2024 (8) TMI 400 - AT - Service Tax

Levy of service tax - Interest Free Maintenance Security (IFMS) - Prime/Preferential Location Charges (PLC) charges - period 2010-11 to 2014-15. Inclusion of the amount collected by the Appellant as IFMS - Revenue s contention is that the said collected amount would fall under the category of Management Maintenance and Repair Services and would be liable to service tax separately - HELD THAT - The said amount collected by the Appellant from the flat owners is towards the security for the purpose of maintenance of the building and to cover the eventual default made by any of the flat owners for payment of monthly maintenance charges. As per the Agreement with the flat owners, the said amount is liable to be refunded to them within the period of Six months from the date of termination of the said agreement. The Adjudicating Authority observed that the genuineness of the said term is very much doubted inasmuch as the Appellant had not produced any evidence to show that the said IFMS was ever refunded to anyone. The amount is refundable in case of termination of the ownership agreement and if no such termination has taken place till date, the amount would not be refunded. As long as the provisions for refund of the said amount in the agreement itself is there, it has to be considered that the said amount is refundable and was towards security deposit and was not for the purpose of providing any services, so as to levy tax on the same. Reference can be made to the Tribunal s decision in the case of C.C.E. S.T. -JAIPUR-I VERSUS SAND DUNES CONSTRUCTION PVT LTD 2018 (7) TMI 1383 - CESTAT NEW DELHI , whereby while taking note of the precedent decision of the Tribunal in the case of Kumar Beheray Rathi vs. CCE, Pune 2013 (12) TMI-269-CESTAT Mumbai, it was held that the security deposits collected by the Builder for providing maintenance to immovable property services would not be taxable under the category of Management Maintenance or Repairs Services . Prime/Preferential Location Charges (PLC) - Appellant submits that the PLC charges collected by the Appellant from it's customers is not a consideration for any individual service rendered by the Appellant to it's customers - HELD THAT - Although the Appellant may have prepared a price list showing preferential location charges, car parking charges etc. separately, but it is evident from the buyer-agreements (sample buyer agreement produced at the time of hearing), that the Appellant have charged the negotiated sales price per sq. ft. and in addition have charged IFMS and EDC/IDC per sq. ft. basis. In addition, there is power back up charges in some of the cases. Evidently, we find that Revenue have calculated preferential location charges, IFMS charges, EDC/IDC, power back up charges based on the price list - service tax is not payable on such hypothetical calculation, there being no actual consideration towards these, which is an admitted fact - service tax levied in this manner based on the price list is wrong, when there is no actual receipt of consideration under these heads. There are no reason to take a different view. Accordingly demand on the said account is set aside, alongwith setting aside of penalty - Appeal filed by the Appellant is allowed.

Summary

Issues:
1. Service tax liability on Interest Free Maintenance Security (IFMS) charges.
2. Service tax liability on Prime/Preferential Location Charges (PLC).

Analysis:

1. Service tax liability on IFMS charges:
The Appellant, a provider of Residential Complex Service, received a Show Cause Notice for IFMS and PLC charges for the period 2010-11 to 2014-15. The Order-In-Original confirmed service tax on IFMS and PLC charges. The Tribunal noted that the issue of IFMS had been consistently decided and the charges were towards security deposit, not for services. The Tribunal cited precedent decisions to support that security deposits for maintenance services are not taxable. The Tribunal emphasized that the amount was refundable upon agreement termination, hence not liable for service tax.

2. Service tax liability on PLC charges:
The Commissioner upheld that PLC charges were a separate taxable service by the Appellant. The Appellant argued that PLC charges were bundled with construction services and not for individual services. They claimed abatement under Notification No 26/2012-ST. The Tribunal agreed with the Appellant, stating that PLC charges were part of construction services. They noted that the Appellant charged based on negotiated sales prices, not separately for PLC. As there was no actual consideration for PLC charges, the Tribunal set aside the demand and penalty, allowing the appeal.

In conclusion, the Tribunal ruled in favor of the Appellant, setting aside the demand and penalty on both IFMS and PLC charges based on the nature of the charges and lack of actual consideration for PLC. The judgment provided detailed analysis and cited relevant legal provisions and precedent decisions to support the decision.