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TMI Blog2022 (4) TMI 705X X X X Extracts X X X X X X X X Extracts X X X X ..... inancial Services and Business Auxiliary Services. During the course of audit it was observed that the Appellant was charging annual maintenance charges from their clients holding demat account with the appellant and were paying service tax on the said charges. However it was noticed that the Appellant was not paying Service tax in respect of certain category of clients which had opted for "Deposit Schemes". The Appellant had introduced the four schemes for their customer/demat account holders and collected Rs. 10,000/- , Rs. 4000/-, Rs. 3000/- , Rs. 2500/- and Rs. 1250/- as interest free deposit. Initially the Appellant deducted the amount of Rs. 1000, Rs. 400, Rs. 300 , Rs. 250 and Rs. 125 towards Annual maintenance contract (AMC) fees and paid the service tax. However, for the subsequent periods they stopped paying any service tax in respect of their clients to whom they have undertook the Deposit Scheme. After the Audit, a show cause notices was issued to appellant demanding Service Tax and proposing penalty under Section 76, 77 and 78 of the Act. The matter came to be adjudicated vide respective above Orders-in-Original wherein the lower adjudicating authority confirmed the Se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hown in the balance sheet as other liabilities. Thus, the amounts in question were only deposit which were maintained for security purpose and were refundable on closer of the account by the client. 2.3 The Commissioner (Appeals) has committed an error in confirming the demand by holding that deposit was 'consideration' and the depositors were rewarded by way waiver of AMC. 10% of the deposit was charged as AMC and the Service tax was paid on the said amount at the very outset. 10% of the deposit was more than the annual maintenance charges collected annually. This fact was completely overlooked by the Commissioner (Appeals). Moreover, the Commissioner (Appeals) has relied upon the calculation of Service tax given by the Adjudicating Authority in the Order on Original dated 29.03.2013. However, the calculation given in the OIO is also wrong because admittedly, the appellant has paid service tax on AMC charges which were Rs. 1000, Rs. 400, Rs. 300 and Rs. 250 respectively. Thus, if the Service tax liability was discharged by the Appellant on the AMC charges actually recovered, there could not be a further demand of Service tax on the same amount. This fact was also ignored by the C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... emat account holders under the Scheme and in lieu of the same Appellant has not collected AMC charges. However, we find that the said "Interest Free Deposit' did not represent value of any taxable service. The said deposit amount was kept with the Appellant as security deposit to adjust the amount in case of any default in making payment by the client. The said deposit amount also refundable to client. We find that in the present matter Appellant also produced Certificate issued by the Chartered Accountant who certify that Appellant have not used the amount collected by them as 'Interest Free Security Deposit' from client for any financial operations or for earning any interest and shown the said amount in Balance Sheet as Current Liability. The amount collected by the Appellant from the clients is in fact an interest free refundable deposit and is not towards any advance for a service. It is, therefore, not taxable. 4.1 We further find that Section 67 provides that taxable value is the consideration whether in monetary or monetary form. Therefore, if any benefit accrues to either party which is not in the nature of consideration agreed upon by the parties, the same is not liable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provider nor can it be regarded as a consideration for the service provided by the service provider. In fact, it has no nexus whatsoever with the taxable services for which value is sought to be determined." The aforesaid view was reiterated by the Supreme Court in Union of India v. Intercontinental Consultants and Technocrats [2018 (10) G.S.T.L. 401 (S.C.)] and it was observed that since service tax is with reference to the value of service, as a necessary corollary, it is the value of the services which are actually rendered, the value whereof is to be ascertained for the purpose of calculating the service tax payable thereupon. 4.3 We also find that issue of addition of notional interest on refundable security deposit in the value of service has already been settled by the Tribunal in the following Judgments. (i) In the case of Kalani Infrastructure Pvt. Ltd. - 2018 (8) TMI 247 the Tribunal also took the same view and held as under:- "6. The case of the department is that in addition to the service tax payable on rent, the liability for the tax also extends to the notional interest accuring on the lump sum deposit received by the Appellant from the lessee. We find that suc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 'ble Apex Court in the case of Moriroku UT India (P) Ltd. (supra), there is no scope for adding any notional interest to the value of taxable service rendered. Even in the excise law, under Rule 6 of the Valuation Rules, unless the department shows that the deposit taken has influenced the sale price, notional interest cannot be automatically included in the sale price for the purpose of levy. In the absence of a provision in law providing for a notional addition to the value/price charged, the question of adding notional interest on the security deposit as a consideration received for the services rendered cannot be sustained and we hold accordingly." (iii) In M/s. ATS Township Private Limited v. Commissioner, Central GST, Noida [2019 (11) TMI 297 (CESTAT-Allahabad)], a Division Bench of this Tribunal observed as follows : "3. The issue relates to 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 servicetax separately. We note that the said amount collected by the appellant from the flat owners is towards the sec ..... X X X X Extracts X X X X X X X X Extracts X X X X
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