Whether the expenses meet by the builder on behalf of buyers for local taxes are leviable to service tax under management services?

PJ/Case Law/2013-14/1702

Case:-GREEN VALLEY DEVELOPERS Vs COMMISSIONER OF SERVICE TAX, MUMBAI

Citation:-2013-TIOL-1198-CESTAT-MUM

Brief facts:-The appellant M/s. Green Valley Developers, 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 chares, revenue assessment or interest or any mandatory charges under the provisions of Section 5 of Maharashtra Ownership Flat (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.25,49,213/- was confirmed including the demand towards GTA service amounting to Rs.2,51,437/-.

Appellants contention:-The appellant has collected the amount from flat owners 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-I dated 19/03/2013, 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.

Reasoning of Judgement:- After carefully considering the submissions made by both the sides and after perusing the provisions of Section 5 of the Maharashtra Ownership 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 application was allowed.

Comment:- The gist of this case is thatthe expenses meet by the builder on behalf of the potential buyers for discharging municipal taxes, electricity charges etc., cannot be leviable to service tax under the category of “Maintenance, Management or Repair Services” because such charges are collected in the capacity of pure agent.

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PJ/Case Law/2013-14/1702

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