2022 (4) TMI 255 - AT - Service Tax

Levy of Service Tax - maintenance security deposit - whether any service on this amount was provided or not - respondent maintained the complexes on its own expense and kept the amount collected as maintenance deposit as a liability to be transferred in toto to the society of the buyers once it was formed - mis-conception on the part of Revenue in interpreting this amount as maintenance charges - HELD THAT - The appeal is filed by the Revenue under the wrong assumption that the maintenance deposit taken by the respondent from the buyers is to be utilized for maintenance of the complexes and any unutilized amount will be transferred to the society after it is formed. It is, therefore, the contention of the Revenue that merely because unutilized amount will be subsequently transferred to the society, the respondent does not get exempted from paying service tax on the amounts collected by it as maintenance deposit. It is evident that no amount of the maintenance deposit was to be utilized for maintenance of the complex by the respondent and the entire amount was to be transferred to the society once it was formed and was then to be used for major repairs, etc. As far as the respondent is concerned, it only held the deposit for the society to be formed later. The maintenance done by the respondent during the intervening period was at its own cost. No amount was charged for such maintenance nor was any amount, out of the maintenance deposit, spent by the respondent on the maintenance. The respondent has not received any consideration for maintenance of the complexes and the maintenance deposit was only held by it in custody for subsequent transfer to the society. Demand of service tax do not sustain, as there is no rendition of any service, for the said amount - appeal dismissed - decided against Revenue.

Summary

Issues:
- Appeal against order-in-appeal allowing the appeal of the assessee and setting aside the order-in-original passed by the Joint Commissioner.
- Taxability of maintenance deposit collected by the respondent.
- Demand for service tax on maintenance security deposit along with interest and penalty.
- Interpretation of provisions under the Finance Act, 1994 regarding service tax on maintenance services.

Analysis:
The appeal was filed by the Revenue against the order-in-appeal that favored the assessee and overturned the order-in-original passed by the Joint Commissioner. The main contention revolved around the taxability of the maintenance deposit collected by the respondent. The Revenue argued that the maintenance services provided by the respondent are taxable under specific sections of the Finance Act, 1994. They claimed that the amount collected as a security deposit should be subject to service tax, irrespective of the fact that it would be transferred to a society for maintenance purposes later on.

Upon careful examination of the facts and legal arguments presented, the Tribunal found that the Revenue's appeal was based on the incorrect assumption that the maintenance deposit was meant for the upkeep of the complexes by the respondent. However, it was revealed that the entire amount collected as maintenance deposit was intended to be transferred to the society once it was formed, to be used for major repairs and maintenance activities. The respondent did not charge any amount for the maintenance done during the interim period, nor did they utilize any portion of the maintenance deposit for such purposes. Therefore, the Tribunal concluded that the respondent did not receive any consideration for the maintenance services provided, as the deposit was held in custody for future transfer to the society.

In light of the factual findings and legal analysis, the Tribunal upheld the order-in-appeal passed by the Commissioner, dismissing the Revenue's appeal. The judgment clarified that the respondent was not liable to pay service tax on the maintenance deposit collected, as it was not considered as consideration for maintenance services provided by the respondent.