TMI Blog2017 (9) TMI 162X X X X Extracts X X X X X X X X Extracts X X X X ..... de the charges collected on services rendered without profit motive, the same has been specifically taken care of. For e.g. in the case of education services, commercial coaching and training services are only within the purview of the levy of service tax. So the argument of the counsel that only if the charges received for services is in surplus it can be treated as consideration received for services is not acceptable. The Annual Finance Statement (P & L Statement) clearly shows that the assessees have collected maintenance charges. Therefore, even if we disregard this Bill, there is evidence that assessee have collected maintenance charges for the services rendered. Thus, we hold that assessee is liable to pay service tax on the charges collected for rendering management, maintenance or repair services of Spencer Plaza. Whether the contention of the assessee that they are acting as pure agent of the occupants and there is mutuality of interest is acceptable? - Held that: - 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 l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Kumar, Senior Advocate Shri B. Satish Sundar, Advocate for the Assessee Shri K. P. Muralidharan, AC (AR) for the Revenue ORDER Per Bench The assessee namely M/s. Plaza Maintenance and Services Ltd. (herein after referred to as PMSL) are engaged in management and maintenance of a commercial complex known as Spencer Plaza. On intelligence that PMSL are not paying service tax on the management and maintenance services, the Survey, Intelligence and Research (SIR) Unit of Service Tax Commissionerate conducted verification of their records which culminated in issuing show cause notice dated 1.4.2008 for the period 16.6.2005 to 31.1.2008 and a second show cause notice dated 22.10.2009 for the subsequent period from February 2008 to August 2009. After due process of law, the original authority confirmed the demand of service tax of ₹ 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/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ance for and on behalf of the occupants. The main activities rendered by them for the occupants is the payment of electricity, water charges and insurance premiums. Tamilnadu Electricity Board (TNEB) was not willing to provide power to individual occupants as the initial power supply of the building exceeded 2000 KW and TNEB would provide only high tension power. Thus, a single electricity connection was obtained in the name of the developer which was later changed to MMSL and then to PMSL. Thus, the assessee collects the electricity charges from individual occupants on the basis of the sub-meter installed in their premises and pay the same to TNEB. Similar is the case with water charges. That, apart from collecting the electricity charges and water charges no extra amount is collected from the occupants in this regard. That as per 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 i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is erroneous. (h) Further, the amount collected by the assessee as a deposit which is maintained as corpus fund of the occupants of the Plaza cannot be subject to levy of service tax, since no service tax can be levied on the corpus fund collected which is decided in the case of Kumar Beheray Rathi Vs. Commissioner of Central Excise, Pune III 2014 (34) STR 139 (Tri. Mumbai). That the said decision also supports the contention of the assessee that there cannot be any relationship of service provider and service recipient between the assessee and the occupants in respect of such corpus fund collected or the maintenance activities carried out since there is a mutuality of interest between assessee and occupants. The learned authority has failed to appreciate that the assessee does not receive any consideration in money for the service rendered as 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 an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts and had not paid service tax on such charges. Originally maintenance or repair service was brought under the service tax net with effect from 1.7.2003 which covered only repair and maintenance service provided to goods. Later, with effect from 16.6.2005, the scope of the services was expanded to cover services rendered to immovable property also. Thus, with effect from 16.6.2005, section 65(105)(zzg) makes the activities rendered by the assessee taxable services. The assessee had not taken registration and were not discharging the service tax on the charges received by them. The fact of collecting such charges and non-payment of service tax was not brought to the notice of the department and the same would not have come to light but for the investigation conducted by the department. (b) In the statement taken from Shri S.K. Rahamtulla, who is the Power 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ahamtulla shows that the contribution towards expenses basing on the square feet is charged taking into account expenses like security charges provided by outside agency and also salary for their own security personnel, housekeeping and cleaning charges, water charges for paying water from outside, annual maintenance charges paid to other agencies, building and equipment insurance, repairs and maintenance of building and replacement of light fittings and other repair of equipments not covered by AMC, salary paid to staff and workers working for the maintenance of Spencer Plaza. That from these it is clear that assessees are rendering services to the occupants and these are classifiable under Management, Maintenance or Repair Services with effect from 16.6.2005. Further, on scrutiny of records, it was seen that they have collected service tax from the occupants for the disputed 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... egistration and has not deposited the amount to the Government. The collection of service tax was not disclosed to the department and therefore the invocation of extended period is right and proper. He thus supported the impugned order in Appeal No. ST/625/2009. (j) In regard to Appeal No. ST/337/2011 filed by the department, the learned AR argued that the adjudicating authority has dropped the proceedings in a cursory manner. The department had issued the subsequent show cause notice dated 22.10.2009 demanding service tax to the tune of ₹ 4,85,78,648/- for the period from February 2008 to August 2009. The original authority failed to appreciate that this show cause notice was sequel to the earlier show cause notice in which the allegations were put forward in detail. Further, this order was passed on 28.2.2011 which is much after the order passed for the earlier period. Therefore, 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 depart ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ants and Technocrats Pvt. Ltd. (supra) to argue that Rule 5(1) which provides for inclusion of expenditure and costs has been struck down by the Hon ble High Court of Delhi in the said decision, therefore Rule 5(2) of the said Rules cannot be pressed into application on the assessee to conclude that they are not pure agents. That sub-rule (2) of Rule 5 has to be read along with sub-rule (1) of the said Rule. 8. The thrust of the arguments put forward by the learned Senior Advocate is that they have not collected any amount other than the actuals (electricity charges, water, diesel) and that no consideration as mentioned in Section 67 of Finance Act was received by them. It is not disputed that assessee was rendering the service of management, maintenance or repair services to the occupants / owners of Spencer Plaza. In fact assessee company (PMSL) was formed only with the object for providing management 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 puri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om doing, or does or abstains from doing, or promises to do or abstains from doing, or promises to do or abstain from doing something, such act or abstinence or promise is called consideration for the promise . In the instant case, the services are not voluntarily done by assessee to the occupants. The services are done at request of owners in terms of agreement. The assessee is rendering the impugned services as per the agreement, on the promise given to occupants / owners of Spencer Plaza to maintain the premises. The agreement shows that occupants have agreed to pay charges for such services. Whether the assessee makes profit/surplus out of the charges collected is not relevant for the purpose of levy of service tax. The law in regard to consideration is well settled that consideration should be real and valid in law; it need not be adequate. Thus, the accounting pattern adopted by the assessees by crediting 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 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sees. Similar view has been taken by the jurisdictional High Court in the case of Sangamitra Services Agency (supra). Though the department has filed appeal before the Hon ble Supreme Court against the judgment in Intercontinental Consultants Technocrats (P) Ltd. (supra), there is no stay of operation of the judgments and in view thereof, by judicial discipline, we follow the same and hold that assessees are not liable to pay service tax on the actuals that is electricity / water and insurance charges collected and paid to the respective authorities. The demand on such amount is unsustainable and requires to be set aside which we hereby do. 13. The issue whether assessees are eligible for CENVAT credit has been discussed by the adjudicating authority. The credit has been denied for the reason that the documents are not proper. However, as per proviso to Rule 9 of CENVAT Credit Rules, 2004, if the Assistant / Deputy 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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