Promoter collections for statutory outgoings are not taxable maintenance service when received on a cost-to-cost basis.

Amounts collected by a promoter from prospective flat buyers to meet statutory outgoings and maintenance expenses on a cost-to-cost basis were treated as held for a limited statutory purpose, not as consideration for taxable Management, Maintenance or Repair Service; the related service tax demand was therefore deleted. The promoter's role was characterised as that of a trustee or pure agent until formation of the cooperative society, so no service element arose on those receipts. By contrast, the service tax demand under GTA service was sustained with interest, and the penalties were set aside because the principal maintenance demand failed and the GTA liability had been discharged with interest.

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Issues: (i) Whether service tax was payable on amounts collected from prospective flat buyers under GTA service; (ii) Whether amounts collected from prospective flat buyers towards maintenance of units were liable to service tax under Management, Maintenance or Repair Service; (iii) Whether penalty was sustainable.

Issue (i): Whether service tax was payable on amounts collected from prospective flat buyers under GTA service.

Analysis: The demand under GTA service was not seriously disputed and the amount involved was negligible. The liability was therefore examined on the basis of the admitted position.

Conclusion: The GTA service tax demand was upheld against the assessee, along with interest.

Issue (ii): Whether amounts collected from prospective flat buyers towards maintenance of units were liable to service tax under Management, Maintenance or Repair Service.

Analysis: The taxable entry under Section 65(64) of the Finance Act, 1994 covers maintenance or management of immovable property, but the amounts collected by the promoter were only to meet statutory outgoings and maintenance expenses until the cooperative society was formed. Under Sections 5 and 6 of the Maharashtra Ownership Flats Act, 1963, the promoter was obliged to maintain separate accounts and pay outgoings on behalf of flat purchasers. The receipts were on a cost-to-cost basis and the promoter acted only as trustee or pure agent, not as a service provider rendering taxable maintenance service.

Conclusion: No service tax was payable under Management, Maintenance or Repair Service on the amounts collected from prospective flat buyers.

Issue (iii): Whether penalty was sustainable.

Analysis: Once the principal demand under Management, Maintenance or Repair Service failed, no penalty could survive on that portion. For the GTA demand, the liability was negligible and had been discharged with interest, leaving no basis for penalty.

Conclusion: The penalties were set aside.

Final Conclusion: The appeal succeeded in part: the demand under Management, Maintenance or Repair Service and the penalties were deleted, while the GTA service tax demand and interest were sustained.

Ratio Decidendi: Amounts collected by a promoter from flat purchasers, when held and applied only to meet statutory outgoings and maintenance expenses under a statutory obligation and on a cost-to-cost basis, are not consideration for taxable maintenance or repair service.

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