Whether charges collected towards local municipal taxes leviable to service tax?

PJ/Case Law/2013-14/2029

Case:-HIRANANDANI CONSTRUCTION PVT. LTD. VERSUS COMMR. OF C.EX., THANE-I

Citation:-2013 (32) S.T.R. 709 (Tri.-Mumbai)

Brief Facts:-The appeal and stay application are arising out of Order-In-Original No. 31/BR-31/ST/Th-I/2011, dated 29-06-2011 passed by the Commissioner of Central Excise, Thane-I.
The appellant-M/s. Hiranandani Construction Pvt. Ltd., Mumbai are engaged in the construction of residential flats. During the sale of the flats before handing over the possession of such flats, the appellant collected the development and maintenance fees from the flat buyers as the promoter is liable to discharge payments towards outgoing expenses including any municipal local taxes, property tax, water charges, electric charges, revenue assessment or interest or any mandatory charges under the provisions of Section 5 of Maharashtra Ownership of Flats (Regulation) Act, 1963. On completion of construction while handing over the possession, the developer returns the balance amount, if any, after debiting the expenses. The department was of the view that the activity undertaken by the appellant as per the provisions of Section 5 of the aforesaid Act comes under the category of 'Management, maintenance and repair services". Accordingly, a Service Tax demand of Rs. 10,44,855/- was confirmed including the demand towards GTA services amounting to Rs. 9,492/-.

Appellant Contentions:-The learned Counsel makes the following submissions:-

The appellant has collected the amount from flat owners as under Section 5 of the Maharashtra Ownership of Flats (Regulation) Act, 1963, as the appellant was obliged to discharge property tax, water and electricity tariff etc on behalf of the flat owners and the appellant has undertaken these activities in the capacity of an executor. Therefore, the appellant has not rendered any management, maintenance or repair services. Therefore, the impugned demand is not sustainable in law. Accordingly, he prays for grant of stay. He also relies on the decision of this Tribunal in the case of Lake View Developers vide Order No. S/416/13/CSTB/C-l, dated 19-3-2013, wherein stay has been granted by this Tribunal in a similar matter. It is his further submission that in respect of the various services such as cleaning services, lift maintenance etc. individual service providers have discharged the Service Tax liability.

Respondent Contentions:-The learned Commissioner (AR) appearing for the Revenue reiterates the findings of the adjudicating authority.

Reasoning of Judgment:-After carefully considering the submissions made by both the sides and after perusing the provisions of Section 5 of the Maharashtra Ownership of Flats (Regulation) Act, 1963, we are of the view that the appellant has made out a strong case in their favour for grant of waiver from pre-deposit. Accordingly, we grant unconditional waiver from pre-deposit of the dues adjudged against the appellant and stay recovery thereof during the pendency of the appeal.

Decision:-Stay granted.

Comment:-The substance of this case is that the charges collected as development and maintenance fees from the flat buyers during the sale of the flats before handing over the possession of such flats are not liable to service tax under the category of “Management, maintenance and repair service.” The reason for the same being that the assessee has collected such charges for discharging payments towards outgoing expenses like municipal local taxes, property tax, water charges, electric charges, or any other mandatory charges under the provisions of Section 5 of Maharashtra Ownership of Flats (Regulation) Act, 1963. Hence, the service rendered by assessee would be treated as activities undertaken in capacity of executor which is not leviable to service tax.

Comments

PJ/Case Law/2013-14/2029

Post a Comment

Query