2024 (7) TMI 1042 - AT - Service Tax

Tribunal Rules Advance Maintenance Charges Not Subject to Service Tax; No Extended Limitation Period Justified.

M/s Friends Land Developers Versus Commissioner of Central Excise & Service Tax, Ghaziabad

The Tribunal ruled in favor of the Appellant, setting aside the impugned order. It determined that the charges collected under 'Interest Free Maintenance ... Valuation - inclusion of charges from the Customers under the category of Interest Free Maintenance Security [IFMS] and Annual Maintenance Charges [AMC] - Revenue’s contention is that the said collected amount would fall under the category of “Management, Maintenance and Repair Services” and would be liable to service tax separately - demand of service tax of advance maintenance charges. Inclusion of charges from the Customers under the category of Interest Free Maintenance Security [IFMS] and Annual Maintenance Charges [AMC] - HELD THAT:- The amount is refundable in case of termination of the ownership agreement and if no such termination has taken place till date, the amount would not be refunded. As long as the provisions for refund of the said amount in the agreement itself is there, it has to be considered that the said amount is refundable and was towards security deposits and was not for the purpose of providing any services, so as to levy tax on the same. Demand of service tax of advance maintenance charges - HELD THAT:- Once it is an admitted fact that Paramount Facilities Services Pvt. Ltd. has provided services, no tax would be demanded from the Appellant. This is also a fact on record that the Department had already demanded service tax from Paramount Facilities Services Pvt. Ltd. under SCN dated 10.10.2014 for the same work during the same period and on same basis. It is also submitted that for the period 2010-11 to 2011-12 the Department had already issued another SCN demanding tax on parking charges which has been finally settled in favour of the Appellant on merits as well as on limitation. Extended period of Limitation - HELD THAT:- It is found that demand stands raised and confirmed by invoking longer period of limitation inasmuch as a SCN was issued on 15.10.2014 for the period July, 2010 to June, 2012. Apart from the fact that the Lower Authorities have alleged that the Appellant did not file the returns and pay the Service Tax, there is otherwise no positive evidence adduced by the Revenue so as to justifiably invoke the longer period of limitation. The Service Tax law, during the relevant period, was still at the nascent stage and was not clear. The Board’s Circular referred to by the Learned Advocate is to the effect that all peripheral activities provided by the builders would not be taxable under the category of ‘Residential Complex Construction Services’. There is also no positive evidence indicating any mala fide on part of the Appellant. Accordingly, the order set aside on limitation and the appeal allowed on the said ground. The impugned order cannot be sustained and is accordingly set aside - Appeal allowed. Issues:1. Inclusion of charges collected by the Appellant under 'Interest Free Maintenance Security [IFMS]' and 'Annual Maintenance Charges [AMC]' as part of taxable services under 'Maintenance, Management & Repair Services.'2. Demand of service tax on advance maintenance charges and imposition of penalty based on extended period of limitation.Analysis:Issue 1:The first issue in the appeal pertains to the treatment of charges collected by the Appellant under IFMS and AMC as taxable services under 'Maintenance, Management & Repair Services.' The Revenue contended that these charges should be subject to service tax separately. However, the Tribunal noted that the amount collected by the Appellant was towards security for building maintenance and to cover potential defaults by flat owners. The Tribunal emphasized that as per the agreement, the amount was refundable within a specified period after termination. The Adjudicating Authority doubted the genuineness of the refund provision due to lack of evidence of refunds. The Tribunal disagreed with this reasoning, stating that as long as the agreement provided for refunds, the amount should be considered refundable and not subject to service tax. The Tribunal also cited precedent decisions supporting this view, ultimately setting aside the demand and penalty.Issue 2:The second issue concerns the demand of service tax on advance maintenance charges and imposition of penalty based on an extended period of limitation. The Appellant argued that they did not provide the services directly; instead, another entity provided the services while the Appellant collected charges from flat owners and passed them on. The Appellant highlighted that the Department had already demanded service tax from the service provider for the same period. The Tribunal observed that the demand was made after a considerable period from the audit, invoking an extended limitation period. However, the Tribunal found no positive evidence to justify the extended period, considering the evolving nature of Service Tax law during that time. Additionally, there was no indication of malafide on the Appellant's part. Consequently, the Tribunal set aside the order on limitation and allowed the appeal on this ground.In conclusion, the Tribunal found in favor of the Appellant on both issues, setting aside the impugned order and allowing the appeal with consequential relief.