2019 (3) TMI 185 - AT - Service Tax

Classification of services - Maintenance and Repair Service or not - appellant is collecting a reserve fund contribution from the purchasers of property for the purpose of replacement of machinery and equipments and for arranging major repairs - Held that - This Tribunal in the case of Kumar Beheray Rathi (supra) has held that collection of such type of funds cannot be treated as consideration for Maintenance or Repair Service - service tax demand of around ₹ 10.98 lakhs along with interest and penalty under Maintenance or Repair Service is not sustainable. Business Auxiliary Service or not - contribution collected by the appellant from all the shop owners for planed events during the festivals and fairs to decorate mall and organize events for attracting customers to the mall - Held that - Revenue could not establish that appellant were promoting or marketing sale of goods produced or belonging to clients or providing to any customer care service etc. - the said transaction cannot be covered by Business Auxiliary Service. Business Auxiliary Service - transfer charges of property - Held that - There is no promotion or marketing of sale of goods or services belonging to others or clients. Therefore, the transaction does not satisfy definition of Business Auxiliary Service - demand set aside. Appeal allowed - decided in favor of appellant.

Summary

Issues involved:
1. Whether the collection of reserve fund contribution by the appellant from property purchasers constitutes Maintenance or Repair Service for service tax purposes.
2. Whether the contribution collected by the appellant from shop owners for planned events during festivals and fairs constitutes Business Auxiliary Service for service tax purposes.
3. Whether the charges collected by the appellant upon resale of property by the purchaser constitute Business Auxiliary Service for service tax purposes.

Analysis:

Issue 1:
The appellant, operating a Multiplex Cinema-cum-shopping Mall, collected reserve fund contributions from property purchasers for machinery replacement and major repairs. Revenue treated this as consideration for Maintenance or Repair Service. The appellant argued that a previous Tribunal decision and subsequent High Court affirmation held that such charges do not attract service tax. The Tribunal agreed, citing that the funds were not for Maintenance or Repair Service, as affirmed by the Bombay High Court. Consequently, the service tax demand of approximately ?10.98 lakhs was deemed unsustainable.

Issue 2:
The second issue pertained to contributions collected by the appellant from shop owners for events during festivals and fairs to attract customers. Revenue viewed this as Business Auxiliary Service. However, the Tribunal found no evidence of promoting goods or providing customer care services. Noting that the appellant contributed 78% for such activities, the Tribunal ruled that the contribution was not for Business Auxiliary Service, setting aside the service tax demand of around ?9.9 lakhs.

Issue 3:
Regarding charges collected by the appellant upon resale of property by the purchaser, Revenue considered this as Business Auxiliary Service. The Tribunal disagreed, stating that as there was no promotion or marketing of goods or services belonging to others, the transaction did not meet the definition of Business Auxiliary Service. Consequently, the demand of approximately ?2.23 lakhs, along with interest and penalty, under Business Auxiliary Service was not upheld.

In conclusion, the Tribunal set aside the impugned order, allowing the appeal and granting the appellant consequential relief as per the law. The judgment was pronounced on 10/01/2019 by the Tribunal members Smt. Archana Wadhwa and Mr. Anil G. Shakkarwar.