2018 (3) TMI 268 - AT - Service Tax

Valuation - inclusion of reimbursement of expenses - electricity charges - air-conditioning charges - Held that - demand in respect of electricity charges and air-conditioning charges being reimbursable expenses, we are of the view that these cannot be included in the total value of taxable services. As per lease deed, the respondent is under obligation to maintain common areas and provide various amenities. The amount collected as operation and maintenance charges represents charges for maintenance of the building rented out to the clients - Though, the respondent has included such charges under Renting of Immovable Property Service and is discharging service tax under such category after 1.6.2007, the issue whether they were providing any maintenance services prior to 1.6.2007 and whether these will fall under MMR services has to be looked into - the matter requires reconsideration on this aspect. Appeal allowed by way of remand.

Summary

Issues:
1. Liability to pay service tax on electricity charges and air-conditioning charges.
2. Liability to pay service tax on operation and maintenance charges.
3. Allegation of suppression of facts and limitation in issuing the show cause notice.

Analysis:
1. The case involved a dispute regarding the liability of the respondent to pay service tax on electricity charges, air-conditioning charges, and operation and maintenance charges. The department contended that the respondent did not discharge service tax on these charges while paying service tax under the category of renting of immovable property service. The respondents, on the other hand, argued that the electricity and air-conditioning charges were reimbursable expenses and should not be included in the total value of taxable services. The Commissioner (Appeals) set aside the demand on electricity and air-conditioning charges, citing a previous Tribunal decision. The Tribunal upheld the Commissioner's order on this issue, finding in favor of the respondent.

2. Regarding the operation and maintenance charges, the department demanded service tax for the period 16.6.2005 to 31.5.2007. The respondents argued that they had already paid service tax under the renting of immovable property service category when such services became taxable. They contended that the operation and maintenance charges were integral parts of the rent and should not be separately taxed. The Tribunal found that the matter required further examination to determine whether the operation and maintenance charges would fall under management, maintenance, and repair services. The case was remanded to the adjudicating authority for a detailed review of this issue, along with consideration of the limitation argument raised by the respondent's counsel.

3. The respondent also raised the issue of limitation, arguing that the show cause notice issued in 2009 for the period June 2005 to May 2007 was time-barred as there was no allegation of suppression of facts. The Tribunal acknowledged the limitation argument and directed the adjudicating authority to consider this aspect during the review of the operation and maintenance charges issue. The appeal filed by the department was partly remanded to address these unresolved issues and provide a comprehensive determination based on the arguments presented by both parties.