By TIOL News Service

MUMBAI, JULY 05, 2017: DEMAND notices were issued and confirmed against the appellant in the matter of recovery of service tax under the heads 'Business auxiliary service', 'Management, maintenance or repair service' and 'Health and fitness service' for the period from July 2003 to September 2008.

The tax demands were as under -

1. BAS: In relation to the reimbursement of share of expense pertaining to common usage by the other companies in the group and, on which the appellant had been discharging service tax liability as provider of 'support services of business and commerce' with effect from 1st May 2006.

2. Management, maintenance or repair service: Relates to the operation of the buildings constructed by them until a registered society came into existence.

3. Health and fitness service: Pertains to the charges levied from owners of apartments for access to club facilities within the premises.

After hearing the submissions made by both sides, the Bench inter alia observed thus -

BAS:

++ It would appear that the intent of the show cause notice is to levy tax on the activities for which consideration is received by the appellant from other companies in the group. Under Finance Act, 1994, it is not the transfer of money that is taxable but the provision of a specific service described in section 65(105) of Finance Act, 1994. Unless the amounts received by the appellant are attributable to one of the enumerated services, the demand cannot sustain.

++ The presumption the group companies are clients of the appellant or that their customers are handled by appellant, in the absence of any evidence to that effect, the specific category within section 65 (19) of Finance Act, 1994 is not sustainable.

Management, maintenance or repair service:

++ The appellant is the developer of properties, and, in accordance with the Maharashtra Ownership of Flats (Regulation of the Promotion of Construction, Sale, Management and Transfer) Act, 1963, collects certain amounts from the owners of the units constructed by the appellant for the operation of common use facilities and to transfer the balance amount to a society of the owners as and when constituted.

++ Even if the statutory obligation devolving on the part of the developer to discharge the function of a society of owners is ignored, there is no finding in the impugned order that the appellant renders 'management/maintenance or repair service'. Even if the appellant has collected lump-sum amounts from the owners of the units, the service of providing 'management/maintenance or repair service' is procured by the appellant from organisations that possess the necessary proficiency. In these circumstances, the appellant is a recipient of the services provided by 'management, maintenance or repair' service providers. It, therefore, does not appear to be logical for the appellant to be taxed as a provider of the service on collection from the owners and, hence, liability to tax under section 66 of Finance Act, 1994 is not sustainable.

Health and fitness service:

++ The appellant has constructed a clubhouse in all the properties that were developed by them and sold.

++ To provide access to the clubhouses, the appellant had been charging some amounts on which, it is alleged, that the tax has not been paid despite these being consideration for providing 'health and fitness service'.

++ The appellant has been paying tax as a provider of 'club or association service' ever since that was included as a taxable entry in section 65(105) of Finance Act, 1994. No evidence has been placed on record by Revenue that the services so provided are not in the latter category but in the former ; the service provided is not one of 'health and fitness service'.

Setting aside the impugned orders, the appeals were allowed.

(See 2017-TIOL-2275-CESTAT-MUM )