Promoter collections for common maintenance are not taxable as independent repair services when held on a cost-to-cost basis; GTA penalty waived.

Amounts collected by a promoter for statutory outgoings and common maintenance, kept in separate accounts and applied on a cost-to-cost basis before transfer of the property, were not taxable as an independent Management, Maintenance or Repair service because the promoter acted only as a trustee or pure agent. The service tax demand, interest, and penalties on that count were set aside. For Goods Transport Agency service, the tax liability and interest were upheld because the assessee had substantially accepted the demand and paid it with interest before the notice, but penalty was waived under Section 80 of the Finance Act, 1994.

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Issues: (i) Whether service tax was payable on the amount collected towards Management, Maintenance or Repair services for common facilities and premises; (ii) Whether the service tax demand under Goods Transport Agency service and the accompanying penalties were sustainable.

Issue (i): Whether service tax was payable on the amount collected towards Management, Maintenance or Repair services for common facilities and premises.

Analysis: The amounts were collected by the builders during the period before conveyance and formation of the cooperative society, and were shown to be used for statutory outgoings and common maintenance. The relevant obligations under Sections 5 and 6 of the Maharashtra Ownership Flats (Regulation of the Promotion of Construction, Sale, Management and Transfer) Act, 1963 required the promoter to maintain separate accounts and to use the sums for the intended outgoings until transfer of the property. The collections were on a cost-to-cost basis, with the appellants acting only as trustees or pure agents and not as providers of an independent maintenance or repair service.

Conclusion: The demand of service tax under Management, Maintenance or Repair services was unsustainable and was set aside, along with the interest and penalties on that count.

Issue (ii): Whether the service tax demand under Goods Transport Agency service and the accompanying penalties were sustainable.

Analysis: The appellants did not seriously contest the tax liability under Goods Transport Agency service and had already discharged the amount with interest before issuance of the show-cause notice, subject only to verification of calculation. The Tribunal therefore upheld the tax liability and interest, but held that penalty was not warranted in the facts and invoked Section 80 of the Finance Act, 1994 to grant relief from penalty.

Conclusion: The service tax liability and interest under Goods Transport Agency service were upheld, but the penalties were set aside.

Final Conclusion: The appeals succeeded on the management and maintenance issue, while the Goods Transport Agency demand survived with penalty relief, resulting in a partial allowance of the appeals.

Ratio Decidendi: Amounts collected by a promoter for statutory outgoings and common maintenance, held in a separate account and applied on a cost-to-cost basis before transfer of the property, are not taxable as an independent Management, Maintenance or Repair service when the promoter acts only as trustee or pure agent; penalty may also be waived where the statutory conditions justify relief.

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