Statutory levy versus service consideration: compulsory maintenance charges were held outside service tax.

Maintenance charges collected under the governing regulations were treated as a statutory levy, not as consideration for a taxable service. The Tribunal held that the charges were compulsory and imposed under the regulatory framework until maintenance of roads, water supply, drainage, street lights and allied services was taken over by the local authority. Because the levy arose from statute rather than a voluntary contractual arrangement, the service tax demand could not be sustained. The resulting effect was that the maintenance charges fell outside the scope of service tax, in favour of the assessee.

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Issues: Whether maintenance charges collected by the Gujarat Industrial Development Corporation under the governing regulations were liable to service tax as consideration for a taxable service, or whether they constituted a statutory levy outside the ambit of service tax.

Analysis: The liability turned on the character of the charge. The governing regulation provided that till a local authority took over maintenance of roads, water supply, drainage, street lights and allied services, the service charges determined from time to time had to be paid by the hirer to the Corporation. The Tribunal contrasted this with the reasoning in the Supreme Court decision dealing with the 2006 exemption circular, where exemption was denied because the relevant activity was discretionary and not a mandatory statutory obligation. On the present statutory framework, the charge was found to be compulsory and imposed under the statute, not a voluntary consideration for a contractual service. Once the charge was held to be a statutory levy, the service tax demand could not stand.

Conclusion: The maintenance charges were held to be a statutory levy and not liable to service tax, in favour of the assessee.

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