SARJAN REALITIES LTD. Vs. COMMISSIONER OF CENTRAL EXCISE

JUDGEMENT

(1.) M /s. Sulzon Energy Limited (M/s. SEL) manufacturer of Wind Turbine Generators offers "total solutions" in wind power generation comprising of design, installation and operation and maintenance services, and identification acquisition and provision of suitable land for wind farm projects to its customers. The appellant, M/s. Sarjan Realities Limited (M/s. SRL), an associate company of M/s. SEL, are primarily engaged in the business of acquiring land, suitable for wind farm projects, as identified by M/s. SEL and providing such land to the customers of M/s. SEL for setting up the wind farm projects. Vide Order -in -Original No. 17/CEX/STC/COMMR/2006, dated 29 -11 -2006 Commissioner held that M/s. SRL has provided Real Estate Agent Service under Section 65(88) of the Finance Act, 1994 read with Section 65(105)(v) which defines taxable service as any service provided or to be provided by a real estate agent in relation to real estate. Duty of Rs. 3,07,83,184/ - was confirmed along with interest and penalties under Section 76 and Section 78 of the Finance Act, 1994. During investigation of the case, an amount of Rs. 88,12,419/ - was deposited by the appellants. The Commissioner, in his said order, appropriated this amount of Rs. 88,12,419/ - against the tax liability mentioned above. The appellants are in appeal before the Tribunal against the order of the Commissioner. Heard both sides. Revenue and the appellants also placed written submissions on record.

(2.) THE contention of appellant is that they are a separate legal entity. They acquire land on outright purchase or lease basis for wind farm projects and then sell/sub -lease the same to the customers who put up the Wind Turbine Generators. Although the land that is acquired by them is identified by M/s. SEL, the sale deeds are duly executed by M/s. SRL themselves on payment of stamp duty. The customer who purchases the land is liable to bear all expenses during the execution of the sale. In the Government records M/s. SRL are owner of land at the time of purchase. Their books show large inventory of land in their ownership. Such land which is in their ownership, although identified as suitable by M/s. SEL for setting up wind farm projects, is then sold to customers who are brought forward by M/s. SEL. Similar is the situation with respect of land leased by them from independent persons and then sub -leased to customers of M/s. SEL. Before selling/leasing land they may also develop the same as per requirement of a wind farm project, and as guided by M/s. SEL, before the land is sold/leased to the customers of M/s. SEL for setting up the wind farm projects. As per their Agreement with M/s. SEL, the appellants would be entitled to a commission of 11% of the total cost of acquisition of land and expenses incurred by M/s. SRL such as stamp duties, employees expenses etc. However, according to them, the profit actually earned by the appellants has varied from 3% to 34%. According to the appellants, the Revenue demanded duty on the income from land operations and deducted cost of land operations to arrive at the commission earned by the appellants. They state that this procedure of arriving at the value is, in any case, incorrect because it includes financial cost while arriving at the value of taxable service.

(3.) THE issue to be considered is whether M/s. SRL have provided Real Estate Agent Service to M/s. SEL in terms of the Agreement between these two parties.