2015 (8) TMI 1249 - AT - Service Tax

Demand of service tax - maintenance and repair services - They were collecting corpus for maintenance, etc., and the said balance of funds along with account of utilisation, are transferred to the newly formed society, in terms of Sections 5 & 6 of the said Maharashtra Ownership Flat Act, 1963 - Held that - Appellants are not liable to pay service tax under the category of maintenance and repair services and one time maintenance charges collected from buyers of the flat, relying on the earlier ruling of this Tribunal in the case of Kumar Beheray Rathi (2013 (12) TMI 269 - CESTAT MUMBAI) - Decided in favour of assessee.

Summary

Issues:
Levy of service tax on "one time maintenance/contribution" collected from flat purchasers.

Analysis:
The appellants, builders/promoters for housing society, appealed against the service tax levy on maintenance charges collected from flat purchasers. They collected funds for maintenance until the society formation, as per the Maharashtra Ownership Flats Act, 1963. The common area maintenance deposit was collected for common area upkeep until the society formation, with amounts transferred to the society. The Revenue claimed the amounts were for management, maintenance, or repair services, taxable under Section 65 (105) (zzg) of the Act from 16/06/2005. The appellants argued they acted as trustees, managing expenses until the society formation, transferring funds to the society. A show-cause notice demanded service tax for 16/06/2005 to 31/12/2006, penalty under Sections 76, 77 & 78. The Commissioner (Appeals) dismissed the appeal on limitation and merit grounds, noting a delay due to swine flu outbreak was not a reasonable cause. The appellants appealed to the Tribunal.

The appellants cited a similar case where builders collecting deposits for common expenses were not liable for service tax on maintenance charges. They argued they acted as trustees, paying expenses on behalf of flat owners until the society formation. The deposit accounts were shifted to the society as per statutory obligations. The appellants contended that repair and maintenance services were not rendered, urging the appeal's merit. They also argued for condoning the delay in filing the appeal, citing reasonable cause recognized by the government in circulars and statutes. The Tribunal found a reasonable cause for the delay and criticized the Commissioner for not condoning it.

During the hearing, the appellants presented a letter from the housing co-operative society acknowledging funds received from the builder/appellant. The Departmental Representative relied on the impugned order. The Tribunal allowed the appeals, ruling that the appellants were not liable for service tax on maintenance and repair services or one-time maintenance charges collected from flat buyers, based on the precedent set in the Kumar Beheray Rathi case. The appeals were allowed with any consequential benefits.

In conclusion, the Tribunal held in favor of the appellants, determining they were not liable for service tax on maintenance charges collected from flat purchasers based on the Kumar Beheray Rathi case precedent. The decision highlighted the appellants' role as trustees managing expenses until the society formation, shifting deposit accounts to the society as per statutory obligations. The Tribunal also criticized the Commissioner for not condoning the delay in filing the appeal, recognizing reasonable cause for the delay.