January 30, 2026 : The Delhi Bench of the Customs Excise and Service Tax Appellate Tribunal (CESTAT) has set aside a service tax demand of ₹4.48 crore raised against Omaxe Limited, holding that the transfer of development rights amounts to a transfer of immovable property and does not constitute a taxable service under the Finance Act, 1994.
The Bench, comprising Judicial Member Binu Tamta and Technical Member Hemambika R. Priya, ruled that the issue was no longer open to debate, as it had already been conclusively settled by a series of earlier decisions. The Tribunal reiterated that development rights are “benefits arising out of land” and therefore fall outside the definition of “service” under Section 65B(44) of the Finance Act.
Omaxe Limited, a real estate developer engaged in developing integrated townships, had entered into memoranda of understanding with land-owning entities for the transfer of land development rights in return for consideration. Under these arrangements, Omaxe undertook development of the land and subsequently executed registered conveyance deeds in favour of buyers, transferring an undivided share in the land along with the constructed property.
Following an investigation by the Directorate General of GST Intelligence, the tax department alleged that the transfer of development rights did not involve transfer of title in immovable property and therefore amounted to a taxable service. A show cause notice dated April 2017 was issued invoking the extended period of limitation, proposing to levy service tax under Section 66B of the Finance Act, 1994. The demand of ₹4,48,59,134, along with interest and penalties, was confirmed by the Commissioner of CGST, Delhi East, through an Order-in-Original dated 6 November 2018.
Before the Tribunal, Omaxe argued that the dispute was squarely covered by the Tribunal’s earlier ruling in DLF Commercial Projects Corporation v. Commissioner of Service Tax, where it was held that transfer of development rights constitutes transfer of immovable property within the meaning of Section 3(26) of the General Clauses Act, 1897, and is expressly excluded from the scope of “service” under the Finance Act. The appellant also relied on consistent rulings of the Allahabad High Court and the Bombay High Court supporting the same legal position.
After examining the statutory framework and judicial precedents, the Tribunal observed that once development rights are transferred, the developer acquires not only the right to develop the land but also the right to sell the developed property together with an undivided share in the land. These transactions ultimately culminate in registered conveyance deeds on which stamp duty is paid, reinforcing their character as transfers of immovable property rather than provision of services.
The Tribunal also noted that the department’s authorised representative fairly conceded during the hearing that the issue was covered against the Revenue by multiple decisions of the Tribunal. In view of the settled law, the Bench set aside the impugned order in its entirety and allowed the appeal, quashing the service tax demand along with interest and penalties.
Case Title: Omaxe Limited v. Commissioner of Central Goods and Service Tax and Central Excise, Delhi East
Case No.: Service Tax Appeal No. 50348 of 2019
