2019 (11) TMI 248 - AT - Service Tax

Classification of services - facilitation service by appointing a facilitation manager to supervise and manage the management and maintenance of immoveable property - whether classified under Real Estate Agent Services or Real Estate Consultant Services ? HELD THAT - The services involved in the present appeal are services in relation to horticulture, housekeeping and cleaning, rent-a-cab operator, supply of manpower, maintenance of immovable property, security, pest control. Out of the aforesaid services, the Appellant deposited Service Tax for services in relation to security and rent-a-cab for the reason that they were taxable services. In regard to maintenance and immovable property services, the Appellant started paying Service Tax w.e.f 16 June 2005 from which date it became a taxable service. Regarding the remaining services, the Appellant did not pay Service Tax as the Appellant claimed that the amount was reimbursed. Section 67 of the Act deals with valuation of taxable services for charging Service Tax. Sub-section (1) of section 67 provides that where Service Tax is chargeable on any taxable service with reference to its value, then such value shall, where the provision of service is for a consideration in money, be the gross amount charged by the service provider for such service provided or to be provided by the service provider. It is, therefore, clear that only such amount is subject to Service Tax which represents consideration for provision of service and any other amount which is not a consideration for provision of service cannot be subjected to service tax. No Service Tax could have been levied in regard to the aforesaid services namely, horticulture, housekeeping and cleaning, supply of manpower and pest control. Valuation - expenses incurred in relation to maintenance of immovable property services - Real Estate Consultant Services - HELD THAT - When the nature of service provided by the Appellant is specifically covered by the amendment made in the definition of management and maintenance of immoveable property w.e.f. 16 June 2005, the Appellant could not have been subjected to payment of Service Tax under the category of Real Estate Agent Services since the definition of Real Estate Agent Service had not undergone any change. Cenvat Credit reversal in excess of 20% of the tax payable - HELD THAT - The Commissioner has failed to appreciate the contentions advanced on behalf of the Appellant in the correct perspective nor is there any discussion on this issue. The imposition of penalty and interest upon the Appellant under this issue has, therefore, be considered afresh. Appeal allowed in part and part matter on remand.

Summary

Issues Involved:
1. Classification of reimbursement expenses under "Real Estate Agent Services."
2. Taxability of services provided before and after the amendment to the definition of "Management Maintenance or Repair Services."
3. Applicability of Rule 5(1) of Service Tax (Determination of Value) Rules, 2006.
4. Cenvat Credit reversal exceeding 20% of the tax payable.
5. Invocation of the extended period of limitation under Section 73(1) of the Finance Act, 1994.

Issue-wise Detailed Analysis:

1. Classification of Reimbursement Expenses:
The Appellant contended that the expenses incurred on services such as horticulture, housekeeping, cleaning, rent-a-cab, supply of manpower, maintenance of immovable property, security, and pest control were reimbursements and not liable to be classified under "Real Estate Agent Services" or "Real Estate Consultant Services." The Tribunal agreed, noting that the Supreme Court in Union of India and ANR Vs. M/s Intercontinental Consultants and Technocrats Pvt Ltd held that reimbursable expenditures cannot form part of the valuation of taxable services. Consequently, no Service Tax could be levied on these expenses as they were not part of the consideration for the provision of services.

2. Taxability of Services Pre and Post Amendment:
The Appellant argued that "management and maintenance of immovable property" became taxable only from 16 June 2005, following an amendment. The Tribunal accepted this argument, stating that the introduction of a new entry for these services implied that they were not covered under the existing "Real Estate Agent Services" before the amendment. Therefore, the Appellant could not be subjected to Service Tax for these services prior to 16 June 2005.

3. Applicability of Rule 5(1) of Service Tax (Determination of Value) Rules, 2006:
The Tribunal referred to the Supreme Court's decision, which declared Rule 5(1) ultra vires of Section 67 of the Act. The rule could not extend the scope of taxable value to include reimbursable expenses. Thus, the Tribunal concluded that the expenses for horticulture, housekeeping, cleaning, supply of manpower, and pest control could not be taxed under Rule 5(1).

4. Cenvat Credit Reversal Exceeding 20%:
The Appellant contended that it maintained separate books of accounts and did not utilize Cenvat Credit in excess of 20% of the Service Tax payable. The Tribunal found that the Commissioner did not adequately consider these contentions. The Tribunal noted that the proportion of exempted services to taxable services was only 1.17%, and the Cenvat Credit pertaining to exempted services amounted to ?8,13,156, which was already paid. The Tribunal remitted this issue back to the Commissioner for reconsideration.

5. Invocation of Extended Period of Limitation:
The Appellant argued that the extended period of limitation under the proviso to Section 73(1) of the Act could not be invoked. The Tribunal did not specifically address this issue in the judgment, focusing instead on the substantive issues of classification, taxability, and Cenvat Credit.

Conclusion:
The Tribunal set aside the confirmation of demand under "Real Estate Agent Services" for the first show cause notice. The issue of Cenvat Credit reversal was remitted to the Commissioner for a fresh order. The appeal was allowed to the extent indicated, with specific directions for reconsideration on certain aspects.