The petitioners, under a registered Sale Deed, had purchased office space measuring 20,101 sft along with an undivided share of land measuring 492 sq.yards in a complex named M/s. Meenakshi Infrastructure Private Limited.
The respondent, in addition to the consideration agreed upon, also demanded and received from the petitioners an amount of Rs.33,77,539/- as service tax payable in respect of the sale of the said property in their favour on the ground that such an activity is considered ‘commercial and industrial construction’ service covered by Section 65(105)(zzq) of Finance Act,1994.
The Petitioners contend that they were initially under a bonafide impression and belief that the said sale and purchase of the commercial property including the undivided share of land is eligible to service tax under the provisions of the said Act and had paid the said amount as demanded by the 4th respondent towards service tax.
The Petitioners filed an application with one of the respondents seeking a refund of the said amount of Rs.33,77,539/- from the other respondent. Petitioners enclosed required documents enclosing receipt of payment of service tax to the other respondent and also provided details of respondent along with it’s Service Tax Registration number and address to enable the respondent to verify the payment and grant refund to the petitioners.
The division bench comprising of Justices M.S.Ramachandra Rao and K.Lakshman has observed that the gross consideration charged by a builder/promoter of a project from a buyer would not only include an element of goods and services but also the value of undivided share of land which would be acquired by the buyer and since neither the Act nor the Rules framed therein provide for a machinery provision for excluding all components other than service components from ascertaining the measure of service tax, the same cannot be levied.
While relying Delhi High Court Judgment in Suresh Kumar Bansal’s case and said that the service tax cannot be levied on the value of undivided share of land acquired by a buyer of a dwelling unit or on the value of goods which are incorporated in the project by a developer and that levying a tax on the constituent goods or the land would clearly intrude into the legislative field reserved for the States under List II of the Seventh Schedule of the Constitution of India.