Taxability depends on the law at the time of service; pure-agent reimbursements, deposits, and penal charges were not taxable.

CESTAT Kolkata held that taxability must be tested by the law in force when the service was rendered, so later exemption conditions could not be applied to an earlier taxable event; the demand on simultaneous availment of abatement and CENVAT credit was set aside. Reimbursements for STP zone repair and maintenance incurred on a pure-agent basis were excluded from taxable value and the demand failed. Collections for club facilities were treated as refundable deposits, not consideration for club or association service. Guarding charges recovered for delayed possession were penal in character, not security agency service consideration. Because the dispute was interpretative and bona fide, extended limitation and penalties were also rejected.

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Issues: (i) Whether the demand relating to simultaneous availment of abatement and CENVAT credit on input services was sustainable; (ii) whether reimbursement of repair and maintenance expenses for the STP zone was taxable as service value; (iii) whether amounts collected for club facilities were chargeable to service tax under club or association service; (iv) whether guarding charges for delayed possession were taxable as security agency service; and (v) whether the extended period of limitation and penalties were invocable.

Issue (i): Whether the demand relating to simultaneous availment of abatement and CENVAT credit on input services was sustainable.

Analysis: The construction service was rendered and completed before Notification No. 1/2006-ST came into force. During the relevant period, Notification No. 18/2005-ST governed the transaction and restricted credit only on inputs and capital goods, not on input services. The subsequent receipt of payment during a later financial year did not alter the applicable exemption regime for the service already rendered. The demand had, therefore, been wrongly confirmed by applying the later notification to an earlier taxable event.

Conclusion: The demand was not sustainable and was set aside in favour of the assessee.

Issue (ii): Whether reimbursement of repair and maintenance expenses for the STP zone was taxable as service value.

Analysis: The assessee arranged maintenance only because the allottees had not yet formed the body corporate that was to manage the STP zone. The expenses were incurred on behalf of the allottees and reimbursed on actual basis. The assessee neither intended to supply maintenance service on its own account nor retained any amount as consideration. The reimbursements were, therefore, in the nature of pure-agent expenditure and outside taxable value.

Conclusion: The demand was not sustainable and was set aside in favour of the assessee.

Issue (iii): Whether amounts collected for club facilities were chargeable to service tax under club or association service.

Analysis: The collections were treated as refundable deposits for construction and eventual handing over of the club facilities to the association or owners. The receipts did not represent consideration for any taxable service rendered by the assessee. In substance, the money was held as a deposit and not as payment for club or association service.

Conclusion: The demand was not sustainable and was set aside in favour of the assessee.

Issue (iv): Whether guarding charges for delayed possession were taxable as security agency service.

Analysis: The levy arose from compensation for failure to take possession within the stipulated time under the general terms and conditions. The assessee was not engaged in rendering security services, nor did it provide security personnel or any service relating to the security of property. The amount recovered was penal in character and not consideration for any security service.

Conclusion: The demand was not sustainable and was set aside in favour of the assessee.

Issue (v): Whether the extended period of limitation and penalties were invocable.

Analysis: The dispute turned on interpretation of exemption and valuation provisions, and the assessee had acted under a bona fide belief regarding taxability. In such circumstances, suppression could not be inferred and the extended limitation period was unavailable. Once the demands were unsustainable on merits and limitation also failed, the penalties could not survive.

Conclusion: The extended period and the penalties were set aside in favour of the assessee.

Final Conclusion: The Tribunal substantially granted relief by setting aside the principal demands, excluding no further liability on the admitted credit issue beyond the amounts already paid, and removing the penalties.

Ratio Decidendi: Taxability and exemption must be determined by the law applicable when the service is rendered, and reimbursements incurred merely as a pure agent do not form part of the taxable value; where the dispute is interpretative and bona fide, the extended limitation period and penalties are not attracted.

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