No service Tax on non- refundable deposits from purchasers; maintenance of apartments/ premises is builder’s obligation: Bombay HC

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Bombay HC upholds CESTAT decision, confirms no service tax on non-refundable amounts collected by builders / promoters from flat purchasers towards maintenance of apartments / premises; Referring to provisions of Maharashtra Ownership Flats (Regulation of the Promotion of Construction, Sale, Management and Transfer) Act, 1963 (MOFA), particularly obligations and duties on builders / promoters specified thereunder, HC observes that the backdrop in which promoter comes on the scene is totally lost sight of by Revenue and that is precisely noted byCESTAT; States, “…the provisions of Sections 5 and 6 and eventually the further provisions right upto Section 13 of the MOFA would make it 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…”;

Therefore, deposit or monies themselves held and appropriated towards payment of taxes etc., popularly known as outgoings, cannot be understood as “management, maintenance or repair” u/s 65(64) of Finance Act, holds HC while observing that it is not a contract simplicitor of maintenance of immovable property; Refuses to apply definition of “service” under Consumer Protection Act stating that same would not control the provisions of Finance Act inasmuch as the backdrop, setting and the context in which it appears is different, viz. protection and safeguarding of interest and rights of a consumer against deficiency and defect in service: Bombay HC

Citation: [TS-48-HC-2018(BOM)-ST]