Case Law (SC) – For invocation of extended period of limitation under the proviso to Section 73(1) of the Finance Act, 1994, the department was required to prove deliberate suppression and concealment of the material facts on the part of the assessee to evade the tax liability. In the absence of fraud, collusion, wilful mis-statement, or suppression of facts with an intent to evade payment of service tax, the invocation of the extended period of limitation under section 73 of the Finance Act, 1994 is wholly unwarranted.

 Commissioner Of Service Tax v. Elegant Developers [2025 INSC 1299] dated 10.11.2025.

ISSUE BEFORE COURT ARE: -

i.                Whether the respondent rendered services falling within the category of ‘Real Estate Agent’, taxable under Section 65(105)(v) read with Section 65(88) of the Finance Act, 1994, during the period from 1st October, 2004 to 31st March, 2007?

ii.         Whether the appellant has established that the respondent deliberately suppressed facts, thereby justifying the invocation of the extended period of limitation under the proviso to Section 73(1) of the Finance Act, 1994?

DECISION: -

“40. In the present case, admittedly, the respondent was not engaged by the SICCL for any such service. The terms of MoUs (supra) which we have carefully examined, do not indicate that there existed any relationship of principal and agent between SICCL and the respondent. The MoUs simply referred to a fixed rate per plot which SICCL would pay to the respondent for every chunk of the land provided by the respondent to SICCL. There was no element of any service charges or consultancy charges being levied by the respondent on such sale transactions. The gains accruing to the respondent would arise from the difference of sale consideration over and above the fixed sale price settled in the MoUs. For this purpose, the respondent would be required to negotiate with the original landowners and facilitate the transfer of the lands to SICCL. It is noteworthy that there existed a probability of the respondent even suffering losses in the transaction if the value of the land exceeded the fixed price agreed upon in the MoUs. This would not be possible if the contract was for providing services based on commission or in any other form.

41. Thus, we are of the firm opinion that the Appellate Tribunal did not commit any error in holding that the respondent did not act as a real estate agent or a consultant while acting in furtherance of the MoUs entered with SICCL. The profitability of the respondent was contingent upon the rate at which land was procured by it from the sellers.

42. As a matter of fact, the transactions inter se between the respondent and SICCL under the said MoUs are covered within the exceptions as enumerated in the definition of ‘Service’ under Section 65B(44)(a)(i) of the Finance Act, 1994 which reads as follows:

“44. ‘service’ means any activity carried out by a person for another for consideration, and includes a declared service, but shall not include— (a) an activity which constitutes merely,–– (i) a transfer of title in goods or immovable property, by way of sale, gift or in any other manner; or (ii) a transaction in money or actionable claim; …” (Emphasis supplied)

43. The respondent admittedly transferred title of land to SICCL after negotiating the price thereof with the owners and procuring a Power of Attorney to execute the sale deeds. Hence, these activities were purely of sale/conveyance of immovable property which clearly falls within the exception as provided under Section 65B(44)(a)(i) of the Finance Act, 1994, reproduced supra.

44. Thus, we are of the firm opinion that the transactions/activities undertaken by the respondent with SICCL did not bring it within the purview of ‘Real Estate Agent’ or ‘Real Estate Consultant’ as defined under Sections 65(88) and 65(89) of the Finance Act, 1994, respectively. These transactions were not undertaken for service charges, commission, agency or consultancy but were plain and simple transactions of sale of land, which are expressly protected under the exception clause to the definition of the ‘Service’ referred to supra.

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48. It is trite that for invocation of extended period of limitation under the proviso to Section 73(1) of the Finance Act, 1994, the appellant was required to prove deliberate suppression and concealment of the material facts on the part of the respondent to evade the tax liability.

49. Recently, this Court in Stemcyte India Therapeutics (P) Ltd. (Supra), while considering the scope of the extended period of limitation under Section 73 of the Finance Act, 1994, held as follows:

“9.3 It is a settled principle of law that, for the Department to invoke the extended period of limitation, there must be an active and deliberate act on the part of the assessee to evade payment of tax. Mere non-payment of tax, without any element of intent or suppression, is not sufficient to attract the extended limitation period… …

9.4 Therefore, in the absence of fraud, collusion, wilful mis-statement, or suppression of facts with an intent to evade payment of service tax, the invocation of the extended period of limitation under section 73 of the Finance Act, 1994 is wholly unwarranted. Mere non-payment of service tax, by itself, does not justify the invocation of the extended limitation period. Accordingly, the showcause notice issued by the Department is clearly time-barred. On this ground alone, the impugned order deserves to be set aside.”

50. The extended period of limitation of five years under the proviso to Section 73(1) of the Finance Act, 1994, was invoked by the Directorate General on the ground that the respondent allegedly failed to file periodical Service Tax returns in ST-3, as required under Section 70 of the Finance Act, 1994, for the period commencing from 1st October 2004. The Show Cause Notice issued in this regard stated that, by such omission, the respondent did not wholly and truly disclose material facts, with a purported deliberate intention to evade service tax, thereby contravening the provisions of Section 68 of the Finance Act, 1994.

51. In its reply to the said Show Cause Notice, the respondent explained that, being under a bona fide belief that no service tax was payable on the payments received under the MoUs, it had neither wilfully suppressed nor mis-stated any material facts, and therefore, there was no mala fide intention or deliberate act of suppression to evade the payment of service tax.

52. Admittedly, all the transactions inter se between the respondent and SICCL were through valid banking channels and thus, there was no element of concealment or suppression by the respondent warranting invocation of the extended period of limitation by the Directorate General under the proviso to Section 73(1) of the Finance Act, 1994.

53. The appellant has failed to adduce any evidence or establish that the respondent engaged in wilful or deliberate suppression of material facts, and there is nothing on record to suggest that the respondent acted with any intention to mislead the authorities or evade payment of service tax. To be specific, the appellant failed to satisfy the Court that the respondent was under any obligation to seek clarification as to whether its activities with SICCL would bring it within the scope and ambit of a real estate agent.”