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TMI Blog2024 (3) TMI 130X X X X Extracts X X X X X X X X Extracts X X X X ..... n unassembled form and not, as claimed by the appellants and already approved by the Department, in the shape of cut-to-size sheets meant for bottoms and bodies of metal cans. Though the demand can be set aside on this preliminary observation, it is found that demand is also not sustainable on the merits. Interest Free maintenance Security (IFMS) - HELD THAT:- It was held in the case of M/S KDP INFRASTRUCTURE PVT. LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE SERVICE TAX, GHAZIABAD [ 2018 (11) TMI 984 - CESTAT ALLAHABAD] 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 . Lease Rent and Capital Replacement Fund - HELD THAT:- From the perusal of the extract of the audit report it is evident that in case of Lease Rent, appellant had taken categorical stand at the time of audit itself that this amount was to be transferred to NOIDA authority as such. This stand of the appellant has not been countered either in the show cause notice, order in original or order in appeal. This amount was not towards any service provided by the appellant. However w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Finance Act,1994. 2. I order to recover interest at appropriate rates as applicable from time to time on the amount of Rs. 41,37,775/- under Section 75 of the Finance Act, 1994 from M/s Supertech Realtors (P) Ltd., B-28 29, Sector-58, Noida, Dist. Gautam Buddha Nagar (UP). 3. I impose a penalty of Rs. 41,37,775/- on M/s Supertech Realtors (P) Ltd., B-28 29, Sector-58, Noida, Distt. Gautam Buddha Nagar (UP) under Section 78 of the Finance Act,1994. 4. The dues adjudged as above should be paid forthwith. 2.1 Appellant are providing service classifiable under taxable category of Construction of Residential Complex, Commercial Construction Service, Consultant Engineer, Architect Service, Maintenance Repair Service, Membership of Club Service, Rent of immovable property Service Preferential Location Charges Service falling under Section 65 of the Finance Act, 1994 2.2 Consequent upon the audit of books of account, it was observed by the revenue that appellant has short paid the service tax during 2011-12. 2.3 A Show Cause Notice dated 19.10.2016 was issued to appellant. 2.4 Assistant Commissioner vide his order in original referred in para 1 adjudicated the show cause notice. 2. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt of taxable value of the service provided or to be provided by them under the category of taxable service Management, Maintenance and Repair service within the meaning of section 65(105) (zzg) of the Finance Act, 1994 and the appellant were liable to pay Service Tax on such amount under the provisions of the Finance Act,1994 read with the Service Tax Rules,1994. I find that in the grounds of appeal, the appellant have mainly contended that the amount received from the buyers of the flat was basically security amount which has been received and it was advance money received against maintenance services to be provided to the flat owners. It has further been contended that for levy of service tax, there has to be service or activity and consideration in terms of Section 65B (44) of the Finance Act, 1994 and without service or activity and consideration , service tax cannot be demanded as it does not fulfill the ingredient of service. In their case there is no consideration for service and is basically returnable deposit in the nature of security and hence do not represent consideration and when there is no consideration for service; no service tax can be levied. I observe that in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t component as forming part of the colorable device (part of consideration for service). It has been clarified in CBEC Guide (Negative List) that if the deposit is in the nature of a colorable device wherein the interest on the deposit substitutes for the consideration for service provided or the interest earned has a perceptible impact on the consideration charged for service then such interest would form part of gross amount received for the service. Also security deposit should not be in lieu of advance payment for the service I observe that the amount taken by the appellant from the buyers of the flats on account of Interest Free Maintenance Security (IFMS) is clearly in lieu of advance payment for the maintenance service in respect of the residential complex. This is not philanthropy but part of consideration for the service to be provided by the appellant. Service tax, therefore, has rightly been demanded and confirmed against the appellant, once it is established that the deposits were sought and taken for maintenance. I, therefore, hold that, in the instant case, the appellant have rendered the service viz Management, Maintenance and Repair scrvice ; within the meaning of s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed areas and facilities relating thereto; and (iv) in case of a building located in a complex or an industrial estate, all common areas and facilities relating thereto, within such complex or estate, but does not include(a) vacant land solely used for agriculture, aquaculture, farming, forestry, animal husbandry, mining purposes; (b) vacant land, whether or not having facilities clearly incidental to the use of such vacant land; (c) land used for educational, sports, circus, entertainment and parking purposes; and (d) building used solely for residential purposes and buildings used for the purposes of accommodation, including hotels, hostels, boarding houses, holiday accommodation, tents, camping facilities. Explanation.- For the purpose of this sub-clause, an immovable property partly for use in the course or furtherance of business or commerce and partly for residential or any other purposes shall be deemed to be immovable property for use in the course or furtherance of business or commerce- Renting of immovable property includes renting, letting, leasing, licensing or other similar arrangements of immovable property for use in the course or furtherance of business or commerce b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Finance Act, Act, 1994 was in relation to Renting of immovable property service. Since the services related to Renting of immovable property service are in the nature of service provided by the builder to buyer over and above the construction service, these were brought within the purview -of new category of service under sub-clause 22 of clause 105 of Section 65 of the Finance Act, 1994 Further I find that in the case of Suresh Kumar Bansal Vs. UOI 2016 (43) S.T.R. 3(Del.) the Hon ble High Court of Delhi, Construction - Preferential location charges - Section 65(105)(zzzzu) of Finance Act, 1994 - Preferential location charges levied by builder - Attributable to preferences of customer in relation to directions in which flat is constructed; floor on which it is located; views from unit; accessibility to other facilities provide in complex, etc. - These are charged by builder based on preferences of customers and are additional value that customer derives from acquiring particular unit - They embody value of satisfaction derived by customer from certain additional attributes of property developed - They do not relate solely to location of land - They cannot be traced directly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut of such premises is approved by an authority under any law for the time being in force, but does not include a complex which is constructed by the person construction directly engaging any other person for designing or planning of such complex is intended personal use as of the residence layout, by such and person. As per Section 65(30a) of the Finance Act, 1994 Construction of Complex means: (a) construction of a new residential complex or a part thereof; or (b) completion and finishing services in relation to residential complex such as glazing, plastering, painting, floor and wall tiling, wall covering and wall papering, wood and metal joinery and carpentry, fencing and railing, construction of swimming pools, acoustic applications or fittings and other similar services; or (c) repair, alteration, renovation or restoration of, or similar services in relation to, residential complex; From the above it is very clear in the statute abatement is permissible only if there is transfer of material during the provision of service and I observe that services remained taxable in the cases when these are specifically provided under Construction of Residential Complex Service . I find th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f material available on records, submissions of the appellant and in pursuance of the aforementioned findings, the impugned order is upheld and the appeal is rejected being devoid of al merit Tax. 4.3 Original authority has in order in original recorded the following findings: 4.1 I find that the basic allegations against the party are as under a) the party did not pay service tax amounting to Rs. 5,39,546/- against the ITMS charges, which was liable to be paid them under the provisions of Finance Act, 1994. b) the party did not pay service tax amounting to Rs. 27,88,916/- against lease rent charges, which was liable to be paid them under the provisions of Finance Act, 1994. c) the party did not pay service tax amounting to Rs. 8,09,313/- against Capital replacement find, which was liable to be paid them under the provisions of Finance Act, 1994. 4.2 On going through the records of the case and party s submission regarding first allegation, I find that IMS charge is an advance taken by the party tor incurring the same towards maintenance of the flats. Hence, submission made by the party that service tax is not leviable on such IFMS charge does not appear to be tenable. 4.3 Regardin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iary Service and service tax was applicable was payable @10.3 % (including cesses). The service tax contended to have paid by the party for Rs 2,02.328/- under the Construction of Residential - Complex service cannot be taken as deposit against the capital replacement fund . Therefore, I hold that the amount of Rs. 8,09,313/- is recoverable from the party under Section 73(2) of the Finance Act,1994 along with interest at applicable rates under Section 75 of the Finance Act, 1994 4.5 I further find that fact of nonpayment of service tax in respect of above said three categories of service by the party was under the knowledge of the party with intent to evade the payment of service tax, the party is liable for penalty under Section 78 of the Finance Act, 1994. 4.4 On perusal of the show cause notice we find that the show cause notice we observe that show cause notice has been issued only on the basis of audit objection without any further investigation or enquiry. Even the figure of amount received and the demand of service tax has been made on the basis of figures indicated in the audit objection. Revenue has not even cared to look and verify the correctness of these figures by exam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 68(1) of the Finance Act 1994. Thus, it became apparent that for the said period, service tax amounting to Rs. 27,88,916/- ( including cess) is liable to be demanded and recovered from the said party along with accrued amount of interest, under the provisions of Section 73(1) Section 75 of the Finance Act, 1994 2.3 As per Para No. 6 of the said IAR, during the year 2011-12, similarly, the party had received an amount of Rs.78,57,408/- as Capital replacement fund from the customer but did not pay service tax on the same. As such this is liable to service tax at the rate prescribed under erstwhile Section 66 in the manner prescribed under Rule 6 of Service Tax Rules, 1994 read with Section 68(1) of the Finance Act 1994. As such this is liable to service tax at the rate prescribed under erstwhile Section 66 in the manner prescribed under Rule 6 of Service Tax Rules, 1994 read with Section 68(1) of the Finance Act 1994. Thus, it became apparent that for the said perlod, service tax amounting to Rs. 27,88,916/- (including cess) is liable to be demanded and recovered from the said party along with accrued amount of interest, under the provisions of Section 73(1) Section 75 of the Finan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ax Rules, 1994, as discussed supra, with the sole intention to evade payment of Service Tax, they also rendered themselves liable for penal action under the provisions of Section 78 of the Finance Act, 1994. 6. Accordingly, the said M/s Supertech Realtors (P) Ltd., B-28 29, Sector-58, Noida are hereby required to show cause to the Assistant Commissioner, Service Tax Division-lll, Noida as to why:- (i) Service Tax amounting to Rs. 41,37,775/- (Rs. Forty one Lakhs Thirty Seven Thousand Seven Hundred amp; Seventy five anly), (including Ed.Cess amp; SHEd. Cess) being Service Tax not paid by M/s Supertech Realtors (P) Ltd., B-28 amp; 29, Sector-58, Noida, should not be demanded and recovered from them under proviso to Section 73(1) of the Finance Act, 1994 (ii) Interest at appropriate rate on the demanded amount Rs. 41,37,775/- should not be recovered from M/s Supertech Realtors (P) Ltd., B-28 amp; 29, Sector-58, Noida under Section 75 of the said Act. (iii) Penalty should not be imposed upon M/s Supertech Realtors (P) Ltd., B-28 amp; 29, Sector-58, Noida under the provisions of Section 78 of the Finance Act, 1994 as discussed in the preceding para 7. The said M/s Supertech Realtors (P) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er v. Union of India and Others - 1981 E.L.T. 389, and Indian Aluminium Company Ltd. and another v. Union of India and Others -1983 E.L.T. 349, in which it was held that show cause notices issued on the basis of advice or directive by the Central Government of the Central Board of Excise and Customs, were illegal and void, as directives could not be issued to subordinate authorities exercising quasi-judicial functions. In this particular case, there have been no such advice or directives by higher authorities. It would have been perfectly in order if the local Central Excise officers were to undertake further inquiries on the receipt of audit objection; and after further examination and necessary investigation, if they were to come to the conclusion on the basis of evidence collected that the goods in question were liable to duty or further duty, they would be well within their jurisdiction to issue a show cause notice to the assessee, explaining to him the grounds and the evidence on the basis of which the Excise has come to the tentative view that the assessee has not discharged his liability to duty. However, this, in the present matters, the Department has failed to do. The sho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the alternative plea of liability to exemption under Notification No. 94/70, dated 1st May, 1970. 19 . The Orders-in-Appeal are set aside and appeals allowed. 4.6 In case of Kirloskar Pneumatic Co. Ltd. [2011 (22) S.T.R. 121 (Tri. - Mumbai)] following has been held: 3. Firstly, the show-cause notice was issued purely on the basis of audit objections without the necessary investigation which must precede action under Section 11A of the Act. In this connection, I may usefully refer to two decisions cited by the Counsel, viz., (i) Swastik Tin Works v. Collector - 1986 (25) E.L.T. 798 (Tri.); and (ii) Ram Steel Rolling and Forging Mills v. Commissioner - 2006 (204) E.L.T. 87 (Tri.-Mumbai). In the former case, one of the reasons stated by the Tribunal s Special Bench for holding the demand of duty to be unsustainable, was that the demand had been raised on the basis of audit objections and without investigations. In the latter case also, it was found that the demand of duty in question had been raised on the basis of audit objection and without gathering evidence by way of investigation. The internal auditors of the department are not investigators. They are rather fact-finding expert ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tands decided by precedent decisions of the Tribunal. Reference can be made to the Tribunal decision in the case of CCE ST, Jaipur v. 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 v. CCE, Pune - 2013 (12) TMI-269-CESTAT Mumbai = 2014 (34) S.T.R. 139 (Tri.-Mum.). 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 . In fact, we note that Commissioner (Appeals) for the subsequent period in the appellant s own case has dropped the demand vide its Order-in-Appeal No. GZB/SVTAX/OOO/APPL-MRT/10/2017-18, dated 19-4-2018. Inasmuch as the issue stands decided, we find no reason to take a different view. Accordingly demand on the said count is set aside, alongwith setting aside of penalty. Lease Rent and Capital Replacement Fund: The audit report on the basis of which the show cause notice has been issued records as follows: Non payment of Service Tax on Lease Rent: during the scrutiny of record it was also obser ..... X X X X Extracts X X X X X X X X Extracts X X X X
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