In Chennai Citi Centre Holdings Pvt. Ltd. vs. CST Chennai, the Chennai Bench of Customs Excise & Service Tax Tribunal ( CESTAT ) held that maintenance charges collected as reimbursements cannot be made liable to Service Tax.
The appellants owned a Shopping mall and had rented the same to various occupants via lease deed. By such transaction, the appellants were discharging service tax liability. However, the Revenue thought the appellants were also liable to pay tax in respect of maintenance and repair charges collected from the tenants. Show cause notices were issued to appellants for different periods proposing demand of service tax liability in respect of amounts collected by them from the tenants / lessees for maintenance and repair charges, along with interest and imposition of penalties under various provisions of law. Adjudicating authorities vide the impugned orders have confirmed these proposals.
The Counsel for the appellant submitted that the maintenance charges collected from tenants in maintaining the common area of the mall are claimed from the tenants as reimbursements on a proportionate basis. He further submitted that there was no intention to derive profit from such collection of maintenance charges. He relied on the decision of the Supreme Court in Union of India vs. Intercontinental Technocrafts Pvt. Ltd. The Counsel for the Revenue contended that the entire onus of the maintenance and repair lied with the appellant. He reiterated the impugned order.
The Court comprising of Judicial Member Sulekha Beevi C.S & Technical Member Madhu Mohan Damodhar found that as per the lease agreement it is unequivocally specified that the lessee shall be responsible to pay only the actual proportionate cost of maintenance charges and the lessor has undertaken that not to have profit from the maintenance charge.
“We therefore find that the appellants in collecting the impugned amounts are only getting themselves reimbursed for the expenses incurred by them for maintenance and repair and upkeep of the mall, that too on a proportionate and equitable basis, without any profit element for themselves. The ratio upheld by the Hon’ble Apex Court in Intercontinental Consultants Technocrafts Pvt. Ltd. (supra) will apply on all fours to the facts of this case. Following the ratio laid down by the Hon’ble Apex Court, we find in favour of the appellant. Impugned orders cannot then be sustained and are required to be set aside, which we hereby do.” said the bench.
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