Refundable security deposits and remitted development charges were excluded from service tax valuation as non-consideration.

Refundable maintenance security collected under a builder agreement is treated as a deposit, not consideration for maintenance services, because it is refundable on termination and intended only to secure performance and cover default in maintenance charges; on that basis, it is outside the taxable value. External development charges collected from buyers and remitted to the statutory development authority are likewise excluded from service tax, as they are not retained by the builder as service consideration and fall within the exclusion reflected in the governing circular. The impugned demand was set aside and the appeal allowed with consequential relief.

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Issues: (i) whether the amount collected as Interest Free Maintenance Security formed part of the taxable value liable to service tax under Management, Maintenance or Repair Services; (ii) whether External Development Charges collected from buyers and remitted to the development authority were liable to service tax under Special Services Provided by Builder.

Issue (i): whether the amount collected as Interest Free Maintenance Security formed part of the taxable value liable to service tax under Management, Maintenance or Repair Services.

Analysis: The amount was recoverable as a security deposit under the agreement and was refundable on termination of the arrangement. Its character remained that of a deposit meant to secure maintenance obligations and cover default in monthly maintenance charges, not consideration for a taxable service. The Tribunal also relied on its earlier view that such security deposits collected by a builder for maintenance of immovable property do not attract tax under the said category.

Conclusion: The demand on this count was unsustainable and was set aside in favour of the assessee.

Issue (ii): whether External Development Charges collected from buyers and remitted to the development authority were liable to service tax under Special Services Provided by Builder.

Analysis: The Board's circular clarified that development charges paid to State Government or local bodies are excluded from the taxable value. The charges here were collected only for remittance to the development authority constituted under the Uttar Pradesh Urban Planning and Development Act, 1973, and were not retained as consideration for any taxable service provided by the appellant.

Conclusion: The demand on this count was also unsustainable and was set aside in favour of the assessee.

Final Conclusion: The impugned order was set aside and the appeal was allowed with consequential relief.

Ratio Decidendi: Amounts collected as refundable security deposits, and charges collected solely for remittance to a governmental or statutory development body in terms of the governing circular, do not constitute taxable consideration for service tax.

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