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ST - Appellant collecting development and maintenance fees from flat buyers to discharge payments towards local taxes, water and electricity charges - prima facie such activity undertaken in capacity of executor is not liable to ST under category of 'Management, maintenance or repair services' - Stay granted: CESTAT

By TIOL News Service

MUMBAI, JULY 11, 2013: THE appellants are engaged in the construction of residential flats. During the sale of the flats before handing over the possession of such flats, the appellant collected the development and maintenance fees from the flat buyers as the promoter is liable to discharge payments towards outgoing expenses including any municipal local taxes, property tax, water charges, electric charges, revenue assessment or interest or any mandatory charges under the provisions of Section 5 of Maharashtra Ownership flats (Regulation) Act, 1963. On completion of construction while handing over the possession, the developer returns the balance amount, if any, after debiting the expenses.

The department was of the view that the activity undertaken by the appellant comes under the category of ‘Management, maintenance and repair services'.

Accordingly, a Service Tax demand of Rs. 10,44,855/- was confirmed by the CCE, Thane-I including the demand towards GTA services amounting to Rs. 9,492/-.

Before the CESTAT, the appellant submitted -

+ The appellant has collected the amount from flat owners as under Section 5 of the Maharashtra Ownership of Flats (Regulation) Act, 1963, as the appellant was obliged to discharge property tax, water and electricity tariff etc. on behalf of the flat owners and the appellant has undertaken these activities in the capacity of an executor. Therefore, the appellant has not rendered any management, maintenance or repair services and hence demand is not sustainable in law.

+ In respect of the various services such as cleaning services, lift maintenance etc. individual service providers have discharged the Service Tax liability.

The Bench observed -

"5. After carefully considering the submissions made by both the sides and after perusing the provisions of Section 5 of the Maharashtra Ownership Flat (Regulation) Act, 1963, we are of the view that the appellant has made out a strong case in their favour for grant of waiver from pre-deposit…."

In fine, the CESTAT granted unconditional waiver from pre-deposit of the dues adjudged and stayed the recovery.

In passing: See 2008-TIOL-1721-CESTAT-MUM for some reality bites!

(See 2013-TIOL-1051-CESTAT-MUM)


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