2018 (11) TMI 462 - AT - Service Tax

Residential Complex Service - Date of effectiveness of the service w.e.f. 01.07.2012 - negative list of services - benefit of abatement under N/N. 26/2012-ST. - Held that - The CBEC's letter issued by TRU dated 26.02.2010 about the scope of valuation in respect of Residential Complex Service which was introduced in the year 2010, during such period when there was no provision of Section 66F dealing with bundled service on the statute. After the introduction of Section 66F on the statute, the provisions of Section 66F will prevail over any clarification or view taken by CBEC. Benefit of abatement under N/N. 26/2012-ST. - Held that - The components such as preferred location charges, external development charges etc. are part and parcel and for various elements of the main service which is Residential Complex Service and therefore the entire consideration received by the appellants are eligible for abatement under said N/N. 26/2012-ST. Appeal allowed - decided in favor of appellant.

Summary

Issues:
Appeal against imposition of penalties on service tax providers for charging various fees separately from buyers, including Preferential Location Charges (PLC), External Development Charges (EDC), and others. Interpretation of provisions under Finance Act, 1994 regarding bundled services and abatement eligibility under Notification No.26/2012-ST.

Analysis:

Issue 1: Charges Separately Levied by Service Providers
The appellants, service tax providers, were charged with issuing invoices with separate fees like PLC, EDC, etc., and paying service tax at a reduced rate, contrary to the full rate required by revenue. The revenue argued that charges like PLC are not eligible for abatement as they do not involve material transfer, going against the principle of granting abatement. The CBEC's letter was relied upon to support the contention that such charges are not covered under specific provisions, leading to demands raised against the appellants. The demands were confirmed, and penalties were imposed on personnel associated with the service providers.

Issue 2: Interpretation of Bundled Services
The appellants contended that charges like EDC, PLC, etc., are integral to the Residential Complex Service provided and cannot be considered separately. They argued that under Section 66F of the Finance Act, 1994, bundled services should be treated as a single service, with all charges forming part of the predominant service. They emphasized that the contract with clients is for the entire amount, not separate fees, making them eligible for abatement as per Notification No.26/2012-ST.

Judgment:
After hearing both sides, the Tribunal noted that the CBEC's letter predates the introduction of Section 66F, which deals with bundled services. The Tribunal held that charges like PLC, EDC, etc., are integral elements of the main service, Residential Complex Service, making the entire consideration received eligible for abatement under Notification No.26/2012-ST. Consequently, the impugned orders were set aside, and all appeals were allowed, granting the appellants consequential relief as per law.

This judgment clarifies the treatment of charges levied by service providers and the interpretation of bundled services under the Finance Act, 1994. It emphasizes the essential character of services provided and the eligibility for abatement based on the predominant service offered, providing guidance on the taxation of complex service transactions.