2018 (4) TMI 1339 - AT - Service Tax

Demand of service tax - Maintenance and Repair Service - Circular No.B1/6/2005-TRU dated 27.6.2005 - Held that - the respondent is collecting repair and maintenance charges under the statutory obligation provided in Maharashtra Ownership Flats (Regulation of the Promotion of Construction, Sale, Management and Transfer) Act, 1963. The respondent is under the obligation of the said Act, collecting the maintenance charges from the dwelling unit owner and transferring it to the actual service provider. The issue has been considered by this Tribunal in various judgments particularly in the case of Kumar Beheray Rathi vs. CCE, Pune-III 2013 (12) TMI 269 - CESTAT MUMBAI , where it was held that the maintenance charges collected from the flat owner under the obligation as per the Maharashtra Ownership Flats (Regulation of the Promotion of Construction, Sale, Management and Transfer) Act, 1963, the same will not be chargeable to tax in the hands of the builder. Appeal dismissed - decided against Revenue.

Summary

Issues:
Taxability of maintenance charges under Service Tax for construction of residential complex service.

Analysis:
The case involved a dispute regarding the taxability of maintenance charges collected by the respondent for construction of residential complexes. The department contended that the maintenance charges fell under the ambit of Service Tax as per Circular No.B1/6/2005-TRU. The adjudicating authority upheld the demand of service tax and imposed penalties. The respondent appealed before the Commissioner (Appeals) who ruled in their favor, leading to the Revenue's appeal before the Tribunal.

The Revenue argued that the repair and maintenance charges collected by the respondent were taxable under maintenance or repair service, citing a previous Tribunal judgment. However, upon examination, the Tribunal found that the respondent was collecting these charges under the statutory obligation of the Maharashtra Ownership Flats Act, 1963. Referring to a previous case, the Tribunal highlighted that the respondent was obligated to collect maintenance charges and transfer them to the service provider as per the Act's provisions.

The Tribunal further analyzed the relevant sections of the Maharashtra Ownership Flats Act, emphasizing the promoter's responsibility to maintain a separate account for deposits and pay outgoings until the property is transferred. It noted that the appellants were not engaged in the business of maintenance or repair services but were fulfilling a statutory obligation under the Act. The Tribunal concluded that the appellants were not providing maintenance or repair services to flat owners but acting as trustees or pure agents in compliance with the Act.

Based on the above analysis and consistent with previous judgments, the Tribunal held that the maintenance charges collected under the statutory obligation of the Maharashtra Ownership Flats Act were not taxable in the hands of the builder. The Tribunal distinguished the cited judgment related to a different state and Act, emphasizing the specific provisions and obligations under the Maharashtra Act. Consequently, the Tribunal upheld the decision of the Commissioner (Appeals) and dismissed the Revenue's appeal.

In conclusion, the Tribunal ruled that the maintenance charges collected by the respondent for construction of residential complexes were not subject to Service Tax, as they were collected under the statutory obligations of the Maharashtra Ownership Flats Act, 1963. The judgment highlighted the distinction between providing maintenance services and fulfilling statutory obligations, ultimately leading to the dismissal of the Revenue's appeal.