The Commissioner Of Service Tax, ... vs M/S Green Valley Developers
2018 Latest Caselaw 957 Bom

 suresh                                  904-CEXAG-289.2016.doc


          IN THE HIGH COURT OF JUDICATURE AT BOMBAY
              ORDINARY ORIGINAL CIVIL JURISDICTION
                CENTRAL EXCISE APPEAL NO.289 OF 2016


 The Commissioner of Service Tax,
 Mumbai-VI Commissionerate, Mahavir
 Jain Vidhyalay, Juhu Lane, C.D.
 Bufiwala Road, Andheri - West,
 Mumbai - 400 058.                               ....  Appellant

          - Versus -

 M/s. Shri Krishna Chaitanya Enterprises,
 102, "A" Wing, Radha Vilas Apartment,
 Kandarpada, Dahisar - West,
 Mumbai - 400 068.                               ....  Respondent

                               WITH
                CENTRAL EXCISE APPEAL NO.311 OF 2016


 The Commissioner of Service Tax,
 Mumbai - VII Commissionerate,
 16th Floor, Satra Plaza, Sector 19D,
 Palm Beach Road, Vashi, 
 Navi Mumbai, Pin Code - 400 705.                ....  Appellant

          - Versus -

 M/s. Green Valley Developers,
 Olympia, Central Avenue, Hiranandani
 Business Park, Powai, Mumbai-400 076.           ....  Respondent

                               WITH



                                                      Page 1 of 32


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                CENTRAL EXCISE APPEAL NO.74 OF 2017


 The Commissioner of Central Excise &
 Service Tax, Pune - III, having his
 office at ICE House, A-Wing,
 41/A, Sassoon Road, Pune - 1.                              ....  Appellant

          - Versus -

 Kumar Beheray Rathi,
 having office at Kumar Capitals,
 2nd Floor, East Street,
 Pune - 411 001.                                            ....  Respondent


 Ms P.S. Cardozo for the Appellant in CEXA-289/2016.
 Mr. Bharat Raichandani i/by UBR Legal for the
 Respondent in CEXA-289/2016.
 Mr. Swapnil Bangur with Mr. Amol D. Joshi for the
 Appellant in CEXA-311/2016.
 Mr. M. Dwivedi for the Appellant in CEXA-74/2017.
 Mr. M.H. Patil with Ms Padmavati Patil i/by Ms Aparna
 Hirandagi for the Respondent in CEXA-74/2017.


                                  CORAM: S.C. DHARMADHIKARI &
                                                 SMT. BHARATI H. DANGRE, JJ.

DATE : JANUARY 25, 2018

ORAL JUDGMENT ( Per Shri S.C. DHARMADHIKARI, J. ):

1. All these appeals involve similar questions of law and

facts and were heard together. They are, therefore, being

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disposed of by this common Judgment and Order.

2. The Central Excise Appeal No.289 of 2016, from

which we take the facts, is directed against the order of the

Customs, Excise & Service Tax Appellate Tribunal ("CESTAT" for

short), West Zonal Bench, Mumbai, dated 7-3-2016.

3. By the order under appeal, the CESTAT held that the

assessee before us could not be called upon to pay service tax on

amounts which are collected as maintenance charges for

up-keep of the apartment or premises. The CESTAT further held

that the issue is settled in favour of the assessee and against the

Revenue by its prior orders.

4. To appreciate the correctness of this legal conclusion

and finding that even otherwise the appeals involve substantial

questions of law, we proceed to admit these appeals on the

following substantial questions of law:-

"(a) Whether the CESTAT was right in holding that the assessee was not providing Management, Maintenance or Repair Service by collecting amount from prospective flat buyers, for maintaining the building, in the guise of

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deposits which is not returnable? Whether the CESTAT has erred in holding that assessee is providing statutory service and has rendered definition provided under Section 65(105)(zzg) of Finance Act as null and void by accepting that he is not providing Management, Maintenance or repair service by maintaining the building and collecting amount for that or not?

(b) Whether the CESTAT was right in setting aside the interest and penalty on the assessee?"

5. Since Ms Cardozo and Mr. Raichandani, as also

Mr. Patil have made extensive submissions and we heard them

at length, we dispose of these appeals with their consent by this

Judgment and Order.

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

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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 the Anti-Evasion Cell. The

assessee was granted registration.

7. A Show Cause Notice dated 28-2-2014, alleging as

above, was issued and the demand was raised on the basis that

the service tax amount collected from customers during the

period 1-7-2010 to 31-3-2011 but not paid in the Government

treasury, is the subject-matter and that was quantified at

Rs.1,23,68,420/-.

8. The assessee admitted that it had not applied for

service tax registration even though it provided taxable service

since 2009-10. The 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 period 2010-11 to 2011-12, without

interest. The assessee admitted that at the time of introduction

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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 tax for the period July, 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.89,82,087/-. The assessee paid

Rs.87,59,633/- leaving a short-payment of Rs.2,22,454/- which

is due to non-revision of the Service Tax Returns for the period

April, 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

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the amount of Rs.99,08,640/-, 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 sub-

heads was confirmed.

suresh 904-CEXAG-289.2016.doc

11. It is such an order which was challenged by filing an

appeal to the CESTAT. 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 vs. 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:-

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"(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 res-intigra as this bench in the case (a) Kumar Behary Rathi 2014 (34) S.T.R. 139 (b) Goel Nitron Constructions 2015-TIOL- 1787-CESTAT-Mum (c) Hiranandani Constructions Pvt. Ltd. 2015-TIOL-2135-CESTAT-Mum, held that service tax is not leviable on such amounts which are collected as maintenance charges for up keep of the apartment's 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.

13. The Revenue has brought this appeal only in relation

to the finding of the Tribunal and its ultimate conclusion that

the assessee was not providing management, maintenance or

repair services by collecting the amount from prospective Flat

buyers, for maintaining the building in the guise of deposit

which is not refundable. The Revenue says that the CESTAT

erred in holding that the assessee is providing statutory service

suresh 904-CEXAG-289.2016.doc

and the definition provided by Section 65(105)(zzg) of the

Finance Act would not be applicable or attracted. In short, the

assessee is not providing management, maintenance or repair

services for maintaining the building and collecting the amount

for that purpose.

14. Ms Cardozo would submit that this conclusion of the

Tribunal is ex facie erroneous and unsustainable in law. The

CESTAT presumes that in taking deposits the assessee acts as a

Trustee or pure agent. The agreements made between the

assessee and the buyers of the Flats submitted by the assessee on

a sample basis also confirm the factual position that the assessee

received the amounts from the buyers for maintenance and

repairs of the property. Thus it was providing a taxable service.

Inviting our attention to the definition of the words

"management, maintenance or repair" as appearing in the

Finance Act, 1994, Ms Cardozo would submit that the CESTAT

failed to appreciate that the amounts were received by the

assessee from the buyers of the Flats, admittedly, for

maintenance and repairs of the property. The assessee has also

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received monetary consideration from them. That is how it has

rendered a taxable service. The Tribunal has rendered

conflicting Orders and Judgments and in that regard our

attention is invited to an order passed by the Tribunal's South

Zonal Bench, Chennai and the orders passed by the Tribunal in

the case of some builders holding that maintenance charges

collected by them are their income. However, the Tribunal relied

upon another order passed in the case of Kumar Behary Rathi

v. Commissioner of Central Excise, Pune-III {2014 (34) S.T.R.

139 (Mumbai)} and that, according to Ms Cardozo, does not

take into consideration the various facets of the services

rendered. She would, therefore, submit that the Tribunal's

findings are erroneous and its conclusions thus unsustainable in

law.

15. On the other hand, Mr. Raichandani and Mr. Patil,

appearing on behalf of the respective assessees, would submit

that the Tribunal has insofar as the Works Contract Services is

concerned, came to the conclusion that post-amendment to the

statutory provision with effect from 1-7-2010, the matter must

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go back for reconsideration by the Adjudicating Authority.

Therefore, it is submitted that insofar as this aspect is concerned,

there is no expression of opinion on merits. That part of the

order of the Tribunal, therefore, raises no substantial question of

law.

16. As far as the conclusion on the other and debatable

point, Mr. Raichandani and Mr. Patil would submit that we

should not loose focus and sight of the Maharashtra Ownership

Flats (Regulation of the Promotion of Construction, Sale,

Management and Transfer) Act, 1963 ("MOFA" for short). The

assessee is a promoter within the meaning of this law. The

Tribunal, on appreciation and appraisal of all the factual

materials and in the backdrop of the obligations and duties,

particularly mentioned in Sections 5 and 6 of the MOFA,

correctly concluded that service tax is not leviable on such

amounts which are collected as maintenance charges for the

up-keep of the apartment or premises. The Tribunal committed

no error in following Kumar Behary Rathi (supra). Both would,

therefore, submit that the substantial questions of law need to

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be answered in favour of the assessee and against the Revenue.

17. For a proper appreciation of the rival contentions,

we must first consider the factual allegations. 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/noticee 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 noticee. 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

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assessee/noticee 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". The Finance

Act, 1994 commences with Section 64 and in Section 65 the

definitions are set out. Insofar as the subject-definition is

concerned, that activity is defined in Section 65 (64). That reads

as under:-

"(64) "Management, maintenance or repair" means any service provided by --

  suresh                                          904-CEXAG-289.2016.doc


          (i)      Any person under a contract or an agreement; or

(ii) A manufacturer or any person authorised by him, in relation to,

(a) Management of properties, whether immovable or not;

(b) Maintenance or repair of properties, whether immovable or not; or

(c) Maintenance or repair including reconditioning on restoration, or servicing of any goods, excluding a motor vehicle.

Explanation. -- For the removal of doubts, it is hereby declared that for the purposes of this clause -

(a) "goods" includes computer software;

(b) "properties" includes information technology software."

19. 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.

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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

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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.

22. In a recent decision delivered by a Division Bench of

this Court, of which one of us (Shri Justice S.C. Dharmadhikari)

was a party and reported in AIR Bombay High Court Reports

2017 (1) ABR Page 673 {Paul Parambi, Chief Promoter,

Springs CHS Limited and another v. Bombay Dyeing &

Manufacturing Co. Ltd. & another}, the Division Bench held

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and in this context as under:-

"17. We have heard the learned counsel for parties at length and have perused the papers and proceedings in the Writ Petition as well as the compilation of documents. We have also carefully perused the impugned order. Before we deal with the rival contentions, it would be necessary to note the objects and reasons of MOFA, 1963 as well as the MAO Act and several of its provisions. The objects and reasons of the MOFA, 1963 indicate that initially the Government of Maharashtra appointed a committee known as the Paymaster Committee to study and report various aspects of the business of construction and sale of flats on ownership basis. The Committee submitted its report to the Government of Maharashtra on 29th June, 1961. On the basis of the findings of this Committee, the Government introduced a Bill. The object behind the legislation was to see that there is integrity of purpose on the part of the promoter and that there is willingness and earnest co-operation of the flat purchaser and to solve the enormous problem of housing to some extent. It is in these circumstances, that MOFA, 1963 was promulgated. The preamble of this Act would show that it is enacted to regulate in the State of Maharashtra, the promotion of construction, sale, management and transfer of flats taken on ownership basis.

18. Section 2 of this Act (MOFA, 1963) is the Definitions Section. The words "Competent Authority"

have been defined in Section 2(a) to mean a Competent Authority appointed under Section 5A of the Act. The word "Flat" is defined in section 2(a-1) to mean a separate and self-contained set of premises used or intended to be used for residence, or office, show-room or shop or godown or for carrying on any industry or business and includes a garage, the premises forming part of a building and includes an apartment. The word "Apartment" has also been defined in Section 2(f) and would have the same meaning assigned to it in the MAO

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Act. The word "Registrar" has been defined in Section 2(d) to mean the Registrar as defined in the Maharashtra Co-operative Societies Act, 1960 or as the case may be in the Companies Act, 1956. The word "prescribed" is also defined in section 2(b) to mean prescribed by the rules made under MOFA, 1963.

19. Thereafter, Section 3 deals with the general liabilities of the Promoter. Section 4 deals with the obligation of the promoter to enter into an agreement before accepting advance payment or deposit. Section 5A talks about who is the Competent Authority under the Act and reads as under:

"5A. Competent Authority The State Government may, by notification in the Official Gazette, appoint an officer, not below the rank of the District Deputy Registrar of Co-operative Societies, to be the Competent Authority, for an area or areas to be specified in such notification and different officers may be appointed as Competent Authority for different local areas, for the purposes of exercising the powers and performing the duties under Sections 5, 10 and 11 of this Act."

20. As can be seen from the said Section, the State Government may appoint an Officer not below the rank of the District Deputy Registrar of Co-operative Societies, to be the Competent Authority, for an area or areas to be specified in such notification. Different officers may be appointed as the Competent Authority for different local areas for the purposes of exercising powers and performing the duties under Sections 5, 10 and 11 of the Act. As far as, Sections 6, 7, 8 and 9 are concerned, they are not really germane for the controversy before us. The real controversy before us is with reference to Section 10 of MOFA, 1963. Section 10 as it was originally enacted read as under:-

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"10. Promoter to take steps for formation of co-operative society or company:- As soon as a minimum number of persons required to form a co-operative society or a company have taken flats, the promoter shall within the prescribed period submit an application to the Registrar for registration of the organisation of persons who take the flats as a co-operative society or, as the case may be, as a company; and the promoter shall join, in respect of the flats which have not been taken, in such application for membership of a co-operative society or as the case may be of a company. Nothing in this section shall affect the right of the promoter to dispose of the remaining flats in accordance with the provisions of this Act."

21. Thereafter, the MAO Act was brought into force w.e.f. 19th February, 1971. Because of this, Section 10 of MOFA, 1963 was amended in 1971 and read thus:

"10. Promoter to take steps for formation of co-operative society or company: (1) As soon as a minimum number of persons required to form a co-operative society or a company have taken flats, the promoter shall within the prescribed period submit an application to the Registrar for registration of the organisation of persons who take the flats as a co-operative society or, as the case may be, as a company; and the promoter shall join, in respect of the flats which have not been taken, in such application for membership of a co-operative society or as the case may be of a company. Nothing in this section shall affect the right of the promoter to dispose of the remaining flats in accordance with the provisions of this Act.

(2) If any property consisting of building or buildings is constructed or to be constructed and the apartment takers propose to submit the apartments to the provisions of the Maharashtra

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Apartment Ownership Act, 1970, by executing Declaration and Deed of Apartments as required by that Act, then the promoter shall inform the Registrar, as defined in the Maharashtra Co-operative Societies Act, 1960 accordingly; and in such cases it shall not be lawful to form any co-operative society or company and each apartment owner shall be entitled to the exclusive ownership and possession of his apartment as provided in the first mentioned Act."

22. As can be seen from the above reproduction, sub-section (2) was added to Section 10 and inter alia stipulated that if any property consisting of building or buildings, is constructed or to be constructed and the apartment takers propose to submit the apartments to the provisions of the Maharashtra Apartment Ownership Act, 1970 by executing a Declaration and Deed of Apartments as required by that Act, then the promoter shall inform the Registrar, as defined in the Maharashtra Co-operative Societies Act, 1960 accordingly, and in such cases it would not be lawful to form any co-operative society or company as contemplated under Section 10(1). It further provided that each apartment owner would be entitled to the exclusive ownership and possession of his apartment as provided in the first mentioned Act."

23. Another Judgment {Mazda Construction Company

& Ors. Vs. 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

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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 sub-section (1) of

this provision opens with a non-obstante clause 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 sub-section (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 non-registration of Agreement required

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to be registered under Section 4 is set out.

24. By Section 5, it is stated that the promoter shall

maintain a separate account in any Bank of the sums taken by

him, from persons intending to take or who have taken, Flats, as

advance or deposit, including any sums so taken towards the

share capital for the formation of a co-operative society, or

towards the outgoings, including ground rent if any, municipal

or other local taxes, taxes on income, water charges, electricity

charges, revenue assessment, interest on any mortgage or other

encumbrances if any, and he shall hold the said moneys for the

purposes for which they were given and shall disburse the

moneys for those purposes and shall on demand in writing by a

Competent Authority, make full and true disclosure of all

transactions in respect of that account. By Section 6, it is clear

that there is a responsibility for payment of outgoings till

property is transferred. A promoter shall while he is in

possession, and where he collects from persons who have taken

or are to take over Flats, sums for the payment of outgoings

even thereafter, pay all outgoings until he transfers the property

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to the persons taking over the Flats, or to the organisation of any

such persons and the promoter shall continue to be liable in

terms of this provision. Then, by Section 7 there are certain

other matters and which are taken care of, namely, plans and

specifications disclosed cannot be altered. The refund of amount

paid with interest for failure to give possession within specified

time or further time allowed, is a matter covered by Section 8.

Then, by Section 9 no encumbrance can be created without

consent of parties after execution of Agreement for Sale. Then

by Section 10, the promoter has to take steps for formation of

co-operative society or company, and by Section 11 the

promoter to convey title, etc., and execute documents according

to the agreement. There are general liabilities of Flat takers also.

Then there is a provision whereby essential supply or service

cannot be cut, withheld, or curtailed or reduced. By Section 13,

offences by promoters and consequences on conviction are

pointed out.

25. Thus, this is an enactment which takes care of the

aspects noted above.

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26. The arguments of the Revenue fail to take note of

this backdrop and in which it terms the obligations and duties

under the MOFA to be rendering of taxable service. The

definition in the Finance Act, pure and simple, alone has been

looked at for the purpose of advancing this argument. The

backdrop in which the promoter comes on the scene is totally

lost sight of and that is precisely noted by the Tribunal. It is

well-settled that in India there is dual ownership. The land

beneath the building does not belong to the person who

constructs or owns the building. In most of the cases, the

builders and developers obtain rights from the land owners so as

to enable them to pull down the existing structure and exploit

the potential of the land to its optimum. The covenants with the

owner are that such land would be exploited to its optimum and

with its exploitation and usage the builder and developer can

construct building/s comprising of units and flats which can be

sold in the open market. The consideration for this agreement is

strictly a sum payable in money so also certain number of units

or Flats to be handed over to the owner. The cost of construction

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and other charges are defrayed or reimbursed by the promoter

or builder by selling units or Flats other than those reserved for

the owner of the land, in open market at the price which it

commands on the given date. It is also clear from the provisions

of law that it is not necessary that any or all the Flats should be

ready or the building itself should be completely constructed

and fit for occupation. The Flats in the buildings under

construction can also be sold and the agreement for sale with

individual Flat takers can provide for appropriate stipulation

with regard to payment of money and consideration. This is

agreed to be paid and collected slab-wise. The Flat taker,

therefore, knows at what stage he has to pay the amount and if

he has to pay the amount in toto by the stage, namely,

construction of a particular floor, located on which the Flat

agreed to be sold to him is constructed, then, full payment

would be made by that time. However, the obligation that is

carved out by the statute goes beyond this contractual

stipulation between the promoter/developer and the Flat

purchaser. The law enacts a regulatory mechanism so that there

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is enough safeguard and protection for such Flat takers and unit

purchasers which would ensure to them a title in the property.

The title in the building has to be conveyed together with the

rights to the land beneath it. The land beneath and appurtenant

to the building therefore enables the building owner, namely, a

co-operative housing society or a company to enjoy the fruits of

the development. When housing accommodation is scarce and

there is acute shortage, private participation for removal of this

shortage or scarcity is encouraged by the State, but at the same

time the Legislature has ensured that there are safeguards and

inbuilt protection to the Flat purchasers else they could be

exploited by builders and developers. There are often complaints

and cases of unscrupulous builders and developers fleecing and

cheating Flat purchasers. Therefore, a complete mechanism till

conveying of the property is put in place. Prior thereto, it is the

promoter who must form the legal entity, namely, a co-operative

housing society or a company. It is towards that end that he has

to hold on to the property and the money for complete discharge

of his eventual duty and function. Until that stage is reached, he

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has to maintain, safeguard and protect the property. He has to

look after the day-to-day wear and tear. Therefore, when he

maintains the structure or repairs it, he is not rendering a

taxable service in the sense envisaged by the Financial Act,

1994. If one looses complete focus or sight of the backdrop in

which the so called service is rendered, then, the conclusion as

erroneous and suggested by the Revenue will be reached.

27. The deposit or the monies themselves are held and

appropriated towards payment of taxes, etc., popularly known

as outgoings. The building and the Flats therein has to stand

intact till all the Flats or units are sold and the statutory

obligations are fully discharged. This is not a service of the

nature understood by Section 65 (64) of the Finance Act, 1994.

It is not a contractor simplicitor of maintenance of immovable

property. It is not as if there is a existing building comprising of

Flats, fully occupied, the maintenance and upkeep of which is

handed over under a contract. It is a statutory obligation

superimposed on a contract to sell a Flat/unit in a building to be

constructed on a piece or parcel of land. That cannot be

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confused with a taxable service as defined under the Finance

Act, 1994. The day-to-day upkeep, maintenance and repair is till

the statutory duty is fully performed as noted above.

28. True that while defining the term "Service" in the

Consumer Protection Act, 1986, the Legislature did not exclude

construction or building activity and therefore provided that the

definition under that {Section 2(o)} means service of any

description which is made available to potential users and

includes the provision of facilities in connection with banking,

financing, insurance, transport, processing, supply of electrical

or other energy, board or loading or both, and by amendment

housing construction is also included in the inclusionary part of

the definition. We are not concerned with the definition of

service under the Consumer Protection Act, 1986 and that

would not control the provisions of the Finance Act, 1994, for

the simple reason that interest and rights of a consumer are

protected and safeguarded by law so as to enable him to

complain about deficiency and defect in the service by

approaching the Forum under the Consumer Protection Act,

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1986 and that law has a distinct objective and purpose. As noted

by the Hon'ble Supreme Court in the case of Lucknow

Development Authority Vs. M.K. Gupta, reported in AIR 1994

SC 787, the building and construction activity is a service

covered by the expression Service as defined in the Consumer

Protection Act, 1986 but that law is not a taxing or fiscal statute.

Hence, that definition is of no assistance in construing similar

expression in the Finance Act, 1994. The backdrop, setting and

the context in which the word or expression and its definition

appears is thus different. We are concerned here with a taxable

service. The service of maintenance, management or repair,

rendered by any person to any other person is a taxable service

but in the context and backdrop in which the issue arises before

us, we do not think that a taxable service is rendered. The

Revenue does not wish to take into consideration the

background in which buildings are maintained and till they are

conveyed with complete title to even the land beneath. Thus, the

provisions of Sections 5 and 6 and eventually the further

provisions right upto Section 13 of the MOFA would make it

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clear that builder and developer maintains and repairs the

property till it is conveyed or the title in the same is conveyed to

the Flat purchasers or the legal entity which would ultimately be

formed by him. Thus, a co-operative housing society or a

company would have to be formed of all those Flat purchasers

who have purchased the Flats prior to or under construction,

namely, subsequently purchased Flats. The completion of the

building or it being rendered fit for occupation is one of the

duties and obligation of the builder and promoter under this

law. For them to be conveyed he has to maintain the property.

His liability is in terms of the statute itself. It is towards that end

that money is collected and paid over to the statutory authorities

in the form of charges and taxes as it is the builder's obligation

to collect these amounts from individual Flat takers and make it

over to these authorities. After formation of the legal entity, the

obligation ceases and it is taken over by the co-operative

housing society or the company. Until that takes place, the

promoter continues to be liable. If this aspect is ignored, then,

the narrow or restricted construction placed on the provision by

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the Revenue can be accepted. The tax then can be justified on

the ground that it is a taxable service provided by the builder.

However, if all this has been seen not de hors the MOFA by the

Tribunal, then, it has not committed any error of law apparent

on the face of the record, or perversity. It has construed the

definition of the above provision consistent with the provisions

of MOFA and mindful of the same. When such is the exercise

undertaken by the Tribunal, we do not think that its conclusions

are so vitiated or perverse so as to enable us to interfere

therewith in our further appellate jurisdiction.

29. As a result of the above discussion, we answer the

substantial questions of law in favour of the assessee and against

the Revenue. Consequently, these three appeals stand dismissed

but with no order as to costs.

(SMT. BHARATI H. DANGRE, J.) (S.C. DHARMADHIKARI, J.)