2018 (12) TMI 253 - AT - Service Tax

Valuation - bundled service - construction of residential complex service - inclusion of charges on account of External Development Charges, Club Building Charges, Fire Fighting Charges, Electrification Fitting Charges, Park Facing Preferential Location Charges, Electrical Sub Station Charges and such other charges in assessable value - bundling of services - Held that - provisions under sub Section (3) of Section 66F has provided that whenever in ordinary course of business some service is naturally associated with a single service which gives essential character to the entire package of service then such naturally associated service is treated as bundled service and the said bundled service is to be treated as single service which gives the entire package its essential character. In the present case construction of residential complex service is the service which gives essential character to the package of the service and, therefore, the charges are essentially required to be bundled with the single service namely construction of residential complex service - appeal allowed - decided in favor of appellant.

Summary

Issues:
Interpretation of bundled services under Section 66F of Finance Act, 1994 for construction of residential complex service.

Analysis:
The appeal was directed against an Order-in-Original passed by the Commissioner, Central Goods & Service Tax – Audit, Noida. The appellants were engaged in the construction of a residential complex and were paying service tax at an abated value as per Notification No. 26/2012-ST. The Revenue contended that charges like External Development Charges, Club Building Charges, etc., were not part of the consideration for the construction service and hence not eligible for abatement. A show cause notice was issued demanding service tax for a specified period. The appellants contested the notice citing the applicability of provisions of Section 66F of the Finance Act, 1994, related to bundled services. The Original Authority upheld the demand, leading to the appeal before the Tribunal.

The learned Chartered Accountant representing the appellant argued that charges in question were essential for the construction of the residential complex and should be considered part of the main service. He emphasized that the charges were not separately contracted but included in the overall consideration. On the other hand, the learned AR supported the Order-in-Original.

After hearing both parties and examining the records, the Tribunal found that the charges were not separately mentioned in the sale deeds and were integral to the construction of the residential complex service. Referring to Section 66F(3) of the Finance Act, the Tribunal concluded that when a service is naturally associated with another service that gives essential character to the entire package, it is considered a bundled service. In this case, the construction of the residential complex service was deemed predominant, making the additional charges part of the bundled service. Consequently, the Tribunal set aside the impugned order and allowed the appeal.

In conclusion, the Tribunal's decision was based on the interpretation of bundled services under Section 66F of the Finance Act, 1994, in the context of construction of a residential complex service. The judgment emphasized the essential character of the main service and the natural association of additional charges with it, leading to the inclusion of such charges in the bundled service.