ST - One-time maintenance charges collected from flat owner by builder is not chargeable to tax under category of Maintenance and Management of immovable property: CESTAT
By TIOL News Service
MUMBAI, DEC 19, 2018: THIS is a Revenue appeal.
The respondent is registered under the category of 'Construction of residential complex service, construction of industrial and commercial structures'.
During the course of audit, it was found that in addition to sale price of individual dwelling unit, they had charged and received certain amounts from unit holders as maintenance charges of the building under construction till possession of it is handed over to Society.
The case of the department is that as per paragraph 6 of Circular No. B1/6/2005-TRU dated 27.6.2005 w.e.f. 16.6.2005, maintenance and management of immovable property (in this case, the building under construction till possession is handed over to Society) are provided as per the terms and conditions of the agreement to sale of the property between the dwelling owner and service provider; that these activities fall under the ambit of Service Tax and liable for service tax w.e.f. 16.6.2005.
The adjudicating authority confirmed the service tax demand under the category of Maintenance and Repair service and also imposed penalties.
However, the Commissioner (Appeals) set aside this order and, therefore, Revenue is aggrieved by the same.
The AR justified the order of the original authority by placing reliance on the decision in Satya Prakash Builders Pvt. Ltd. - 2017-TIOL-1475-CESTAT-DEL.
The Bench considered the submissions made by the AR and observed thus -
+ Respondent is collecting repair and maintenance charges under the statutory obligation provided in Maharashtra Ownership Flats (Regulation of the Promotion of Construction, Sale, Management and Transfer) Act, 1963.
+ The respondent is under the obligation of the said Act, collecting the maintenance charges from the dwelling unit owner and transferring it to the actual service provider.
The CESTAT further noted that the issue has been considered by the Tribunal in the case of Kumar Beheray Rathi vs. CCE, Pune-III - 2013-TIOL-1806-CESTAT-MUM and where it is held that -
Appellants are not in the business of maintenance or repair service or management of immovable property - they are collecting one-time maintenance charges from their buyers to whom they have sold flats - 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 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 - this is a statutory obligation on the appellants in terms of sections 5 & 6 of the Maharashtra Ownership Flats (Regulation of the Promotion of Construction, sale, management and transfer) Act, 1963 - Appellants cannot be held as provider of maintenance or repair service - Order set aside and appeals allowed.
Following the said judgment, the Tribunal concluded that the maintenance charges collected from the flat owner under the obligation as per the Maharashtra Ownership Flats (Regulation of the Promotion of Construction, Sale, Management and Transfer) Act, 1963, would not be chargeable to tax in the hands of the builder.
The decision cited by the AR was distinguished on the ground that the same did not relate to Maharashtra and no similar Act was invoked.
The impugned order was upheld and the Revenue's appeal was dismissed.
(See 2018-TIOL-3800-CESTAT-MUM)
