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TMI Blog2018 (2) TMI 1056X X X X Extracts X X X X X X X X Extracts X X X X ..... ESTAT held that the assessee before us could not be called upon to pay service tax on amounts which are collected as maintenance charges for upkeep of the apartment or premises. The CESTAT further held that the issue is settled in favour of the assessee and against the Revenue by its prior orders. 4. To appreciate the correctness of this legal conclusion and finding that even otherwise the appeals involve substantial questions of law, we proceed to admit these appeals on the following substantial questions of law: "(a) Whether the CESTAT was right in holding that the assessee was not providing Management, Maintenance or Repair Service by collecting amount from prospective flat buyers, for maintaining the building, in the guise of deposits which is not returnable? Whether the CESTAT has erred in holding that assessee is providing statutory service and has rendered definition provided under Section 65(105)(zzg) of Finance Act as null and void by accepting that he is not providing Management, Maintenance or repair service by maintaining the building and collecting amount for that or not? (b) Whether the CESTAT was right in setting aside the interest and penalty on the assessee?" ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,59,633/- leaving a short-payment of Rs. 2,22,454/- which is due to non-revision of the Service Tax Returns for the period April, 2011 to September, 2011. 9. The assessee provided an explanation in reply to this Show Cause Notice and as far as the subject of the present appeal is concerned, the assessee stated it is following the project completion method for accounting of income and the said amount was received against the Flat bookings before 1-7-2010 and therefore that amount was not taxable. As regards the amount of Rs. 99,08,640/- , charged and collected towards the maintenance costs from the clients who had booked the Flats after 1-7-2010, the assessee has not paid the service tax on the said amount because it was not aware whether that amount is liable for service tax. However, the assessee assured that the service tax liability of Rs. 10,20,590/- at full rate @ 10.30% along with applicable interest will be paid within three days. 10. The assessee had also disputed the liability insofar as the amount collected towards the booking of Flats from the clients. A statement was given of admission of the tax liability and the disputed sum. The Bank account was freezed and that is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Ltd. 2015-TIOL-2135CESTAT-Mum, held that service tax is not leviable on such amounts which are collected as maintenance charges for up keep of the apartment's premises. Accordingly, the CESTAT set aside that portion of the order which confirmed the demand along with interest and penalty." Thus, that portion of the Order-in-Original which confirmed the demand under this head along with interest and penalty, was set aside. 13. The Revenue has brought this appeal only in relation to the finding of the Tribunal and its ultimate conclusion that the assessee was not providing management, maintenance or repair services by collecting the amount from prospective Flat buyers, for maintaining the building in the guise of deposit which is not refundable. The Revenue says that the CESTAT erred in holding that the assessee is providing statutory service and the definition provided by Section 65(105)(zzg) of the Finance Act would not be applicable or attracted. In short, the assessee is not providing management, maintenance or repair services for maintaining the building and collecting the amount for that purpose. 14. Ms Cardozo would submit that this conclusion of the Tribunal is ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3 ("MOFA" for short). The assessee is a promoter within the meaning of this law. The Tribunal, on appreciation and appraisal of all the factual materials and in the backdrop of the obligations and duties, particularly mentioned in Sections 5 and 6 of the MOFA, correctly concluded that service tax is not leviable on such amounts which are collected as maintenance charges for the upkeep of the apartment or premises. The Tribunal committed no error in following Kumar Behary Rathi (supra). Both would, therefore, submit that the substantial questions of law need to be answered in favour of the assessee and against the Revenue. 17. For a proper appreciation of the rival contentions, we must first consider the factual allegations. We have summarised the factual allegations and what has been argued is that amenities were provided and maintenance was done from July, 2010 to March, 2012. On this count, a sum was charged and collected. That was categorised as maintenance cost from the clients who had booked Flats after 1-7-2010. The service tax was not paid on the same. The Adjudicating Authority came to the conclusion that this was a taxable service. Pertinently, the Adjudicating Authority ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anagement of properties, whether immovable or not, maintenance or repair of properties, whether immovable or not, or maintenance or repair including reconditioning on restoration, or servicing of any goods, excluding a motor vehicle. Then, there is an explanation which clears doubts and it declares that for the purposes of this clause, namely, 65 (64), goods includes computer software and properties include information technology software. The words "Taxable service" is defined in Section 65, Clause (105) to mean any service provided or to be provided to any person by any person in relation to management, maintenance or repair. 20. Since the MOFA has been referred by the counsel appearing before us, we would be required to make a reference to its provisions. The MOFA is an Act to regulate in the State of Maharashtra, the promotion of the construction of the sale and management, and the transfer of Flats on ownership basis. It was brought to the notice of the State Government that, consequent on the acute shortage of housing in several areas of the State of Maharashtra, sundry abuses, malpractices and difficulties relating to the promotion of construction, and the sale and manageme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it is enacted to regulate in the State of Maharashtra, the promotion of construction, sale, management and transfer of flats taken on ownership basis. 18. Section 2 of this Act (MOFA, 1963) is the Definitions Section. The words "Competent Authority" have been defined in Section 2(a) to mean a Competent Authority appointed under Section 5A of the Act. The word "Flat" is defined in section 2(a1) to mean a separate and self-contained set of premises used or intended to be used for residence, or office, showroom or shop or godown or for carrying on any industry or business and includes a garage, the premises forming part of a building and includes an apartment. The word "Apartment" has also been defined in Section 2(f) and would have the same meaning assigned to it in the MAO Act. The word "Registrar" has been defined in Section 2(d) to mean the Registrar as defined in the Maharashtra Cooperative Societies Act, 1960 or as the case may be in the Companies Act, 1956. The word "prescribed" is also defined in section 2(b) to mean prescribed by the rules made under MOFA, 1963. 19. Thereafter, Section 3 deals with the general liabilities of the Promoter. Section 4 deals with the obligati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r a company have taken flats, the promoter shall within the prescribed period submit an application to the Registrar for registration of the organisation of persons who take the flats as a cooperative society or, as the case may be, as a company; and the promoter shall join, in respect of the flats which have not been taken, in such application for membership of a cooperative society or as the case may be of a company. Nothing in this section shall affect the right of the promoter to dispose of the remaining flats in accordance with the provisions of this Act. (2) If any property consisting of building or buildings is constructed or to be constructed and the apartment takers propose to submit the apartments to the provisions of the Maharashtra Apartment Ownership Act, 1970, by executing Declaration and Deed of Apartments as required by that Act, then the promoter shall inform the Registrar, as defined in the Maharashtra Cooperative Societies Act, 1960 accordingly; and in such cases it shall not be lawful to form any cooperative society or company and each apartment owner shall be entitled to the exclusive ownership and possession of his apartment as provided in the first mention ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 24. By Section 5, it is stated that the promoter shall maintain a separate account in any Bank of the sums taken by him, from persons intending to take or who have taken, Flats, as advance or deposit, including any sums so taken towards the share capital for the formation of a cooperative society, or towards the outgoings, including ground rent if any, municipal or other local taxes, taxes on income, water charges, electricity charges, revenue assessment, interest on any mortgage or other encumbrances if any, and he shall hold the said moneys for the purposes for which they were given and shall disburse the moneys for those purposes and shall on demand in writing by a Competent Authority, make full and true disclosure of all transactions in respect of that account. By Section 6, it is clear that there is a responsibility for payment of outgoings till property is transferred. A promoter shall while he is in possession, and where he collects from persons who have taken or are to take over Flats, sums for the payment of outgoings even thereafter, pay all outgoings until he transfers the property to the persons taking over the Flats, or to the organisation of any such persons and the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clear from the provisions of law that it is not necessary that any or all the Flats should be ready or the building itself should be completely constructed and fit for occupation. The Flats in the buildings under construction can also be sold and the agreement for sale with individual Flat takers can provide for appropriate stipulation with regard to payment of money and consideration. This is agreed to be paid and collected slabwise. The Flat taker, therefore, knows at what stage he has to pay the amount and if he has to pay the amount in toto by the stage, namely, construction of a particular floor, located on which the Flat agreed to be sold to him is constructed, then, full payment would be made by that time. However, the obligation that is carved out by the statute goes beyond this contractual stipulation between the promoter/developer and the Flat purchaser. The law enacts a regulatory mechanism so that there is enough safeguard and protection for such Flat takers and unit purchasers which would ensure to them a title in the property. The title in the building has to be conveyed together with the rights to the land beneath it. The land beneath and appurtenant to the building ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d not exclude construction or building activity and therefore provided that the definition under that {Section 2(o)} means service of any description which is made available to potential users and includes the provision of facilities in connection with banking, financing, insurance, transport, processing, supply of electrical or other energy, board or loading or both, and by amendment housing construction is also included in the inclusionary part of the definition. We are not concerned with the definition of service under the Consumer Protection Act, 1986 and that would not control the provisions of the Finance Act, 1994, for the simple reason that interest and rights of a consumer are protected and safeguarded by law so as to enable him to complain about deficiency and defect in the service by approaching the Forum under the Consumer Protection Act, 1986 and that law has a distinct objective and purpose. As noted by the Hon'ble Supreme Court in the case of Lucknow Development Authority Vs. M.K. Gupta, reported in AIR 1994 SC 787, the building and construction activity is a service covered by the expression Service as defined in the Consumer Protection Act, 1986 but that law is ..... X X X X Extracts X X X X X X X X Extracts X X X X
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