Custom, Excise & Service Tax Tribunal
The King Reserve Residents Welfare ... vs Noida Ii on 9 October, 2025
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
ALLAHABAD
REGIONAL BENCH - COURT NO.II
Service Tax Appeal No.70293 of 2025
(Arising out of Order-in-Appeal No.NOI-EXCUS-002-APP-62-23-24 dated
10/05/2023 passed by Commissioner (Appeals) Central Goods & Services
Tax, Noida)
M/s The Kings Reserve Residents Welfare Association,
.....Appellant
(Plot No.GH-01A, Sector-Gama-11,
Greater Noida-201308)
VERSUS
Commissioner of Central Excise &
Service Tax, Noida ....Respondent
(Lucknow) APPEARANCE:
Shri Sanjay Kumar Jha, Advocate & Shri Akhand Pratap Tripathi, Advocate for the Appellant Smt Chitra Srivastava, Authorised Representative for the Respondent CORAM: HON'BLE MR. SANJIV SRIVASTAVA, MEMBER (TECHNICAL) FINAL ORDER NO.70763/2025 DATE OF HEARING : 09 October, 2025 DATE OF DECISION : 09 October, 2025 SANJIV SRIVASTAVA:
This appeal is directed against Order-in-Appeal No.NOI- EXCUS-002-APP-62-23-24 dated 10/05/2023 passed by Commissioner (Appeals) Central Goods & Services Tax, Noida. By the impugned order following has been held:-
"ORDER
17. In the light of above discussion and findings, the appeal bearing No. 383/ST/NOIDA/APPL/GBN/2022-23 dated 21.02.2023 filed by M/s The Kings Reserve Residents Welfare Association, Plot No.GH-01A, Sector-
Service Tax Appeal No.70293 of 2025 2 Gamma-II, Greater Noida, Gautam Buddh Nagar (U.P.)- 201308 fails to succeed and the Order-In-Original No. 56 AC/DIV-1/2022-23 dated 14.12.2022 passed by the Assistant Commissioner, CGST Division-1, Gautam Buddh 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 Gross Gross Value Difference between Value Service Tax Year Receipts of Services as of Services as per ITR / payable on from declared in TDS and the Value of such Services as the ST-3 Services declared in the differential per ITR / Returns Relevant ST-3 returns value as per TDS (d)
(a) (b) (c) (d) (e) 2015-16 81,13,138 67,30,589 13,82,549 2,00,470 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.
(ii) Interest at applicable rate on the above amount of Service Tax should not be recovered from them under Section 75 of the Finance Act, 1994 read with Section 174 of CGST Act, 2017.
(iii) Penalty should not be imposed upon them under Section 78 of the Finance Act, 1994 read with Section 174 of CGST Act, 2017 for the reasons explained above."
2.4 The said show cause notice was adjudicated as per the Order-in-Original dated 14.12.2022 by holding as follows:-
"ORDER Service Tax Appeal No.70293 of 2025 3 I. I confirm the demand of Rs. 1,75,083/- (inclusive of cess) (Rupees One Lakh Seventy-Five Thousand Eighty-
Three Only) towards service tax not paid during the fiscal 2015-16 and order for its recovery from M/s Kings Resrve Residents Welfare Association, Plot No.GH-01A, Sector-Gama-II, Greater Noida, Gautam Buddh Nagar, under Section 73(1) of the Finance Act, 1994 along with the interest payable on the confirmed amount of tax in terms of section 75 of the Finance Act. 1994. 1 drop the remaining demand of service tax of Rs.25,387/-. II. I impose a penalty of 1,75,083/- (Rupees One Lakh Seventy-Five Thousand Eighty-Three Only upon M/s Kings Resrve Residents Welfare Association under Section 78 of the Finance Act, 1994 and order for its recovery from them;"
2.5 Aggrieved appellant have filed appeal before Commissioner (Appeals) which has been disposed of as per the impugned order referred in para 1 above.
2.6 Aggrieved appellant have filed this appeal. 3.1 I have heard Shri Sanjay Kumar Jha learned Counsel appearing for the appellant and Smt Chitra Srivastava learned Authorised Representative appearing for the revenue.
3.2 Arguing for the appellant learned Counsel submits that the difference between ST-3 return filed and the ITR return is on the account of the charges calculate and paid towards the electricity charges to Rs.11,52,505/-, for lighting of the common areas and also for the water supply charges amounting to Rs.2,30,044/-, the amount so collected has been paid to the concern authorities. As such the amounts could not have been tallied to the value of taxable amount provided by them. On the remaining amount they have discharged the service tax liability. 3.3 Learned Authorised Representative reiterates the findings recorded in the orders of the lower authorities.
4.1 I have considered the impugned orders along with the submissions made in appeal and during the course of argument.
Service Tax Appeal No.70293 of 2025 4 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 considered the same while analyzing the instant issue. I observe that in the "Income & Expenditure Statement for the FY 2015-16, the party has divided total income into two categories such as Direct Income (Rs 81,13,138:00) and Indirect Income (Rs 24,06,980.00) I further observe that as per ledger 'Monthly Electricity Collection' the party booked income of Rs 3,40,945/ under the head of DG Electricity and remaining amount of Rs.11,52,505/ in the head of NPCL Electricity". Further, as per ledger "Water Charges Recovery for the FY 2015-16, the party received Rs.2,30,044/ in the month of October 2015 from their members. I observe that inclusion of the value of DG Service Tax Appeal No.70293 of 2025 5 electricity charged by them from their members has not been in dispute as the party itself declared the same (Rs.3,40,945.00) and maintenance receipt of Rs 63,89,644/- aggregating to Rs.67,30,589/ out of total income of Rs.81,13,138/-in their ST-3 returns and applicable service tax was paid by them and this fact has also been confirmed in the SCN dated 20.04.2022. Therefore, the differential amount is attributed to NPCL electricity (Rs. 11,52,505.00) and water charges receipts (Rs.2,30,044.00) aggregating to Rs. 13,82,549/-I observe that the party has submitted sample copies of electricity bills issued by M/s Noida Power Company Limited to M/s Kings Township Pvt. Limited C/o Sandeep Khanna, GH- 01A, Gama-2, Greater Noida and "Common Area Electricity Bills" issued by them to their members for the F.Y 2015-
16. I have seen all the bills issued by them for recovery of electricity charges and for illustration, I am quoting some the bills viz bill no. 912 dated 10.04.2015, 1023 dated 10.07.2015, 2037 dated 10.10.2015 and 2147 dated 15.01.2016. On perusal of the said bills, I observe that the party had been collecting common area electricity charges on quarterly basis from each apartment owner on two counts ie. NPCL supply charges and DG supply charges. I further observe that the party had charged service tax component on the DG supply charges separately on the invoice from their members but regarding NPCL electricity supply charges they had not charged any service tax. Further, I observe that on the bills issued for the quarter ending September 2015, they charged water supply charges om their members but they did not charge service tax component separately on the invoices In view of the above, I find that 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 Service Tax Appeal No.70293 of 2025 6 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 the clarity of the issue is being illustrated. I further observe that the electricity consumed for lighting of common area and supply of water are not metered on consumption basis rather these are intrinsic part of services provided by them to their members and thus includible in the gross value of taxable services under section 67 of the Finance Act, 1994 for the purpose of calculation of service tax. Regarding the claim of the party that they collected common area electricity charges and water supply charges on behalf of the respective electricity company/ water supply authority, I observe that as to whether the value of these charges are to be included in the gross value of services for the purpose of calculation of service tax liability, the relevant provisions are governed under section 67 of the Finance Act, 1994 read-with rule 5 of Service Tax (Determination of Value) Rules, 2006 and the same are reproduced below-
A. SECTION [67. Valuation of taxable services for charging service tax. Subject to the provisions of Service Tax Appeal No.70293 of 2025 7 this Chapter, where service tax is chargeable on any taxable service with reference to its value, then such value shall,-
(i) in a case where the provision of service is for a consideration in money, be the gross amount charged by the service provider for such service provided or to be provided by him;
(ii) in a case where the provision of service is for a consideration not wholly or partly consisting of money, be such amount in money as, with the addition of service tax charged, is equivalent to the consideration;
(ⅲ) in a case where the provision of service is for a consideration which is not ascertainable, be the amount as may be determined in the prescribed manner.
(2) Where the gross amount charged by a service provider, for the service provided or to be provided is inclusive of service tax payable, the value of such taxable service shall be such amount as, with the addition of tax payable, is equal to the gross amount charged.
(3) The gross amount charged for the taxable service shall include any amount received towards the taxable service before, during or after provision of such service.
(4) Subject to the provisions of sub-sections (1), (2) and (3), the value shall be determined in such manner as may be prescribed.
Explanation-For the purposes of this section, -
(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, Service Tax Appeal No.70293 of 2025 8 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 any associated enterprise.]] [5. Inclusion in or exclusion from value of certain expenditure or costs. -
(1) Where any expenditure or costs are 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.
Explanation For the removal of doubts, it is hereby clarified that for the value of the telecommunication service shall be the gross amount paid by the person to whom telecommunication service is actually provided.
(2) Subject to the provisions of sub-rule (1), the expenditure or costs incurred by the service provider as a pure agent of the recipient of service, shall be Service Tax Appeal No.70293 of 2025 9 excluded from the value of the taxable service if all the following conditions are satisfied, namely:
(i) the service provider acts as a pure agent of the recipient of service when he makes payment to third party for the goods or services procured;
(ii) the recipient of service receives and uses the goods or services so procured by the service provider in his capacity as pure agent of the recipient of service,
(iii) the recipient of service is liable to make payment to the third party;
(iv) the recipient of service authorises the service provider to make payment on his behalf
(v) the recipient of service knows that the goods and services for which payment has been made by the service provider shall be provided by the third party;
(vi) the payment made by the service provider on behalf of the recipient of service has been separately indicated in the invoice issued by the service provider to the recipient of service;
(vii) the service provider recovers from the recipient of service only such amount as has been paid by him to the third party; and
(viii) the goods or services procured by the service provider from the third party as a pure agent of the recipient of service are in addition to the services he provides on his own account Explanation 1.-For the purposes of sub-rule (2), "pure agent" means a person who-
(a) enters into a contractual agreement with the recipient of service to act as his pure agent to incur expenditure or costs in the course 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, Service Tax Appeal No.70293 of 2025 10
(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 facsimile or telegraph or telex or for leased circuit,
(iii) the amount of premium charged by the insurer from the policy holder;
(iv) the commission received by the air travel agent from the airline;
(v) the commission, for or any other sum received by an actuary, or intermediary or insurance intermediary or insurance agent from the insurer,
(vi) the reimbursement received by the authorised service station, from manufacturer for carrying out any service of any motor car, light motor vehicle or two wheeled motor vehicle manufactured by such manufacturer;
(vii) the commission or any amount received by the rail travel agent from the Railways or the customer, Service Tax Appeal No.70293 of 2025 11
(viii) the remuneration or commission, by whatever name called, paid to such agent by the client engaging such agent for the services provided by a clearing and forwarding agent to a client rendering services of clearing and forwarding operations in 1. any manner
(ix) the commission, fee or any other sum, by whatever name called, paid to such agent by the insurer appointing such agent in relation to insurance auxiliary services provided by an 2. insurance agent; and
(x) the amount realised as demurrage or by any other name whatever called or the provision of a service beyond the period originally contracted or in any other manner relatable to the provision of service.";
(2) Subject to the provisions contained in sub-rule (1), the value of any taxable service, as the case may be, does not include-
(i) initial deposit mode by the subscriber at the time of application for telephone connection or pager or facsimile (FAX) or telegraph or telex or for leased circuit,
(ii) the airfare collected by air travel agent in respect of service provided by him,
(iii) in the rail fare collected by rail travel agent in respect of service provided by him, and
(iv) interest on delayed payment of any consideration for the provision of services or sale of property, whether moveable or immoveable.
(v) the taxes levied by any Government on any passenger travelling by air, if shown separately on the ticket, or the invoice for such ticket, issued to the passenger.
(vi) accidental damages due to unforeseen actions not relatable to the provision of service, and (vi) Service Tax Appeal No.70293 of 2025 12 subsidies and grants disbursed 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 not fulfil any conditions provided under rule 5(2) of the said Rules for being a pure agent. Therefore, I find that the activities of providing common area lighting and water supply are intrinsic part of the services provided by the then to their members, hence, service tax would be chargeable on the gross value including common area electricity charges and water supply charges for the FY 2015-16 in terms of the provisions of section 67(1) of the Finance Act, 1994 read- with Rule 5(1) of the Valuation Rules." 4.3 Impugned order records as follows:-
"10. Brief of the case is that the appellant is a Resident Welfare Association (RWA) in the name and style of M/s The Kings Residents Welfare Association and was Service Tax Appeal No.70293 of 2025 13 registered with the department for providing taxable services of maintenance or repair, manpower recruitment/supply agency and works contract service. The department on the basis of third-party data received from the Income Tax Department noticed a difference between the receipts in ITR / TDS and corresponding value of services shown by the appellant in their service tax returns for the F.Y. 2015-16. The department demanded service tax on differential value along with applicable interest and penalty under the Act. The appellant pleaded that the said difference is on account of collection of electricity charges and water charges as per bill received from the U.P. State Government from parties (residents) and were paid to the respective State Government department. The supply of water and electricity is incidental to sale, lease or renting of a building, residential or commercial and sale of water and electricity is not a service but sale of goods and that service tax is not payable on the water and electricity charges.
11. The adjudicating authority, while confirming the demand against the appellant, has observed that the appellant is an association of members of residential apartments who has been providing club & membership services by way of extending services, facilities, or advantage to its members for a monetary consideration. The appellant had been collecting common area electricity charges and water supply charges from their members. He has further observed that electricity consumed for lighting of common area and supply of water are not metred on consumption basis rather these are intrinsic part of services provided by them to their 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.
Service Tax Appeal No.70293 of 2025 14
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, which is an integral part of the community. Therefore, common area electricity charges and water charges collected by the RWA have correctly been held as liable to service tax by the adjudicating authority.
13. I find that, the only exemption provided in respect of services by a RWA is under Sl. No. 28(c) of the exemption Notification 25/2012-ST dated 20.06.2012. As per Sl. No.28(c) of the said Notification, with effect from 01.07.2012, services by a RWA to its own members by way of reimbursement of charges or share of contribution up to five thousand rupees per month per member for sourcing of goods or services from a third person for the common use of its members are exempt from the whole of the service tax leviable under Section 66B of the Act.
14. I find that the instant issue of levy of service tax on services provided by a Resident Welfare Association (RWA) to its own members has already been clarified by the C.B.E.C. vide Circular No.175/1/2014-ST dated Service Tax Appeal No.70293 of 2025 15 10.01.2014. The sald Circular has been issued to clarify certain doubts raised regarding the scope of exemption extended to RWAs vide SI. No. 28(c) of the Notification No. 25/2012-ST dated 20.06.2012. For sake of the clarity, I would like to reproduce the doubts raised and their clarification provided related to instant case vide said circular dated 10.01.2014 as below:-
SI. Doubt Clarification
No.
1. (i) In a residential Exemption at Sl. No. 28(c) in
complex, monthly notification No. 25/2012-S.T. is
contribution collected provided specifically with
from members is used reference to service provided by the RWA for the by an unincorporated body or a purpose of making non-profit entity registered payments to the third under any law for the time parties, in respect of being in force such as RWAs, to commonly used services its own members.
or goods [Example: for However, a monetary ceiling providing security has been prescribed for this service for the exemption, calculated in the residential complex, form of five thousand rupees maintenance or upkeep per month per member of common area and contribution to the RWA for common facilities like sourcing of goods or services lift, water sump, health from third person for the and fitness centre, common use of its members. swimming pool, payment If per month per member of electricity Bill for the contribution of any or some common area and lift, members of a RWA exceeds etc.). Is service tax five thousand rupees, the leviable? contribution of such members
(ii) If the contribution of whose per month contribution a member/s of a RWA exceeds five thousand rupees exceeds exceeds five would be ineligible for the thousand rupees per exemption under the sald Service Tax Appeal No.70293 of 2025 16 month, now should the notification. Service tax would service tax liability on then be leviable on the of calculated? monthly aggregate amount contribution of such members.
2. .......... ..........
3. If a RWA provides In Rule 5(2) of the Service Tax certain services such as (Determination of Value) Rules, payment of electricity or 2006, it is provided that water bill issued by third expenditure or costs incurred person, in the name of by a service provider as a pure its members, acting as a agent of the recipient of service pure agent of its shall be excluded from the members, is exclusion value of taxable service, from value of taxable subject to the conditions service available for the specified in the Rule. purposes of exemptions For illustration, where the provided in Notification payment for an plectricity bill 33/2012-ST or 25/2012- raised by an electricity ST? transmission or distribution utility in the name of the owner of an apartment in respect of electricity consumed thereon, is collected and paid by the RWA to the utility, without charging any commission or a consideration by any other name, the RWA is acting as a pure agent and hence exclusion from the value of taxable service would be available.
However, in the case of electricity bills issued in the name of RWA, in respect of electricity consumed for common use of lifts, motor pumps for water supply, lights Service Tax Appeal No.70293 of 2025 17 in common area, etc., since there is no agent involved in these transactions, the exclusion from the value of taxable service would not be available.
15. From the above, it is crystal clear that the charges collected by the RWA towards common area electricity and water charges is a part of the consideration for supply of services to its members and hence is liable to service tax at the appropriate rates. I, therefore find no substance in the present appeal filed by the appellant.
16. Further, it is also fact on record that the appellant were regularly filing their ST-3 returns with the department however, they did not disclose the amount in question in their statutory returns. In the light of above narrated facts, I hold that demand of service tax of Rs.1,75,083/- is liable to be recovered along with interest u/s 73(1) and 75 respectively of the Finance Act, 1994. I also upheld the penalty of Rs.1,75,083/ under Section 78 of the Finance Act, 1994 as imposed by the adjudicating authority on the appellant."
4.4 I find that in the present case appellant had not collected charges from the members of its association for payment of electricity bills and the charges collected were for usage of the electricity in the common areas. The electricity supply company billed on account of usage of electricity in the common area in the name of appellant and the appellantin turn collected these charges from the residents on the basis of agreed formula on pro rata basis. Thus these electricity charges were billed in the name of appellant, collected by them and paid by them to the electricity supply company. As these charges are directly in raised in the 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 Service Tax Appeal No.70293 of 2025 18 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 referred in the impugned order. 4.6 I observe that appellant was filing ST-3 return and paying service tax on the services provided by deducting the amount collected towards electricity charges for common facility and water charges. In my view appellant entertained a bonafide belief that these amounts are to be excluded from gross receipt for determining the taxable value for payment of service tax. It is also not in dispute that from its services recipient appellant did not collect any service tax in respect of these amounts. In view of the bonafide belief entertained, I do not find any merits in invocation of extended period in making these demands.
4.7 Hon'ble Supreme Court in the case of M/s UNIWORTH TEXTILES LTD. 2013 (288) ELT 161 has held as follows:-
"21. The Revenue contended that of the three categories, the conduct of the appellant falls under the case of "willful misstatement" and pointed to the use of the word "misutilizing" in the following statement found in the order of the Commissioner of Customs, Raipur in furtherance of its claim :
Service Tax Appeal No.70293 of 2025 19 "The noticee procured 742.51 kl of furnace oil valued at Rs. 54,57,357/- without payment of customs duty by misutilizing the facility available to them under Notification No. 53/97-Cus., dated 3-6-1997"
22. We are not persuaded to agree that this observation by the Commissioner, unfounded on any material fact or evidence, points to a finding of collusion or suppression or misstatement. The use of the word "willful" introduces a mental element and hence, requires looking into the mind of the appellant by gauging its actions, which is an indication of one‟s state of mind. Black‟s Law Dictionary, Sixth Edition (pp 1599) defines "willful" in the following manner :-
"Willful. Proceeding from a conscious motion of the will; voluntary; knowingly; deliberate. Intending the result which actually comes to pass...
An act or omission is "willfully" done, if done voluntarily and intentionally and with the specific intent to do something the law forbids, or with the specific intent to fail to do something the law requires to be done..."
23. In the present case, from the evidence adduced by the appellant, one will draw an inference of bona fide conduct in favour of the appellant. The appellant laboured under the very doubt which forms the basis of the issue before 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 Service Tax Appeal No.70293 of 2025 20 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 fide lies on the shoulders of the one alleging it. This Court observed in Union of India v. Ashok Kumar & Ors. - (2005) 8 SCC 760 that "it cannot be overlooked that burden of establishing mala fides is very heavy on the person who alleges it. The allegations of mala fides are often more easily made than proved, and the very seriousness of such allegations demand proof of a high order of credibility."
25. Moreover, this Court, through a catena of decisions, has held that the proviso to Section 28 of the Act finds application only when specific and explicit averments challenging the fides of the conduct of the assessee are made in the show cause notice, a requirement that the show cause notice in the present case fails to meet. In Aban Loyd Chiles Offshore Limited and Ors. (supra), this Court made the following observations :
"21. This Court while interpreting Section 11-A of the Central Excise Act in Collector of Central Excise v. H.M.M. Ltd. (supra) has observed that in order to attract the proviso to Section 11-A(1) it must be shown that the excise duty escaped by reason of fraud, collusion or willful misstatement of suppression of fact with intent to evade the payment of duty. It has been observed :
Service Tax Appeal No.70293 of 2025 21 „...Therefore, in order to attract the proviso to Section 11- A(1) it must be alleged in the show-cause notice that the duty of excise had not been levied or paid by reason of fraud, collusion or willful misstatement or suppression of fact on the part of the assessee or by reason of contravention of any of the provisions of the Act or of the Rules made thereunder with intent to evade payment of duties by such person or his agent. There is no such averment to be found in the show cause notice. There is no averment that the duty of excise had been intentionally evaded or that fraud or collusion had been practiced or that the assessee was guilty of wilful misstatement or suppression of fact. In the absence of any such averments in the show-cause notice it is difficult to understand how the Revenue could sustain the notice under the proviso to Section 11-A(1) of the Act.‟ It was held that the show cause notice must put the assessee to notice which of the various omissions or commissions stated in the proviso is committed to extend the period from six months to five years. That unless the assessee is put to notice the assessee would have no opportunity to meet the case of the Department. It was held :
...There is considerable force in this contention. If the department proposes to invoke the proviso to Section 11- A(1), the show-cause notice must put the assessee to notice which of the various commissions or omissions stated in the proviso is committed to extend the period from six months to 5 years. Unless the assessee is put to notice, the assessee would have no opportunity to meet the case of the department. The defaults enumerated in the proviso to the said sub-section are more than one and if the Excise Department places reliance on the proviso it must be specifically stated in the show-cause notice which Service Tax Appeal No.70293 of 2025 22 is the allegation against the assessee falling within the four corners of the said proviso...."
(Emphasis supplied)
26. Hence, on account of the fact that the burden of proof of proving mala fide conduct under the proviso to Section 28 of the Act lies with the Revenue; that in furtherance of the same, no specific averments find a mention in the show cause notice which is a mandatory requirement for commencement of action under the said proviso; and that nothing on record displays a willful default on the part of the appellant, we hold that the extended period of limitation under the said provision could not be invoked against the appellant."
4.8 In view of the above, I find that demand is hit by limitation and the findings recorded in the impugned order in this regard cannot stand in the eyes of law. Accordingly, the impugned order is set aside.
5.1 Appeal is allowed.
(Dictated and pronounced in open court) (SANJIV SRIVASTAVA) MEMBER (TECHNICAL) akp