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TMI Blog2017 (9) TMI 162X X X X Extracts X X X X X X X X Extracts X X X X ..... he demand of service tax of Rs. 7,76,47,888/- for the period from 16.6.2005 to 31.1.2008 along with interest and also imposed penalties. The proceedings in respect of the subsequent show cause notice was dropped by the Commissioner. Thus, the assessee is in appeal against the confirmation of demand in Appeal No. ST/625/2009 and the department has filed Appeal No. ST/337/2009 against the dropping of the proceedings. Both the appeals were heard together and are disposed by this common order. 2. For the sake of convenience, the parties herein are referred to as assessee and department . 3. On behalf of the assessee, learned Senior Advocate Shri B. Kumar assisted by Shri B. Satish Sundar submitted the following main arguments among other submissions:- (a) That assessees are not liable to pay any service tax on Management, Maintenance and Repair Service for the reason that they are neither collecting any service charges and that there is no relationship of service provider and service recipient with regard to the assessee and the owners of the shops. He explained the background of the case stating that Mangal Tirth Estate Ltd. was formed to promote Spencer Plaza on the land belonging ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er the agreement entered with TNEB itself, it is stated that such an activity would not amount to sale or distribution of electricity. That nonetheless, only TNEB is authorized to sell or distribute electricity. The demand is raised in terms of Rule 5(1) of Service Tax (Determination of Value) Rules, 2006 which provides that the entire expenditure or cost incurred by the service provider has to be included in the taxable value of services. The judgment of the Hon'ble High Court of Delhi in the case of Intercontinental Consultants & Technocrats Pvt. Ltd. Vs. Union of India 2013 (29) STR 9 (Del.) has struck down the said rule and the matter is pending before the Hon'ble Supreme Court. That there is no stay in this regard. Similar view has been taken by the jurisdictional High Court in the case of Commissioner of Service Tax, Chennai Vs. Sangamitra Services Agency 2014 (33) STR 137 (Mad.). Thus the major part of the demand would be reimbursable expenses in the nature of electricity charges and water charges. The assessee is not liable to pay service tax on the reimbursable expenses. (d) The assessee have not collected any further charges other than the electricity and water and remit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the amounts received by the assessee are credited to the owners account and the monies belongs to the owner at all times. The assessee will not be liable to service tax as he does not receive any quid pro quo or consideration in terms of money for rendering maintenance service. The same concept is also applied when a club provides goods and services to the members of the club. Such a mutuality will exclude application of Service Tax Act. This is clear from 2012 (26) STR 401 (Jhar.) in the case of Ranchi Club Ltd. Vs. CCE, Ranchi following Hon'ble Supreme Court judgment in the case of Joint Commercial Tax Officer v. The Young Men s Indian Association - 1970 (1) SCC 462. To the same effect, the judgment of the Hon'ble Supreme Court in the case of Chemsford Club reported in 2000 (243) ITR 89 and Commissioner of Income Tax Vs. Bunkipur Club reported in 1997 Vol. 226 ITR page 97. (i) Further that the show cause notice is issued alleging suppression of facts invoking extended period of limitation. The assessee was under bona fide belief that the activities would not fall under MMR Services. The assessment proceedings by the Income Tax Department support the fact that the arrangement bet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Attorney of the Director of the assessee cum Assistant General Manager (Finance and Accounts) deposed that the main object of the assessee is to provide building maintenance and allied services to the occupants of Spencer Plaza. Initially M/s. MMSL was the promoters of Spencer Plaza who also took over the responsibility of maintaining Spencer Plaza on behalf of the occupants. Accordingly, MMSL entered into agreement with all the occupants of Spencer Plaza for entrusting the maintenance work to assessee. The occupants of Spencer Plaza agreed for the arrangement and contributed their share of maintenance expenses to assessee. The assessee, accordingly, recruited several persons to carry out the various jobs and entered into contracts with various service agencies to maintain Spencer Plaza. The assessee also collects the amount from the occupants every month and appropriates the same towards the common expenses. The assessee maintains separate set of accounts of the owners and all the connected expenses both direct and indirect expenses are recovered from the owners. The assessee also renders miscellaneous jobs such as providing plants to individual, doing minor electrical works a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sputed period. Thus, the demand raised is legal and proper. Section 67 of the Finance Act, 1994 lays down that service tax is to be collected on the gross amount charged and therefore the demand raised upon the taxable value of services including electricity charges, water charges etc. is correct. (g) With regard to the contention of the assessee that they are acting as pure agent of the occupants, the learned AR submitted that the said issue has been discussed by the adjudicating authority in para 6.4 of the order dated 31.8.2009. He submitted that the assessee did not satisfy any of the conditions laid down in Rule 5(2) of Service Tax (Determination of Value) Rules, 2006 in order to be considered as a pure agent. According to this Rule, sub-clause (3) states that the recipient of service is liable to make payment of the third party, whereas in the instant case the services of engaging security, housekeeping, common area maintenance, lift. etc. are managed by assessee. The assessee enters into agreement with third parties to provide such services. The owners of the apartments are not liable to make any payment to third party since they have not entered into any agreement with TNE ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ore, the Commissioner ought to have considered the findings arrived in the Order-in-Original passed for the earlier period. The Commissioner has dropped the proceedings by stating that the only evidence relied upon in the show cause notice is a letter dated 12.10.2009 issued by assessee to the department and that in such letter, there is no details with regard to any of the allegations or type of activity undertaken by the assessee. That being a sequel show cause notice and also since the earlier order had given detailed discussions with regard to the issues, the Commissioner ought not to have dropped the proceedings by brushing aside the entire findings made in the order passed for the earlier period. The Commissioner has wrongly concluded that the demand of service tax is not sustainable. He pleaded that the impugned order in Appeal No.ST/337/2011 may be set aside. 5. Heard both sides and perused the records. 6. On the submissions made by both sides as well as on perusal of records, the following issues emerge for consideration:- (a) Whether the assessees are rendering Management, Maintenance or Repair Services to the occupants and are liable to pay service tax under such cate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and maintenance or repair services of Spencer Plaza. For a moment, if we keep aside the issue of payment of electricity, water charges, there are other services like common area maintenance, engaging security personnel, lift, escalator, maintenance and repair services, water purifying services etc. The amount collected other than payment of electricity, water charges pertain to these services. On perusal of the records, it is clear that the assessee has collected charges over and above actuals (electricity, water) from the occupants of the plaza premises. Such charges have been collected for rendering management and maintenance activities of the premises. The common areas and lift facility etc. is managed / maintained by the assessee. The learned counsel contends that though amount was collected for such services, it is not consideration for the services as it was not done on a profit motive. That not being a commercial activity the amount collected is not consideration. He relied upon the decision by Commissioner of Income Tax (Appeals) stating that no revenue is received by the assessee and therefore it is to be treated that there is no consideration received by them for indulgi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the surplus / deficit in the accounts of the occupants and not accounting the same as revenue in the books of the assessee would not make the charges collected by them as not consideration as envisaged in section 67 of the Finance Act, 1994. For the very reason, we are not able to endorse the view of the learned counsel that the assessees are acting as pure agents of the occupants. As rightly discussed by the adjudicating authority, the occupants have no legal obligation with the agencies who are entrusted with the maintenance works and therefore the concept of pure agent does not arise. 10. The contention of the assessee that there is mutuality of interest is also not correct for the reason that the assessee is a company registered under the Companies Act, 1956 and is therefore a separate legal entity. Thus, the assessee as a separate legal entity having entered into contracts with third persons for providing services for and on behalf of occupants and collected charges especially for providing maintenance and upkeep of common area, common amenities, common facilities cannot be considered to be outside the purview of levy of service tax on the ground of mutuality of interest. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... puty Commissioner is satisfied after verification of accounts that the assessee is eligible for credit, the same has to be considered and the benefit has to be given to the assessee. On mere deficiency in the document, the credit cannot be denied if the same is otherwise eligible and has been properly accounted. On such score, we are of the view that this issue requires to be remanded to the adjudicating authority for verification of documents, in line with the various decisions in this regard. 14. The assessee have also argued on the ground of limitation. It is seen from the records that they have collected maintenance charges and have not disclosed the same to the department. Even if we brush aside the specimen bill that is made part of the impugned order, the annual financial statements as well as other documents evidence that the assessee have collected maintenance charges from occupants. Further, they have been rendering activity of management, maintenance and repair services which have become taxable swith effect from 16.6.2005. Therefore, the argument of the learned counsel that the entire facts were disclosed to the department and being interpretational issue, extended per ..... X X X X Extracts X X X X X X X X Extracts X X X X
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