2020 (2) TMI 37 - AT - Service Tax

Construction of Residential Complex Service - Abatement claim - charges collected from the buyers under electric meter main load supply charges head - HELD THAT - Sub-Section 3 of Section 66F of Finance Act, 1994 provides that taxability of a bundled service shall be determined if various elements of such services are naturally bundled in the ordinary course of the business. From the submissions made recorded herein above it is clear that around ₹ 16 lakhs charges for electric meter main load supply were collected along with the consideration for sale of residential unit and they were collected from very person to whom the residential unit was sold and not to any other person and as explained the same was for providing electricity supply during the power failure to the residents of the complex. Therefore, the said service is bundled services under Section 66F of the Finance Act, 1994. The appellant has paid around ₹ 49 thousand along with interest which is appropriate amount after taking into consideration the abatement admissible - thus, without interfering with the service tax of around ₹ 49 thousand along with interest paid, the remaining part of the order is set aside - appeal allowed in part.

Summary

Issues:
1. Whether charges collected under 'electric meter main load supply charges' head are eligible for abatement under the Construction of Residential Complex Service?
2. Whether the charges collected should be considered as bundled services under Section 66F of the Finance Act, 1994?
3. Imposition of penalty under Section 78 of the Finance Act, 1994.

Analysis:
1. The appellant was providing nonnegative list services during the Financial Year 2014-15, collecting charges under 'electric meter main load supply charges' head along with the sale of residential units. The Revenue contended that these charges were not eligible for abatement under the Construction of Residential Complex Service, leading to a demand of around ?2 lakhs under Section 73 of the Finance Act, 1994. The impugned Order-in-Appeal confirmed the demand, prompting the appellant to appeal before the Tribunal.

2. The appellant argued that the charges were collected along with the sales value of residential units and provided to the same buyers, constituting a bundled service. Citing a previous Tribunal order, the appellant contended that such charges should be considered bundled services under Section 66F of the Finance Act, 1994. The Revenue emphasized that the amount collected was for providing specific services and raised concerns about penalty under Section 78 of the Finance Act, 1994.

3. The Tribunal, after considering submissions from both sides, observed that the charges for electric meter main load supply were collected along with the sale of residential units and provided to the same buyers for electricity supply during power failures. Applying Section 66F of the Finance Act, 1994, the Tribunal concluded that the service constituted bundled services. Referring to a previous Tribunal order, the Tribunal found the appellant had paid an appropriate amount after considering abatements. Consequently, the Tribunal set aside the balance demand, interest, and penalty, noting no suppression in the appellant's transactions, and allowed the appeal while upholding the payment of around ?49 thousand along with interest.