2016 (3) TMI 137 - AT - Service Tax

Waiver of pre-deposit - Management, Maintenance and Repair Services - Whether notional interest to be taken as value of service - Appellant contended that there is no provision under Service Tax law to adopt notional interest as value of taxable service and as per Notification No.8/07-ST dated 1.3.2007 taxable services specified in clause (zzze) of section 65(105) of the said Finance Act provided or to be provided by a resident welfare association subject to the condition that the total consideration received from an individual member by the said society for providing the said services does not exceed three thousand rupees per month is exempt - Held that as the appellant provided Management, Maintenance and Repair Services and is not a resident welfare association, the Notification No.8/07-ST dated 1.3.2007 is not applicable to it. The fact is that the service was rendered, and only amount of ₹ 3 lakh per flat owner was collected for this purpose although corpus fund was to be transferred to the welfare association as contended by the appellant but the corpus amount was not transferred by the appellant during the period and it earned interest thereon. Therefore, the notional interest reasonably represents the value of the said taxable service. - Stay granted partly.

Summary

Issues:
1. Service tax demand confirmation for Management, Maintenance and Repair Services.
2. Applicability of Notification No.8/07-ST dated 1.3.2007.
3. Charging services based on notional interest.
4. Time-barred demand contention.
5. Pre-deposit requirement under section 35F of Central Excise Act, 1944.

Analysis:

1. The appellant filed a stay application and appeal against the Order-in-Appeal confirming a service tax demand for Management, Maintenance, and Repair Services provided from June 2005 to September 2009. The demand was based on the collection of notional interest of Rs. 3 lakh per flat owner as corpus fund.

2. The appellant argued that Notification No.8/07-ST exempted taxable services provided by a resident welfare association if the consideration received from an individual member did not exceed Rs. 3,000 per month. However, it was established that the appellant was not a resident welfare association, making the notification inapplicable.

3. The appellant contested the adoption of notional interest as the value of taxable service, claiming no provision under the Service Tax law supported this method. The Tribunal noted that although the service was rendered, the corpus fund was not transferred to the welfare association during the period, resulting in the appellant earning interest on the amount. Therefore, the Tribunal found that the notional interest reasonably represented the value of the taxable service.

4. Regarding the time-barred demand contention, the Tribunal acknowledged that a full assessment could only be made during the final hearing. However, it emphasized the importance of considering this factor while determining the pre-deposit amount.

5. In compliance with section 35F of the Central Excise Act, 1944, the Tribunal ordered a pre-deposit of Rs. 3.3 lakhs within six weeks. The remaining adjudicated liability recovery was stayed pending the appeal, with the condition that failure to make the pre-deposit would result in the dismissal of the appeal.

This detailed analysis covers the issues raised in the legal judgment, providing a comprehensive overview of the Tribunal's decision and the reasoning behind it.