Crescendo Associates vs Commissioner Of Service Tax, Mumbai

(Arising out Order-in-Original No. 25/BR-25/TH-I/2011 dated 21.06.2011 passed by the Commissioner of Service tax, Mumbai II)

Appeal No. ST/647/11 - Mum

(Arising out Order-in-Original No. 39/BR-39/TH-I/2011 dated 24.08.2011 passed by the Commissioner of Service tax, Mumbai II)

For approval and signature: Honble Mr. M.V. Ravindran, Member (Judicial) Honble Mr. C.J. Mathew, Member (Technical)

1. Whether Press Reporters may be allowed to see No the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?

2. Whether it should be released under Rule 27 of the Yes CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?

3. Whether Their Lordships wish to see the fair copy Yes of the Order?

4. Whether Order is to be circulated to the Departmental Yes authorities?

Crescendo Associates Hiranandani Builders Appellant

Vs.

Commissioner of Service tax, Mumbai Respondent

Appearance:

Shri S.S. Gupta, CA for the appellant Shri S.R. Nair, EO (AR) for the respondent

CORAM:

Honble Mr. M.V. Ravindran, Member (Judicial) Honble Mr. C.J. Mathew, Member (Technical)

Date of hearing : 15-09-2015 Date of decision : 15-09-2015

O R D E R No:..

Per: M.V. Ravindran:

These two appeals are directed against Order-in-Original No. 25/BR-25/TH-I/2011 dated 21.06.2011 and Order-in-Original No. 39/BR-39/TH-I/2011 dated 24.08.2011.

2. Since the issue involved in both the cases is the same, they are being disposed of by a common order.

3. Heard both sides and perused the record.

4. The issue involved in these appeals is regarding the service tax liability on the appellants under the category of Goods Transport Agency and Management, Maintenance or Repair services.

5. It is undisputed that the appellants are builders and on construction of the residential premises handover the same to the individual flat owners. During the interregnum period till the flats are handed over to the individual flat owners and the cooperative society is formed, by the flat owners, the appellant collected an amount from the flat owners which is titled as towards Management, Maintenance or Repair of the premises. It is the case of the revenue that the amount so collected by the appellant would be taxable under the category of Management, Maintenance or Repair services. In the case of Goods Transport Agency, we find that the demand of the service tax is on the appellant by reverse charge mechanism.

6. Ld. CA would draw our attention to the facts of the case. He would submit that identical issue of taxability of Management, Maintenance or Repair services was decided by this bench in the case of Kumar Beheray Rathi 2013-TIOL-1806-CESTAT-MUM and submits that this view was followed by the bench again in Goel Nitron Constructions 2015-TIOL-1787-CESTAT-MUM he produces a copy of the said judgment. As regards the service tax liability under the Goods Transport Agency service, he submits that they are not contesting the issue and they have already paid the entire amount along with interest before the issuance of show-cause notice. He would submit that penalties imposed on this count be set aside.

7. Ld. Departmental Representative submits that the appellant had collected an additional amount from the owners towards Management, Maintenance or Repair of the common facilities of roads, gardening etc. which definitely would fall under the category of Management, Maintenance or Repair services. It is his submission that the appellant is handing over the balance amount collected in case of Management, Maintenance or Repair services to the cooperative society as and when the flat owners proposes a society but in the case of maintenance of roads, gardens, club house the said amount is not transferred to the society hence that needs to be taxed. He would submit that in respect of Goods Transport Agency service both the appellants have not paid the correct amount confirmed as per the show-cause notice.

8. On consideration of the submission made by both sides, we find that since both the appellants are not contesting the service tax liability under the Goods Transport Agency service seriously, we uphold the service tax liability and interest thereof.

9. Ld. CA submits that they have paid the entire demand before the issuance of show-cause notice subject to some calculation discrepancy which has been considered by them while paying the demand before the issuance of show-cause notice. This fact needs to be verified by the lower authorities. Upholding the demand of the service tax liability and the interest thereof in the case of Goods Transport Agency service, we direct the lower authorities, only to check the calculation made by the appellant and accept the amount paid by them before the issuance of show-cause notice. As regards the penalties imposed in the issue of Goods Transport Agency we find that the issue being agitated before the higher judicial forum there is no need to visit the appellant with the penalty. Invoking the provisions of section 80 of the Finance Act, 1994 we set aside the penalties imposed by the lower authorities.

10. As regards the Management, Maintenance or Repair services, we find that it is undisputed that the said amounts are collected by the appellant as a builder for the common maintenance of building as well as the entire premises of the apartment. We find that it is undisputed that the amounts which are collected are used for Management, Maintenance of the common facilities. Ld. CA was correct in bringing to our notice that the issue is now settled by this bench in Kumar Beheray Rathi (supra). We reproduce the ratio :-

6. At the outset, we note that Circular and case laws quoted are not relevant to the present issue as services and situations context discussed are totally different. We find that as per the agreement submitted by the appellants, certain amounts were collected from the buyers of the flats as one time deposit on account of the following services:-

(a) Towards maintenance and repairs of common areas and facilities;

(b) Wages of watchmen, sweepers etc.

(c) Insurance

(d) Revenue assessment

(e) All other taxes, levies, charges and cess.

(f) Electricity and water charges and deposits in respect of common electrical and water pumps and other installations.

(g) Expenses of and incidental to the management and maintenance of the said Housing societies.

6.1 From the various activities we find that the appellants are required to make payment relating to Revenue assessment, insurance, all other taxes, levies, electricity and water charges and deposits in respect of common electrical and water pumps and other installations. In addition they are paying for the maintenance and repair of common areas and facilities, wages or watchmen, sweepers etc. and some expenses relating to maintenance of the housing blocks.

6.2 We have also gone through the relevant provisions of the Maharashtra Ownership Flats (Regulation of the Promotion of construction, sale, management and transfer) Act, 1963. We find that the Section 5 and 6 provides as under:-

SECTION 05: PROMOTER TO MAINTAIN SEPARATE ACCOUNT OF SUMS TAKEN AS ADVANCE OR DEPOSIT AND TO BE TRUSTEE THEREFOR; AND DISBURSE THEM FOR PURPOSES FOR WHICH GIVEN The promoter shall maintain a separate account in any bank of 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 co-operative society or a company, 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 an officer appointed SECTION 06: 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 over flats or are to take over flats sums for the payment of outgoings ever thereafter, pay all outgoings (including ground rent, municipal or other local taxes, taxes on income, water charges, electricity charges, revenue assessment, interest on any mortgage or other encumbrances, if any), until he transfers the property to the persons taking over the flats, or to the organization of any such persons. Where any promoter fails to pay all or any of the outgoings collected by him from the persons who have taken over flats or are to take over flats, before transferring the property to the persons taking over the flats or to the organization of any such persons, the promoter shall continue to be liable, even after the transfer of the property, to pay such outgoings and penal charges (if any) to the authority or person to whom they are payable and to be responsible for any legal proceedings which may be taken therefor by such authority or person.

From the above sections, it is clear that under the Act the appellants are obliged to maintain a separate account in any bank of the deposits taken and use the same amount towards the outgoings. Further section 6 puts responsibility for payment of outgoings on the appellants till the property is transferred.

6.3 We also note that at the relevant time the provisions of Finance Act are as under:-

Maintenance or repair means any service provided by 

(a) Any person under a contract or an agreement; or

(b) A manufacturer or any person authorized by him in relation to 

(i) Maintenance or repair including reconditioning or restoration, or servicing of any goods or equipment, excluding motor vehicle; or

(ii) Maintenance or management of immovable property.

6.4 We also note that the appellants are not in the business of maintenance or repair service or management of immovable property. The appellants cannot be held as provider of maintenance or repair service as they are only paying on behalf of various buyers of flats to various authorities (Municipal Corporation, Revenue authorities etc.) and various service providers (such as security agency, cleaning service providers etc.) and they are not charging anything on their own. The payments are made cost on cost basis and the same is debited from the deposit account. They act only as trustee or as pure agent. When the co-operative society is formed even the deposit account is shifted to Flat Owner's Co-operative Society. We also note that this is a statutory obligation on the appellants in terms of Maharashtra Ownership Flats (Regulation of the Promotion of Construction, sale, management and transfer) Act, 1963.

11. In view of the foregoing ratio of the judgment of this Tribunal on similar issue we hold that the service tax liability as confirmed against the appellant under Management, Maintenance or Repair services is unsustainable. As regards the point raised by the ld. AR, that amount collected for maintenance of Garden, roads and club house facilities are for the members of the society as and when formed; secondly the entire premises is transferred to society of members, on execution of conveyance deed. The impugned order to that extent is set aside and the penalties imposed o the appellant as also the interest on this count is unsustainable.

12. Both the appeals are disposed of as indicated above.

(Operative part pronounced in Court)

(C.J. Mathew) (M.V. Ravindran) Member (Technical) Member (Judicial)

//SR

8 ST/540/11 ST/647/11