Service Tax Levy depends on Services rendered, not on basis of Agreements where No Payment received by Service Provider: CESTAT grants relief to Adithya Builders [Read Order]

In a major relief to the Adithya Builders and Developers, the Banglore Bench of Customs, Excise and Service Tax Appellate Tribunal (CESTAT) held that Service Tax Levy depends on services rendered, not on basis of agreements where no payment received by service provider.

The appellant, M/s. Adithya Builders and Developers has been engaged in selling of land, upon providing adequate infrastructure facilities; in this case, the appellant had entered into an agreement with the Government Employees House Building Co-operative Society Ltd., Mysore for carrying out various activities namely, procurement for land from farmers, getting land thus procured converted from agricultural land to non-agricultural land, seeking various government permissions and approvals, necessary till formation of residential layouts etc.

The appellant submitted that during the period from April 2011 to March 2016 (period in dispute), the appellant had only received the amount from the society, which pertains to the phase – I activities and that the entire amount received was spent by them for the purchase of land and payment of government fees. He further submitted that during the disputed period, the appellant did not provide any service nor did any physical activity on the agricultural land either before or after conversion into non-agricultural land.

The coram of Judicial Member, S.K. Mohanty and Technical Member, P. Anjani Kumar held that the activities undertaken by the appellant pursuant to the agreements entered into with the society will not fall under the taxing net for levy of service tax up to the period 01.07.2012. Similarly, the services provided by the appellant would also not fall under the purview and scope of the definition of “service” as per Section 65B (44) ibid for the period post 01.07.2012, onwards inasmuch as such definition clause has specifically excluded the activity of transfer of title in goods or immoveable property by way of sale etc. Hence, mere procurement of land from the farmers and getting necessary approval from the government authorities will not create a tax liability under the taxable category of “service”.

“No evidence whatsoever has been also adduced for the same. It is a settled legal position that levy of service tax depends on the service rendered, but not on the basis of agreements which were never fulfilled and no payment was received by the service provider,” the CESTAT said.

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