2019 (3) TMI 1389 - AT - Service Tax

Construction of residential complex service - management, maintenance or repair service - demand of service tax - Held that - It is not disputed that such construction activities involve both supply of labour as well as element of service and contracts are composite in nature. The demand prior to 1.6.2007 cannot sustain as per the decision of Apex Court in Larsen & Toubro Ltd. 2015 (8) TMI 749 - SUPREME COURT - The Tribunal in the case of Real Value Promoters 2018 (9) TMI 1149 - CESTAT CHENNAI had analyzed the very same issue and had held that even after 1.6.2007, service tax on such composite contracts would not be sustainable under Residential Complex Services or Commercial or Industrial Construction Services - the demand made under Construction of Residential Complex cannot sustain and requires to be set aside. Management, maintenance or repair service - Held that - The appellant has collected a lumpsum amount which forms a corpus and is transferred to the flat owners association. Apart from this, the appellant has collected maintenance charges at ₹ 1.25 per square feet. The said amount would definitely be subject to levy of service tax if it has not been formed as part of corpus that has been transferred to the association. However, this fact whether corpus was transferred to association and how much was collected by appellant for Management, Maintenance and repair service is not forthcoming. For this reason, the matter requires to be remanded to the adjudicating authority who shall look into the issue of demand under management, maintenance or repair service. Appeal allowed in part and part matter on remand.

Summary

Issues:
1. Demand raised under construction of residential complex service.
2. Demand raised under management, maintenance, or repair service.

Analysis:

Construction of Residential Complex Service:
The appellant, a partnership firm engaged in construction activities, was issued a show cause notice for not properly discharging service tax under construction of residential complex service and management, maintenance, or repair service. The appellant argued that the demand under construction of residential complex service cannot sustain as the contracts are composite in nature involving both supply of materials and services. The Tribunal agreed with the appellant, citing precedents and the decision of the Apex Court in Larsen & Toubro Ltd., holding that service tax on such composite contracts would not be sustainable. The Tribunal set aside the demand under construction of residential complex service, emphasizing that the decision in G.D. Builders case, relied upon by the department, was no longer valid law post the Apex Court ruling.

Management, Maintenance, or Repair Service:
Regarding the demand under management, maintenance, or repair service, the appellant collected a lump sum amount transferred to the flat owners' association, along with maintenance charges. The Tribunal noted that the amount collected for management, maintenance, and repair services would be subject to service tax if not part of the transferred corpus. However, the exact details of the corpus transfer and the amount collected by the appellant were not clear. Therefore, the Tribunal remanded this issue to the adjudicating authority for further examination. The impugned order was set aside partially, with the demand under management, maintenance, or repair service being remanded for review.

In conclusion, the Tribunal partially allowed the appeal, setting aside the demand under construction of residential complex service and remanding the issue of demand under management, maintenance, or repair service for further investigation by the adjudicating authority. The judgment was pronounced on 17/01/2019 by the Bench comprising Ms. Sulekha Beevi C.S., Member (Judicial), and Shri Madhu Mohan Damodhar, Member (Technical).