Custom, Excise & Service Tax Tribunal
Hiranandani Constructions Pvt. Ltd vs Thane I on 3 September, 2015
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
WEST ZONAL BENCH AT MUMBAI
APPEAL NO: ST/546/2011
CROSS-OBJECTION NO: ST/CO-30/2012
[Arising out of Order-in-Original No: 31/BR-31/ST/Th-I/2011 dated 29/06/2011 passed by the Commissioner of Central Excise, Thane I.]
For approval and signature:
Honble Shri M V Ravindran, Member (Judicial)
Honble Shri C J Mathew, Member (Technical)
1.
Whether Press Reporters may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?
:
No
2.
Whether it should be released under Rule 27 of CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?
:
No
3.
Whether Their Lordships wish to see the fair copy of the Order?
:
Seen
4.
Whether Order is to be circulated to the Departmental authorities?
:
Yes
Hiranandani Constructions Pvt. Ltd.
Appellant
Vs
Commissioner of Central Excise
Thane I
Respondent
Appearance:
Shri S.S. Gupta, Chartered Accountant for the appellant Shri V.K. Singh, Special Counsel for the respondent CORAM:
Honble Shri M V Ravindran, Member (Judicial) Honble Shri C J Mathew, Member (Technical) Date of hearing: 03/09/2015 Date of decision: 03/09/2015 ORDER NO: ____________________________ Per: M.V. Ravindran:
This appeal is directed against Order-in-Original No: 31/BR-31/ST/Th-I/2011 dated 29/06/2011 passed by the Commissioner of Central Excise, Thane I.
2. The issue involved in this appeal is regarding service tax liability on the appellant under the category of GTA service for the period January 2005 to September, 2007 and service tax on the other category of Management, Maintenance or Repair Service for the period June 2005 to September 2007. The adjudicating authority has come to the conclusion that the appellant having collected an amount from the prospective flat buyers towards management, maintenance or repair service, tax liability would arise. The adjudicating authority has held that the maintenance charges recovered from the prospective purchasers of flat in residential building as well as commercial building are liable to be taxed as the definition does not make any distinction on the basis whether the service has been rendered to the purchasers or owners of the residential units or commercial units. By coming to such a conclusion, the adjudicating authority has confirmed the demands raised along with interest and also imposed penalties.
3. Learned Chartered Accountant appearing on behalf of the appellant would take us through the findings recorded by the adjudicating authority and submit that, as regards the demand on GTA services, they concede the same as the amount being very negligible. As regards the demand of service tax under Management, Maintenance or Repair Service, it is his submission that the issue is now squarely covered by the judgment of this bench in the case of Kumar Beheray Rathi vs. Commissioner of Central Excise, Pune III 2013-TIOL-1806-CESTAT-MUM. He would read the specific paragraph from the judgment and submits that an identical issue was before the bench have analysed the provisions of Maharashtra Ownership Flats (Regulation of the Promotion of Construction, Sale, Management and Transfer) Act, 1963 held that the amounts collected by the appellant therein are not liable to be taxed under maintenance or repair service to the buyer. It is his submission that identical view has been taken by the bench in the case of Goel Nitron Constructions vs. Commissioner of Central Excise, Pune III 2015-TIOL-1787-CESTAT-MUM.
4. The learned Departmental Representative, on the other hand, submit that the appellant had collected an amount from the prospective buyers in respect of maintenance or repairs from residential units as also the commercial units. It is his submission that in respect of commercial units the tax liability arises as the commercial units are not shops which are purchased outrightly. It is his submission that the demand under GTA services is correctly confirmed by the adjudicating authority.
5. After giving due consideration to the submissions made by both the sides, we have to hold that the service tax liability on the appellant under the GTA service have not been contested seriously due to the amount being negligible, need to be upheld and confirm the tax liability along with interest.
6. As regards service tax liability under the category of Management, Maintenance or Repair Service under Section 65(64) of the Finance Act, 1994, during the period 2006-07, we find that there is no dispute as to the fact that the amount are collected by the appellant from prospective buyers for maintenance of the units sold to them till the prospective buyers come together and form a cooperative housing society. It is the case of the Revenue that the services rendered by the appellant would be covered as they are maintaining the building for the prospective buyer. We do not find any force in the submissions made by the learned Departmental Representative as also the findings of the adjudicating authority on this ground. We find that this bench in the case of Kumar Beheray Rathi (supra) was considering identical issue wherein it was held as under:
6.1 From the various activities we find that the appellants are required to make payment relating to Revenue assessment, insurance, all other taxes, levies, electricity and water charges and deposits in respect of common electrical and water pumps and other installations. In addition they are paying for the maintenance and repair of common areas and facilities, wages or watchmen, sweepers etc. and some expenses relating to maintenance of the housing blocks. 6.2 We have also gone through the relevant provisions of the Maharashtra Ownership Flats (Regulation of the Promotion of construction, sale, management and transfer) Act, 1963. We find that the Section 5 and 6 provides as under:-
SECTION 05: PROMOTER TO MAINTAIN SEPARATE ACCOUNT OF SUMS TAKEN AS ADVANCE OR DEPOSIT AND TO BE TRUSTEE THEREFOR; AND DISBURSE THEM FOR PURPOSES FOR WHICH GIVEN The promoter shall maintain a separate account in any bank of sums taken, by him, from persons intending to take or who have taken flats, as advance or deposit including any sums so taken towards the share capital for the formation of co-operative society or a company, or towards the outgoings (including ground rent, if any, municipal or other local taxes, taxes on income, water charges, electricity charges, revenue assessment, interest on any mortgage or other encumbrances, if any); and he shall hold the said moneys for the purposes for which they were given and shall disburse the moneys for those purposes and shall on demand in writing by an officer appointed SECTION 06: RESPONSIBILITY FOR PAYMENT OF OUTGOINGS TILL PROPERTY IS TRANSFERRED.
A promoter shall, while he is in possession and where he collects from persons who have taken over flats or are to take over flats sums for the payment of outgoings ever thereafter, pay all outgoings (including ground rent, municipal or other local taxes, taxes on income, water charges, electricity charges, revenue assessment, interest on any mortgage or other encumbrances, if any), until he transfers the property to the persons taking over the flats, or to the organization of any such persons. Where any promoter fails to pay all or any of the outgoings collected by him from the persons who have taken over flats or are to take over flats, before transferring the property to the persons taking over the flats or to the organization of any such persons, the promoter shall continue to be liable, even after the transfer of the property, to pay such outgoings and penal charges (if any) to the authority or person to whom they are payable and to be responsible for any legal proceedings which may be taken therefor by such authority or person.
From the above sections, it is clear that under the Act the appellants are obliged to maintain a separate account in any bank of the deposits taken and use the same amount towards the outgoings. Further section 6 puts responsibility for payment of outgoings on the appellants till the property is transferred.
6.3 We also note that at the relevant time the provisions of Finance Act are as under:-
Maintenance or repair means any service provided by
(a) Any person under a contract or an agreement; or
(b) A manufacturer or any person authorized by him in relation to
(i) Maintenance or repair including reconditioning or restoration, or servicing of any goods or equipment, excluding motor vehicle; or
(ii) Maintenance or management of immovable property.
6.4 We also note that the appellants are not in the business of maintenance or repair service or management of immovable property. The appellants cannot be held as provider of maintenance or repair service as they are only paying on behalf of various buyers of flats to various authorities (Municipal Corporation, Revenue authorities etc.) and various service providers (such as security agency, cleaning service providers etc.) and they are not charging anything on their own. The payments are made cost on cost basis and the same is debited from the deposit account. They act only as trustee or as pure agent. When the co-operative society is formed even the deposit account is shifted to Flat Owner's Co-operative Society. We also note that this is a statutory obligation on the appellants in terms of Maharashtra Ownership Flats (Regulation of the Promotion of Construction, sale, management and transfer) Act, 1963. The above said ratio has been followed by this bench in the case of Goel Nitron Constructions (supra).
7. In view of the factual findings and the issue being covered by the decision of this bench, we hold that no service tax liability arise on the appellant under the category Management, Maintenance or Repair Service for the amounts collected by them from the prospective flat owners.
8. As regards the penalty imposed, we find that bulk of the demand is on Management, Maintenance or Repair Service and having accepted the contention of the appellant, we find no reason for visiting the appellant with any penalty. As regards the penalty imposed for non-discharge of service tax liability under the category of GTA service, we hold that the appellant having discharged the service tax liability along with interest thereof, and the amount also being negligible, there is no reason to visit the appellant with penalty on this point also.
9. Accordingly the appeal is disposed of as indicated herein above.
(Pronounced in Court) (C J Mathew) Member (Technical) (M V Ravindran) Member (Judicial) */as 3