2018 (2) TMI 289 - AT - Service Tax

Maintenance, Management or Repair Service - appellant carry out maintenance and repair of streets, street lights, water supply, drainage etc. They collect from the lessees of the plots, an annual fee for providing such services, calling it as service charge - whether the service will be taxable under the head Maintenance, Management or Repair Service? Held that - the activities performed by sovereign or public authorities under the provisions of law which are in the nature of statutory obligations are covered by clause 2 which provides that the fee collected by such sovereign or public authorities for performing such activities is in the nature of compulsory levy. Only if such authority performs service which is not in the nature of statutory activity and the same is undertaken for a consideration which is not in the nature of statutory fee, service tax would be leviable if the activity undertaken otherwise falls within the ambit of taxable service - service tax not leviable - appeal allowed - decided in favor of appellant.

Summary

Issues:
Interpretation of service tax liability on Maintenance, Management, or Repair Services provided by the appellant.

Analysis:
The appellant provided Management, Maintenance, or Repair Services by maintaining and repairing streets, street lights, water supply, drainage, etc., collecting an annual fee termed as service charge. The Revenue contended that service tax was applicable under the Maintenance, Management, or Repair Service category. The appellant's representative cited a previous Tribunal decision and a subsequent Bombay High Court judgment in favor of the appellant, settling the issue.

The High Court order emphasized that activities by public authorities fulfilling statutory obligations, collecting fees as compulsory levy, do not constitute taxable services. The appellant, MIDC, was already paying service tax for renting immovable property services. The MID Act mandated MIDC to establish and manage industrial estates, providing amenities like roads, water supply, street lighting, drainage, etc. The statutory obligations of MIDC included managing and maintaining these amenities, making the service charges collected a compulsory levy for statutory functions.

The judgment referenced the Apex Court's validation of MID Act's purpose for industrial growth and organization, highlighting MIDC's role as a governmental wing. The statutory obligation of MIDC to provide and maintain amenities was underscored, indicating that the service charges were part of its statutory functions. The Tribunal found no error in the Appellate Tribunal's view, concluding that no substantial question of law arose. The High Court upheld the Tribunal's decision, noting the appellant's unnecessary litigation costs due to the Revenue's appeals.

In light of the High Court's judgment aligning with the Tribunal's decision, the impugned order was set aside, and the appeal was allowed. The appellant was directed to pay costs to MIDC, emphasizing that the Revenue should not have compelled the appellant to litigate unnecessarily. The judgment favored the appellant based on the settled legal position and statutory obligations of MIDC, concluding the case in their favor.