2014 (1) TMI 667 - AT - Service Tax

Business Auxiliary Service - Management, Maintenance or Repair Service - Sharing of expenditure with group companies - Collection of maintenance charges/deposits from the flat buyers - Held that - The notice demands tax under clause (ii) of the BAS which relates to promotion or marketing of service provided by the client and under clause (vi) which deals with any incidental or ancillary support service such as billing, collection or recovery of cheques, maintenance of accounts and remittance, inventory management, evaluation of prospective customer or vendor, public relation services, w.e.f. 10/09/2004. By sharing common facilities, the appellant does not promote or market the services of the group companies nor the services rendered can be considered under the category of services incidental or ancillary to the marketing services. In any case, the appellant has been discharging service tax on the said activity under Business Support Services effective from 01/04/2006 and the department has been accepting such payment. Appellant is collecting security/maintenance deposits from the flat owners. Till such time, the flats are actually handed over to the flat owner, the appellant is liable to discharge statutory obligations such as property tax, water charges, electricity charges, etc. under the Maharashtra Ownership of Flats (Regulation of the Promotion of Construction, Sale, Management and Transfer) Act, 1963, which is a statutory requirement. Since the amount is collected for discharging statutory obligations and amount is utilised for incurring those statutory obligations, it cannot be said that the appellant was rendering management, maintenance or repair service to the flat owners. Further, any excess amount collected, over and above the actual, were reimbursed to the housing cooperative society when the flats were actually given possession and handed over to the flat owners. Thus the appellant was acting as a pure agent and was performing custodial functions. Therefore, the demand of service tax under Management, Maintenance or Repair service does not appear to be sustainable in law - appellant has made out a strong case in their favour for grant of waiver - Stay granted.

Summary

Issues:
- Service tax liability under 'Business Auxiliary Service'
- Service tax liability under 'Management, Maintenance or Repair Service'
- Service tax liability under 'Health and Fitness Club Service'

Service Tax Liability under 'Business Auxiliary Service':
The appellant shared common expenses with group companies, leading to a service tax demand of Rs. 45,04,294 under 'Business Auxiliary Service'. However, the appellant argued that they did not provide marketing or promotion services for the group companies, nor did the activities fall under transaction processing. The tribunal agreed, noting that the appellant had been paying service tax under 'Business Support Service' since 2006, which the department accepted. Consequently, the tribunal held that the services provided did not fall under 'Business Auxiliary Service'.

Service Tax Liability under 'Management, Maintenance or Repair Service':
Regarding the demand of Rs. 1,21,54,570 for maintenance charges collected from flat buyers, the appellant contended that they acted as a pure agent under the Maharashtra Ownership of Flats Act, 1963, using the funds solely for statutory obligations until the flats were handed over to the housing cooperative society. The tribunal agreed, stating that the appellant was not providing management, maintenance, or repair services to the flat owners but acting as a custodian. The demand was deemed unsustainable in law, especially for functions like security and cleaning where individual service providers had already paid service tax.

Service Tax Liability under 'Health and Fitness Club Service':
For the demand of Rs. 1,31,824 under 'Health and Fitness Club Service', the appellant had already discharged the service tax liability. The tribunal acknowledged this compliance.

In conclusion, the tribunal found in favor of the appellant, granting an unconditional waiver from pre-deposit of the adjudged dues and staying the recovery during the appeal's pendency. The judgment highlighted the distinctions in services provided by the appellant, emphasizing their compliance with service tax liabilities where applicable and rejecting demands where the services did not align with the specified categories for taxation.