Whether maintenance charges collected by flat owners chargeable to tax?

PJ/Case Law /2016-17/3331

Case:-OMEGA ASSOCIAES Versus COMMISSIONER OF SERVICE TAX, MUMBAI

Citation:-2016 –TIOL-490-CESTAT-MUM

Brief Facts:-This appeal was directed against Order-in-Original No. 418/33/V/2011/COMMR/KS/ST dated 29/11/2011 passed by the Commissioner of Service Tax, Mumbai V, wherein Ld. Commissioner 7/12/2016 OMEGA ASSOCIATES Vs CST-TIOL had confirmed the service tax demand of Rs. 9,886/under the category of Transport of Goods by Roads Service, service tax amount of Rs. 58,66,991/under the category of Management, Maintenance or Repair Service, demanded interest, imposed penalty of Rs. 58,76,877/and appropriate the amount of 28,305/and Rs. 6,974/(interest) which was already paid by the appellant before issuance of show cause notice.The fact of the case was that department received an intelligence indicating evasion of service tax by Hiranandani group of Companies. Anti evasion Section , Service tax Commissionerate, Mumbai investigated the case and it was found that appellant had not discharged service tax on GTA service and on Management, Maintenance or Repair service collected from Flat owners. Accordingly, show cause notice issued proposing recovery of service tax on both above services. Meanwhile before issuance of show cause notice, appellant deposited Rs. 28,305/and Rs. 6,974/against entire service tax demanded on GTA service and interest.

Appellant Contention:-Shri S.S. Gupta, ld. C.A. along with Shri. Archit, Agrawal, Ld. C.A. appearing on behalf of the appellant was not contesting. The appellant had already paid an amount of Rs. 28,305/ along with interest which was much higher than the demand confirmed in the order. As regard service tax on Management, Maintenance or Repair service, he submitted that this maintenance was carried out under the statutory obligations as provided under Maharashtra ownership Flat (Regulations of the promotion of construction, sell management and transfer) Act, 1962 (MOFA). As per statutory provisions under the said Act, builder was under obligation to maintain the building and the appellant had only taken reimbursement of various services which was provided by various service providers. Therefore the appellant neither provided the service nor retained the amount of maintenance with them. Therefore the appellant has neither provided the service nor retained the amount of maintenance with them. Therefore no service was involved and appellant was not liable for any service tax on so called Management, Maintenance or Repair service of the building. He submits that this issue had been settled in the case of Kumar Beharay Rathi vs. C. Ex, Pune 3 [2014(34) STR 139(Tri)] 2013-TIOL-1806-CESTAT-MUM.In view of this judgment, the demand confirmed by the impugned order was not sustainable. As regard the penalty imposed under Section 78, he submitted that the service tax on GTA escaped only due to inadvertence. The data of service charges of GTA was retrieved from the appellant's books of account only which shows that there was no intention of evasion of service tax. Moreover, the appellant had discharged the service tax along with interest on GTA service before issuance of show cause notice, for this reason also penalty under section 78 was not imposable invoking Section 73(3) as well as Section 80 of the Finance Act, 1994.

Respondent Contention:-Shri. Sanjeev Nair, Ld. Examiner (A.R.) appearing on behalf of the Revenue reiterates the findings of the impugned order.

Reasoning of Judgment:-They found that as regard demand of service tax on GTA service there was no dispute about thetaxability of service. Hence the demand of Service Tax on GTA service confirmed in theimpugned order was upheld. As regard the service tax on Management, Maintenance or RepairService of building collected from Flat owner, they found that the collection of such maintenancecharges was under the statutory provisions of MOFA, 1963. According to which it was mandatory on thepart of the builder to maintain the building for which the builder engaged various serviceproviders and payment made to such service provider was taken as reimbursementfrom the flatowner. In this fact the appellant was not liable for service tax as held in the case of Kumar BeherayRathi(supra) therefore service tax demand on Management, Maintenance or Repair service was clearly unsustainable and therefore same was set aside. As regard penalty under Section 78commensurate to the service tax on GTA service. It was found that firstly the appellant after knowingabout nonpayment of service tax on GTA, they promptly paid the service tax along with interestwhich was much before the issuance of show cause notice. In this fact they were of the view thatpenalty was not imposable in t erms of section 73(3) of Finance Act,1994, according to which if theamount of service tax alongwith interest is paid then no show cause notice should had beenissued. Taking into consideration overall facts and circumstances of the case, they found that theappellant had also made out a case of reasonable cause accordingly they were also not liable penalty under Section 80. They therefore waived the penalty related to service tax on GTA. In result:
(a) The service tax and interest on GTA service is upheld.
(b) The demand of service tax on Management, Maintenance or Repair service and penalty and interest related thereof are set aside.

The appeal was partly allowed in the above terms.

Decision:- appeal partly allowed.

Comment:-the gist of this case is that service tax on Management, Maintenance or RepairService of building charges collected from Flat owner was not leviable as collection of such maintenancecharges was under the statutory provisions of MOFA, 1963. According to which it was mandatory on thepart of the builder to maintain the building for which the builder engaged various serviceproviders and payment made to such service provider was taken as reimbursementfrom the flatowner. Therefore appellant was not liable for service tax as held in the case of Kumar BeherayRathi(supra) therefore service tax demand on Management, Maintenance or Repair service was unsustainable.

Prepared by:- Bharat

Comments

PJ/Case Law /2016-17/3331

Post a Comment

Query