Case: The Commissioner of Service Tax, Mumbai-Vi Vs. M/S. Shri Krishna Chaitanya Enterprises

6. It is common ground that the assessee before us is in the business of construction of buildings and is a builder and developer. Apart therefrom, what is urged is that on investigation by Officials of the Anti Evasion, Service Tax II, Mumbai, it was found that the assessee was engaged in providing works contract service during the period October, 2008 to March, 2013 and was not discharging the service tax liability. The service tax of Rs. 9,57,98,251/under the category of works contract service, Rs. 25,77,710/under the category of management, maintenance or repair Service, totally amounting to Rs. 9,83,75,962/was due and payable by the assessee for the aforesaid period. The assessee applied for service tax registration on 28.11.2011, for construction of residential complex service and after the visit of the Officers of theThe assessee admitted that it had not applied for service tax registration even though it provided taxable service sinceThe assessee got registered on 28.11.2011 and paid Rs. 87,59,633/out of the total service tax liability of Rs. 89,82,087/for the period2, without interest. The assessee admitted that at the time of introduction of service tax with effect from 1.7.2010, it was indeed providing taxable service but due to lack of knowledge, the registration could not be obtained within the prescribed time limit. The assessee admitted that the service taxfor the periodJuly, 2010 to June, 2012 was not paid on due dates and the interest for the delay was also not paid. As per the Service Tax Returns for this period, the assessee declared total taxable income of Rs. 34,88,18,870/and the taxable value, after availing abatement of 75%, comes to Rs. 8,72,04,718/and the service tax payable works out to Rs.The assessee paid Rs.a short payment of Rs. 2,22,454/which is due toof the Service Tax Returnsfor the periodApril, 2011 to September, 2011.9. The assessee provided an explanation in reply to this Show Cause Notice and as far as the subject of the present appeal is concerned, the assessee stated it is following the project completion method for accounting of income and the said amount was received against the Flat bookings before 1.7.2010 and therefore that amount was not taxable. As regards the amount of Rs.charged and collected towards the maintenance costs from the clients who had booked the Flats after 1.7.2010, the assessee has not paid the service tax on the said amount because it was not aware whether that amount is liable for service tax. However, the assessee assured that the service tax liability of Rs. 10,20,590/at full rate @ 10.30% along with applicable interest will be paid within three days.10. The assessee had also disputed the liability insofar as the amount collected towards the booking of Flats from the clients. A statement was given of admission of the tax liability and the disputed sum. The Bank account was freezed and that is why this Court was approached by filing a Writ Petition and on 5.12.2013 the Writ Petition was disposed of with a direction to provide Bank Guarantee for the balance amount. There was a direction to issue a Show Cause Notice and adjudicate it. Accordingly, the Show Cause Notice was adjudicated by the Commissioner of Service Tax and he passed the order dated 30.4.2014. The amount of service tax demanded under the subheads was confirmed.11. It is such an order which was challenged by filing an appeal to the Cest at. As far as the activity undertaken by the assessee, and particularly the provision of Works Contract Service, the Tribunal held as under:"(i) Prior to 01.07.2010 the activity undertaken by assessee will not be covered under "Works Contract Services" as it is undisputed that they are engaged in providing construction of residential complex services and selling the flats to prospective buyers. (ii) Construction of residential complex is category under which service tax liability arises with effect from 01.07.2010 by an amendment which stated the activity of construction would deem to be taxable service provided by the builder/promoter/developer to the prospective buyers unless the entire consideration for property is paid after the completion of the construction. Post 01.07.2010 there is no justification given that these are works contract services by the adjudicating authority.Accordingly, Cestat set aside the impugned order to the aforesaid points and remit the matter back to the adjudicating authority to reconsider the issue afresh after following the principle of natural justice quoting the judgment of the tribunal in the case of Krishna Homes v. CCE, 2014 (34) S.T.R. 881 and also after the amendment to the statutory provision from 01.07.2010. The case cited above has been accepted by the department."12. As regards service tax on the amount collected as a builder/promoter towards the maintenance of common facilities and service tax liability thereof, the Cestat held as under:"(ii) As regards service tax on an amount collected as a builder/promoter towards maintenance of common facilities and service tax liability thereof, the Cestat observed that the issue is no more resintigra as this bench in the case (a) Kumar Behary Rathi 2014 (34) S.T.R. 139 (b) Goel Nitron Constructions(c) Hiranandani Constructions Pvt. Ltd.held that service tax is not leviable on such amounts which are collected as maintenance charges for up keep of the apartments premises.Accordingly, the Cestat set aside that portion of the order which confirmed the demand along with interest and penalty."Thus, that portion of the Order in Original which confirmed the demand under this head along with interest and penalty, was set aside.

Court's reasoning:
We have summarised the factual allegations and what has been argued is that amenities were provided and maintenance was done from July, 2010 to March, 2012. On this count, a sum was charged and collected. That was categorised as maintenance cost from the clients who had booked Flats after 1.7.2010. The service tax was not paid on the same. The Adjudicating Authority came to the conclusion that this was a taxable service. Pertinently, the Adjudicating Authority held that the assessee/notice before us entered into agreements with the prospective buyers for sale of the residential Flats even before their completion of all the projects constructed by the notice. By a letter dated 17.4.2014. the assessee submitted a copy of the sample Agreements for Sale of the Flats entered into with the buyers. The assessee received the consideration for sale at the time of initial booking and subsequently during the course of construction, in instalments which has been admitted. It is not the case of the assessee/notice before us that the agreement to sell the Flats have been entered into only after completion of the Flats and consideration for sale of the Flats have been received only after grant of the Completion Certificate by the Competent Authority. The Adjudicating Authority then concluded that the assessee collected amounts against the services provided and which were taxable under the category of management, maintenance or repair. Apart from alleging suppression, the Adjudicating Authority concluded that there was a clear liability and which has not been discharged in relation to this category of services. That is how the demand was confirmed.18. Our attention has been invited to the definition of the term "management, maintenance or repair".A perusal of the same would indicate that management, maintenance or repair means any service provided by any person under a contract or an agreement, or a manufacturer or any person authorised by him, in relation to, the management of properties, whether immovable or not, maintenance or repair of properties, whether immovable or not, or maintenance or repair including reconditioning on restoration, or servicing of any goods, excluding a motor vehicle. Then, there is an explanation which clears doubts and it declares that for the purposes of this clause, namely, 65 (64), goods includes computer software and properties include information technology software. The words "Taxable service" is defined in Section 65, Clause (105) to mean any service provided or to be provided to any person by any person in relation to management, maintenance or repair.20. Since the MOFA has been referred by the counsel appearing before us, we would be required to make a reference to its provisions. The MOFA is an Act to regulate in the State of Maharashtra, the promotion of the construction of the sale and management, and the transfer of Flats on ownership basis. It was brought to the notice of the State Government that, consequent on the acute shortage of housing in several areas of the State of Maharashtra, sundry abuses, malpractices and difficulties relating to the promotion of construction, and the sale and management and transfer of Flats taken on ownership basis exist and are increasing. That is why the Government decided to appoint a Committee to advice it and that Committee inquired into and reported to the State Government on several matters referred to aforesaid with the purpose of considering measures for their amelioration. Then, the report of the Committee was published for general information and after considering its recommendations and suggestions, it was decided to make provision during the period of such shortage of housing, for the regulation of the promotion of the construction, sale and management and transfer of Flats taken on ownership basis in the State of Maharashtra.21. The Act must, therefore, receive an interpretation consistent with its object and purpose. This Court, on several occasions, had emphasised the aims and objects of the Act.Another Judgment (Mazda Construction CompanyOrs. v. Sultanabad Darshan CHS Ltd.Ors., 2013 (2) All M.R. 278) of this Court should also be referred where certain amendments made to the law came to be challenged as unconstitutional together with an order passed by the Competent Authority granting deemed conveyance. The said Judgment is also relevant for the purposes of noting the aims and objects of this law and the amendments brought to it from time to time. Thus, the law which provides for the promotion of construction, sale, management and transfer of Flats on ownership basis, while defining the term "promoter" it also sets out the general liabilities of the promoter. The Section 3 of the MOFA provides for his general liabilities. The subsection (1) of this provision opens with aclause and states that, notwithstanding anything in any other law, a promoter who intends to construct or constructs a block or building of Flats, all or some of which are to be taken on ownership basis, shall in all transactions with persons intending to take or taking one or more of such Flats, be liable to give or produce, or cause to be given or produced, the information and the documents mentioned in this section. Then, by subsection (2) the liabilities are set out. The promoter before accepting advance payment or deposit has to enter into Agreement and the Agreement to be registered. That is an aspect taken care of by Section 4 and by Section 4A, the effect of