Case name – Commissioner Of Service Tax v. M/S Elegant Developers
Case Number – CIVIL APPEAL NO(S). 11744 – 11745 OF 2025
Date – Monday, the Tenth Day of November, Two Thousand and Twenty – Five
Quorum – Justice J.B. Pardiwala and Justice Sandeep Mehta
FACTS
M/s Elegant Developers entered into three MOUs with Sahara India Commercial Corporation Ltd. (SICCL) for land acquisition, development and management of land parcels for its real estate project at Sahara City Homes, Sri Ganganagar (Rajasthan), Vadodara (Gujarat), and Kurukshetra (Haryana) respectively. The respondent was to purchase land, furnish title papers, obtain approvals, and facilitate registration in SICCL’s name. Any shortfall or surplus between the amount paid to the landowners and the fixed average rate would be respondent’s profit or loss. The Directorate General of Central Excise Intelligence, Delhi Zonal Unit 6, on the basis of specific intelligence issued a Show Cause Notice demanding service tax of Rs. 10.28 crores from 1st October, 2004 to 31st March, 2007, alleging that the respondent acted as a ‘Real Estate Agent’ and wilfully suppressed the facts. Therefore the Commissioner confirmed the demand of tax service and imposed penalties. The Customs, Excise and Service Tax Appellate Tribunal, Principal Bench, New Delhi, reversed this decision, holding that no agency relationship existed and there was no deliberate suppression of facts, which the Commission appealed to the Supreme Court.
ISSUES
- Whether the respondent was a ‘Real Estate Agent’ taxable under Section 65(105) (v) read with Section 65(88) of the Finance Act, 1994.
- Whether extended limitation under Section 73(1) of the Finance Act, 1994 was justified due to deliberate suppression of facts.
LEGAL PROVISIONS
- Section 65(88) of the Finance Act, 1994 – defines ‘real estate agent’ as a person rendering service in relation to sale, purchase, leasing or renting of real estate.
- Section 65(89) of the Finance Act, 1994 – defines ‘real estate consultant’ as a person rendering advice, consultancy or technical assistance related to real estate.
- Section 65B (44) (a) (i) of the Finance Act, 1994 – defines ‘service’ but excludes transfer of title in immovable property by way of sale.
- Section 73(1) of the Finance Act, 1994 – provides for extended limitation of five years where there is fraud, collusion, wilful mis-statement or suppression of facts with intent to evade tax.
ARGUMENTS
APPELLANT – the appellant argued that the respondent never gained ownership of lands but merely obtained Powers of Attorney and transferred lands to SICCL, acting as a facilitator earning commission on amounts exceeding the fixed rate, thereby qualifying as a ‘Real estate Agent’ under Section 65 (88) of the Finance Act, 1994. They relied on the judgement of Chhattisgarh Steel Castings (P) Ltd. v. Union of India [2020 (34) G.S.T.L. 70.] where acquiring property with intention of subsequently selling it was held to wilfully suppress facts to evade service tax.
RESPONDENT – The respondent contended that the transaction did not constitute a ‘service’ and it did not fall within the definition of ‘Real Estate Agent’. Relying on the landmark judgment Union of India v. Future Gaming Solutions Pvt. Ltd. [(2025) 5 SCC 601] they contended that the respondent had taken on both the risks and rewards of profit and loss in the land dealings, functioning as an independent trader rather than an agent. They further argued that the service tax demand was time-barred, having been issued after the limitation period prescribed under Section 73 of the Finance Act, 1994. Reliance was placed on Stemcyte India Therapeutics Pvt. Ltd. v. CCE & ST [2025 SCC OnLine SC 1412.] ruling that mere non – payment of tax does not constitute suppression of facts.
ANALYSIS
The Supreme Court held that Section 65(88) and Section 65(89) of the Finance Act, 1994 are service – centric definitions requiring an agency relationship with identifiable service charges or commission. To be a real estate agent there must be a contract of agency. Thus after the Court examined the MOUs, they couldn’t find principal – agent relationship between SICCL and respondent. MOUs merely specified a fixed rate per plot with no element of service charges or consultancy fees. The respondent’s gains arose from the difference between the fixed price and actual procurement cost, and it could even suffer losses if land value exceeded the agreed price which would not be possible in a commission – based service contract. The transactions constituted sale/conveyance of immovable property falling within the exception under Section 65B(44)(a)(i), which excludes transfer of title in immovable property from the definition of ‘service’. On the second issue, the Court reiterated that extended limitation requires an active and deliberate act to evade tax. All transactions were conducted through valid banking channels with no element of concealment. The appellant failed to establish wilful suppression or that the respondent had any obligation to seek clarification on service tax applicability.
JUDGMENT
The Hon’ble Supreme Court dismissed the appeals, holding that the transactions did not fall within the definition of ‘Real Estate Agent’ or ‘Real Estate Consultant’ under Sections 65(88) and 65(89) of the Finance Act, 1994. Thus the respondent was engaged in plain transactions of sale of land, which are expressly protected under the exception clause in Section 65B (44) (a)(i) of the Finance Act, 1994. The Court ruled that the Commissioner was incorrect in imposing penalties and raising demand. It further held that the appellant successfully demonstrated that there was no deliberate suppression of facts, thus the extended limitation period under Section 73(1) of the Finance Act, 1994 could not be rightfully applied.
CONCLUSION
This judgment clarifies that ‘Real Estate Agent’ and ‘Real Estate Consultant’ definitions are service-centric, requiring an agency relationship with identifiable service charges or commission. Activities constituting transfer of title in immovable property fall within the exception under Section 65B(44)(a)(i) and are not subject to service tax. Thus facilitation of land transactions where a person assumes commercial risk, acting as a principal rather than agent, does not constitute taxable service. This present judgment also reinforces that extended limitation under Section 73(1) requires positive evidence of deliberate suppression with intent to evade tax; mere non-payment does not suffice. Therefore this decision of the Supreme Court helps in protecting genuine commercial transactions from being characterized as taxable services and reinforces taxpayer protection against arbitrary invocation of extended limitation periods.
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WRITTEN BY- SUSMITA ROYCHOWDHURY
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