Case Title:- Commissioner of Service Tax vs. M/s Elegant Developers
Citation:- 2025 INSC 1299
Date:- 10.09.2025
Hon’ble Supreme Court Bench:- JUSTICE J.B. PARDIWALA and JUSTICE SANDEEP MEHTA
The Supreme Court has clarified that an activity which merely involves the transfer of title in immovable property by way of sale cannot be treated as a “service” under the Finance Act, 1994. Consequently, such transactions lie outside the ambit of service tax.
- The case involved M/s Elegant Developers, a firm from Allahabad, and Sahara India Commercial Corporation Ltd. (SICCL). The Service Tax Department had claimed that Elegant Developers acted as a real estate agent for SICCL and demanded ₹10.28 crore as service tax. Between 2002 and 2005, Elegant Developers signed agreements with SICCL to buy large pieces of land in Rajasthan, Gujarat, and Haryana. The firm purchased the land itself, bore all the financial risks, and later sold it to SICCL at a fixed rate.
- The Hon’ble Supreme Court noted that the firm’s earnings came from the difference between its buying and selling price, not from any commission or consultancy fees. This clearly showed it was a sale transaction, not a service arrangement. Referring to Section 65B(44) of the Finance Act, the Court said that activities involving transfer of title in land by way of sale are excluded from the definition of “service.”
- The Hon’ble Court further stated that Elegant Developers did not act as an agent or consultant, as defined under Sections 65(88) and 65(89). It was buying and selling land on its own account, not on behalf of anyone else.
- The Hon’ble Court also rejected the department’s argument that the firm had “suppressed facts” to evade tax. All transactions were made through proper documents and bank channels, showing no fraudulent intent. On limitation, the Hon’ble Court said that the extended time period for recovery under Section 73(1) can only be used when there is intentional suppression or fraud, not for simple non-payment or misunderstanding of the law.
- The Hon’ble Court upheld the earlier order of the Customs Excise and Service Tax Appellate Tribunal CESTAT (2019), which had cancelled the tax demand against the firm.
