Break-up of Charges in Builder Agreement Supports Non-Taxability of Parking Fees: CESTAT relief to Omaxe Buildhome [Read Order]

The Delhi Principal Bench of the CESTAT has ruled in favour of Omaxe Buildhome Limited, holding that car parking charges collected during July 2010 to June 2012 were not taxable as part of “construction of complex services” prior to the introduction of the negative list regime.

The Tribunal concluded that the parking component was clearly segregated in the builder-buyer agreement and did not fall within the scope of the taxable service during the period in question, rendering the demand untenable.

Omaxe Buildhome, a prominent developer engaged in large-scale residential projects, had collected basic sale price, preferential location charges and car parking fees from buyers. According to the statutory structure in effect at the time, the corporation considered parking charges as non-taxable even though service tax was duly paid on the basic sale price.

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The Department, relying on audit observations, proceeded to raise a claim under section 65(105)(zzzh) of the Finance Act and alleged suppression to support invocation of the extended limitation period.

The Tribunal, comprising Justice Dilip Gupta (President) and P.V. Subba Rao (Member Technical), observed that the imposition of service tax on construction of complex services suffered a major shift with the introduction of the negative list from 1 July 2012, following which Omaxe Buildhome began paying tax on parking charges.

For the previous period, however, there was no statutory basis to deem independent parking charges as taxable consideration. The Tribunal acknowledged that the assessee's belief was supported by the agreement's explicit division of charges.

Addressing the claim of suppression, the Bench ruled that there was no evidence of any premeditated act to dodge tax. The assessee had maintained records, filed returns, and provided all facts in the normal course, and the simple fact that the matter appeared during audit did not demonstrate deliberate falsification.

The Tribunal emphasised that revenue authorities can't deploy self-assessment to transfer their statutory duty of scrutiny to the assessee, and that disagreements resulting from legal interpretation cannot be used as justification for imposing penalties or invoking extended limitations.

It was further held that the Commissioner (Appeals) was not justified in invoking the extended period of limitation.

Allowing the appeal, the Bench set aside the demand, interest and penalties in their entirety.

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