Order date – 28 November 2022

 Facts –

• The Appellant, Safal Construction Pvt Limited, developed and built residential scheme on the land owned by Sameet and Samprat. Subsequently they made a co-development agreement between the appellant, M/s. Safal Infrastructure Pvt. Limited and M/s. Pegasus Commercial Co-op Society Limited for joint development of Pegasus Commercial Complex. The appellant have not paid service tax in relation to the joint development under the agreement.
• A show cause notice was issued demanding service tax, interest thereon and proposing penalties alleging 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.
• Being aggrieve the appellant had filed an appeal.

Issue –

• Whether the appellant is liable to pay service tax on the consideration received by the appellant against the co-development agreement?

Order –

• The Tribunal observed that from the extract of the agreement it is clear that the appellant is not an agent and providing service to anyone else whereas the appellant (SCPL) is an active party to the joint venture with M/s. Safal nfrastructure Pvt. Limited and M/s. Pegasus Commercial Co-op Society Limited. The consideration is also on the basis of the profit of joint venture.
• In this fact, the appellant (SCPL) is not providing any service to any other person and the appellant was assigned the work in the capacity of co-developer and not an agent. Therefore, it cannot be said that appellant have provided Business Support Service to any other person.
• The Tribunal relied the decision of the Hon’ble Supreme Court in the case of UOI vs. Mahindra & Mahindra Limited wherein it was held that ordinarily the Court should proceed on the basis that apparent tenor of agreement reflects the real state of affairs.
• As per the agreement, all the parties to co-development agreement have been assigned to their respective jobs and all have performed in favor of the joint venture in which again all the three parties are participants. Therefore, it is clear that the appellant have not provided any service to the joint venture.
• Further, the appellant have not carried out activities clandestinely as the same were as per the co-development agreement and was on principal to principal basis. The case was made out on the observation of audit from various records of the appellant and all the transactions were admittedly recorded in the books of accounts. In this fact, the suppression of fact or any malafide to evade payment of service tax is not established. Therefore, demand of service tax is hit by limitation also.
• Hence the appeal is allowed.