the considered view that the receipt of compensation cannot, by any stretch of imagination, fall under the provisions of Declared Service under Section 66E(e) of the Finance Act.”
Subscribe Taxscan Premium to view the JudgmentSupport our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates
