2010 (9) TMI 640 - AT - Service Tax

Waiver of predeposit - Management Maintenance and Repair Service - Service tax is payable by the assessees who outsource various maintenance services such as lift maintenance, security service, repair and maintenance of air conditioners etc., the cost of services being shared by the shop owners and no consideration received by the applicants, is contentious in view of the definition of in the statute - Issue is that the assessees act as pure agents of the owners/occupants of the plaza - Therefore, not liable to service tax as per Rule 5(2), provides for exclusion of expenses or costs incurred by a service provider as a pure agent of the recipient of service from the value of taxable service subject to fulfillment of certain conditions, is also debatable - CENVAT credit prima facie not acceptable. The applicants contend that none of the moneys received from the occupants of the shops in the plaza are accounted as revenue - Commissioner of Income Tax (Appeals) holding that surplus available in the end of financial year need not be brought to tax in the hands of the applicants, as the surplus does not belong to the applicant s company - Prima facie no service tax an be levied on supply of electricity and water which are goods and cannot be treated as services - Direct the respondent for predeposit of a sum of Rs. 15,00,000/- and on such deposit, pre-deposit of the balance amounts shall stand waived and recovery thereof stayed.

Summary

Issues:
1. Waiver of predeposit of service tax
2. Liability for service tax on management, maintenance, and repair services
3. Claim of being pure agents under Rule 5(2) of the Service Tax Rules
4. Treatment of surplus funds from shop occupants
5. Exclusion of supply of electricity and water from service tax liability
6. Financial hardship plea for waiver of predeposit

Analysis:
1. The judgment dealt with the application for waiver of predeposit of a substantial service tax amount covering a specific period, along with interest and penalty, imposed under Section 28 of the Finance Act, 1994. The demand arose from the provision of "Management, Maintenance and Repair Services" to individual shop owners in a commercial complex under a contract.

2. The contentious issue revolved around whether the assessees were liable to pay service tax for outsourcing various maintenance services to shop owners, with the cost shared among them and no direct consideration received. The applicability of Rule 5(2) of the Service Tax Rules, excluding expenses incurred as a pure agent, was also debated. The claim for additional credit was not accepted based on the adjudicating authority's findings.

3. The applicants argued that the funds received from shop occupants were not treated as revenue, as they were managed in a separate account, with surplus retained by the occupants and deficits collected. However, the income tax order cited did not align with the service tax concept of taxing service provision.

4. While a prima facie case for total waiver was not established, it was noted that service tax could not be levied on the supply of electricity and water, which were considered goods and not services. Adjusting for these exclusions, the service tax liability was recalculated, considering the claimed credit amount, which was not accepted initially.

5. Considering the financial hardship plea based on the profit and loss account, a partial waiver was granted, with a specific amount to be deposited within a set timeframe. Failure to comply would result in the vacation of stay and dismissal of the appeal.

6. The judgment emphasized the need for compliance reporting by a specified date, ensuring the orderly progression of the case. The operative part of the order was pronounced in open court, providing clarity on the decision made by the tribunal.