TaxTMI 
TaxTMI 
TaxTMI 
2025 (12) TMI 321
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.... Nagar is upheld, being legal and proper." 2.1 Appellant is registered with the Service Tax Department vide Registration No.AADAT2257QSD001 for providing taxable services as defined under Section 66D (44) read with Section 66B of the Finance Act, 1994. 2.2 On the basis of information received from Income Tax Department for the Financial Year 2015-16, it was observed that appellant has suppressed the value of services provided as indicated in table below:- Financial Year Gross Receipts from Services as per ITR / TDS Gross Value of Services as declared in the ST-3 Returns Difference between Value of Services as per ITR / TDS and the Value of Services declared in the Relevant ST-3 returns (a) (b) (c) (d) 2015-16 81,13,138 67,30,589 13,82,549 2.3 A show cause notice dated 20.04.2021 was issued to the appellant, asking them to show cause as to why- "(i) Service Tax amounting to Rs.200470/-(including S.B.Cess) for the financial year 2015-16 should not be demanded and recovered from them by invoking extended period of limitation under Proviso to Section 73(1) of the Finance Act, 1994 read with Section 174 of the CGST Act, 2017. ....
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.... appeal and during the course of argument. 4.2 Order-in-Original records as follows:- "12.1 I have perused ST-3 returns filed by the party for the F.Y 2015-16 and observed that they declared taxable value in the category of "maintenance or repair services. I have gone through the balance sheet for the FY 2015-16 also and observe that the party is an association of members of residential apartments who has been providing club & membership services by way of extending services, facilities, or advantages to its members for a monetary consideration. They have booked income in their books of account in the following manner- SL. No. Income head Amount in rupees 1. Maintenance receipts 6389644 2. Electricity charges Recovery 1493450 3. Water charges receipts 230044 4. Sub Total 8113138 5. Delayed payment charges 528533 6. interest on saving account 41145 7. interest on FDRS 1772434 8. Liability written back 64868 9. Sub Total 2406980 10. Grand Total (4+9) 10520118 Since, in the SCN dated 20.04.2021, the amount under reference is Rs.81,13,138/-only, hence, I have consider....
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....hat the party collected Rs. 11,52,505/- from their members towards the electricity charges consumed for lighting of common area of the residential complex and Rs.2,30,044/- towards water supply charges. I observe that the prime motive of a Apartment Owners Association is to facilitate, provide service and extend advantage to its members which includes maintenance of the assets of the residential complex, cleanliness of the complex, security, lighting of common area of the complex, supply of water from single source etc. In these times, some of the residential complexes are having common connection of electricity from the electricity supplying company and subsequently electricity is supplied to each apartment through separate lines and a separate electricity meter is installed in each apartment and bill is charged on actual consumption basis. The electricity charges, so charged by the electricity supply company, are paid by the Association of Apartment Owners by way of collecting the proportionate charges from their members and thus this activity is not covered under service tax being reimbursement of electricity charges. I observe that no such issue has been raised in SCN and for t....
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....n, - (a) ["consideration" includes - (i) any amount that is payable for the taxable services provided or to be provided; (ii) any reimbursable expenditure or cost incurred by the service provider and charged, in the course of providing or agreeing to provide a taxable service, except in such circumstances, and subject to such conditions, as may be prescribed, (iii) any amount retained by the lottery distributor or selling agent from gross sale amount of lottery ticket in addition to the fee or commission, if any, or, as the case may be, the discount received, that is to say, the difference in the face value of lottery ticket and the price at which the distributor or selling agent gets such ticket." [(b) * * * * * * * * *] (c) "gross amount charged includes payment by cheque, credit card, deduction from account and any form of payment by issue of credit notes or debit notes and [book adjustment, and any amount credited or debited, as the case may be, to any account, whether called "Suspense account or by any other name, in the books of account of a person liable to pay service tax, where the transaction of taxable service is with....
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....se of providing taxable service; (b) neither intends to hold nor holds any title to the goods or services so procured or provided as pure agent of the recipient of service, (c) does not use such goods or services so prosure an (d) receives only the actual amount incurred to procure such goods or services Explanation2-For the removal of doubts it is clarified that the value of the taxable service is the total amount of consideration consisting of all components of the taxable service and it is immaterial that the details of individual components of the total consideration is indicated separately in the invoice. 6. Cases in which the commission, costs, etc., will be included or excluded.- (1) Subject to the provisions of section 67, the value of the taxable services shall include,- (i) the commission or brokerage charged by a broker on the sale or purchase of securities including the commission or brokerage paid by the stock-broker to any sub- broker, (ii) the adjustments made by the telegraph authority from any deposits made by the subscriber at the time of application for telephone connection or pager or facsim....
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....by the Government, not directly affecting the value of service". 12.2 From the above provisions, I understand that as per the provisions of section 67(1), service tax shall be chargeable on the gross value of taxable services. Further, as per rule 5(11, any expenditure or costs, incurred by the service provider in the course of providing taxable service, all such expenditure or costs shall be treated as consideration for the taxable service provided or to be provided and shall be included in the value for the purpose of charging service tax on the said service. Further, as per rule 5(2), the expenditure or cost incurred by the service provider as a pure agent of the recipient of service, shall be excluded from the value of the taxable service if all the specified conditions are satisfied. Rule 6, deals with specific situations. 12.3 I observe that the party has not produced any documentary evidence as to how they fall under the category pure agent with respect to the collection of considerations received from their members on account of common area electricity charges and water supply charges on behalf of NPCL and the U.P State Government. Secondly, the party do n....
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....heir members and thus includible in the gross value of taxable services under section 67 of the Act read with Rule 5(1) of the Service Tax (Determination of Value) Rules, 2006 for the purpose of calculation of service tax. 12. In general water received by the RWA / society is used for multiple purpose l.e. for swimming pools, gardens and for the use in the apartments. The water so supplied is usually stored in the common underground water tank. Such societies generally consist of many residential towers with various floors and further each such tower consists of many residential apartments which have a common underground and overhead water storage tank. These underground and overhead storage water tanks are being maintained by the RWA/ society. Similarly, Lift installed in the society, lights of common area, club and other common facilities cannot run without electricity. The common area electricity and water are integral parts and the services of maintenance and facilities cannot be executed without electricity and/or water. Thus, it may be concluded that the services provided by a RWA cannot be performed without the supply of electricity and water, to the infrastructure,....
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.... five thousand rupees per month per member contribution to the RWA for sourcing of goods or services from third person for the common use of its members. If per month per member contribution of any or some members of a RWA exceeds five thousand rupees, the contribution of such members whose per month contribution exceeds five thousand rupees would be ineligible for the exemption under the sald notification. Service tax would then be leviable on the of monthly aggregate amount contribution of such members. 2. .......... .......... 3. If a RWA provides certain services such as payment of electricity or water bill issued by third person, in the name of its members, acting as a pure agent of its members, is exclusion from value of taxable service available for the purposes of exemptions provided in Notification 33/2012-ST or 25/2012ST? In Rule 5(2) of the Service Tax (Determination of Value) Rules, 2006, it is provided that expenditure or costs incurred by a service provider as a pure agent of the recipient of service shall be excluded from the value of taxable service, subject to the conditions specified in the Rule. For illustration, where the paymen....
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....he name of appellant and are directly paid by them these charges are in the nature of the expense incurred by the appellant for providing the common area management services. Appellant has not acted as agent, to collect the charges from the person against whom the bill was raised and thus in view of the clarification issued by the Board and referred in the impugned order, these charges could not have been excluded from the gross receipts while determining the taxable value of the services provided. 4.5 Appellant has taken one water connection and was distributing the water to various residents and flat owners. They were collecting the charges towards the water from the residents and flat owner on pro-rata basis depending on the consumption of the water by the flat owner/ resident and made the payment of same amount to the supplier of the water without any commission for rendering these charges. Definitely in respect of collection and payment of the water charges the appellant acted as pure agent and the amounts collected by them could not have been included in the taxable value of services provided. This is what has been clarified by the Board in the circular dated 10.01.2014 re....
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....re us and hence, decided to address it to the concerned authority, the Development Commissioner, thus, in a sense offering its activities to assessment. The Development Commissioner answered in favour of the appellant and in its reply, even quoted a letter by the Ministry of Commerce in favour of an exemption the appellant was seeking, which anybody would have found satisfactory. Only on receiving this satisfactory reply did the appellant decide to claim exemption. Even if one were to accept the argument that the Development Commissioner was perhaps not the most suitable repository of the answers to the queries that the appellant laboured under, it does not take away from the bona fide conduct of the appellant. It still reflects the fact that the appellant made efforts in pursuit of adherence to the law rather than its breach. 24. Further, we are not convinced with the finding of the Tribunal which placed the onus of providing evidence in support of bona fide conduct, by observing that "the appellants had not brought anything on record" to prove their claim of bona fide conduct, on the appellant. It is a cardinal postulate of law that the burden of proving any form of mala....