2023 (9) TMI 1284 - AT - Service Tax

Levy of Service Tax - Management, Maintenance or Repair Service - amounts collected by the Appellant towards electricity, diesel charges for DG sets, water and parking charges - non-inclusion of parking charges in the value of taxable services - HELD THAT - Having regard to the Order passed by this Tribunal in the case of VITP Pvt Ltd 2022 (7) TMI 1030 - CESTAT HYDERABAD , wherein the reliance has also been placed on Hon ble Supreme Court s judgment in the case of Intercontinental Consultants Technocrats Ltd 2018 (3) TMI 357 - SUPREME COURT , as also factual matrix brought out in the SCNs as well as in the OIOs, the amount collected towards water, electricity and diesel are in the nature of reimbursable expenses and therefore, not liable for inclusion in the taxable value towards provision of Management, Maintenance or Repair services by the Appellant. There is nothing in the SCNs or impugned orders, which states that they have been collecting anything over and above the amount incurred towards payment of electricity bill and water bill or diesel consumption or that there was any profit involved therein - The fact that the reimbursable expenses, have been specifically brought under the coverage of gross value w.e.f. 14.05.2015, further supports the Appellant s argument that the amounts collected on reimbursable basis were not liable for inclusion before that. In fact they have stated that in their own case itself for the subsequent period, Commissioner (Appeals) has also set aside the demand for the period 01.10.2014 to 14.05.2015 on diesel charges . Thus, the demand on these three charges viz., electricity, water and diesel cannot sustain - for parking charges, the amount collected also needs to be included in the gross value in Management, Maintenance or Repair services - appeal allowed in part.

Summary

Issues Involved:
1. Liability of service tax on reimbursable expenses (electricity, diesel, water charges).
2. Inclusion of parking charges in the taxable value of services.

Summary:

Issue 1: Liability of service tax on reimbursable expenses (electricity, diesel, water charges)

The Appellants provided services of renting immovable property and maintaining common areas, collecting charges for electricity, diesel, water, and parking separately. The Department issued SCNs demanding service tax on these charges under 'Management, Maintenance or Repair Service'. The Adjudicating Authority confirmed the demand, considering these as necessary for building maintenance and includible in the taxable value under Rule 5(1) of Service Tax Valuation Rules, 2006. However, for the period 2012-2013, the Authority found the Appellants acted as 'pure agents' for electricity and water charges, thus excluding them from taxable value, but included diesel charges and parking charges.

The Appellants relied on judgments, including the Supreme Court's decision in Inter Continental Consultants & Technocrats Ltd, which held that reimbursable expenses are not includible in taxable value before 14.05.2015. The Tribunal, referencing this and other cases, concluded that the amounts collected for water, electricity, and diesel were reimbursable expenses and not liable for inclusion in the taxable value, as there was no profit element involved.

Issue 2: Inclusion of parking charges in the taxable value of services

The Department argued that parking charges should be included in the taxable value under 'Management, Maintenance or Repair Service'. The Tribunal upheld this view, noting that parking charges were not collected on a reimbursable basis and were part of the maintenance service. Therefore, the demand for service tax on parking charges was confirmed.

Conclusion:

The Tribunal set aside the demand for service tax on water, electricity, and diesel charges, affirming them as reimbursable expenses. However, it upheld the demand for service tax on parking charges, considering them part of the maintenance service. All penalties were set aside, and the appeal was partially allowed.