Whether Service Tax is Payable by Parking Operators in Malls?

On Wednesday the Supreme Court stayed a judgement of CESTAT, which had confirmed levy of Service Tax under the head of the service of management, repair and maintenance of immovable properties on the operation of the parking facilities provided by entities to shopping malls.

In the instant case, the appellant was Metropolitan Event Management which challenged the Tribunal’s order on the ground that even though parking to visitors was exempt, the department is indirectly trying to tax an exempted service by putting it under a head that is not applicable at all.

Counsels for the assessee argued that the Tribunal’s order was incorrect as entities rendering parking facilities offer no service and don’t receive any consideration for such services.

After hearing the submissions, the Bench issued notice to Revenue authorities and stayed the Tribunal’s order.

Background of the case:-

The appellants operate parking areas in five malls for which they have appointed a third party which remits the proceeds back to the appellant.

The third-party raised invoices for management fee and operating cost and levies a service tax on these amounts and remits the remaining amount every month. The appellants argued that income from this belongs to them and nothing is owed to mall owners. 

Appellants also claim that they have no written contract with the mall owners and neither do they rent any space from them and the only concern of the Mall owners is that their patrons should get access to hassle-free parking.

An audit of appellants account was conducted by the service tax department and show cause notices were issued to it for alleging that its activity amounted to maintenance, management and repair and service tax should be levied on them as per the Finance Act. 1994

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The CETSTAT upheld the service tax demand and stated that they could not accept that the mall owners had given them massive space without any agreement. The Tribunal further held that the appellant’s activity is covered under management, maintenance, and repair. They were liable to pay service tax even if they were not paying anything to the mall owners.

Lastly, the Tribunal stated that the right to collect fees from the patrons was a consideration that the appellants got for rendering their service.

In the appeal filed u/s 35L of Central Excise Act, the appellant argued that their activity’s nature was ‘operations’ which is distinct from ‘management’.

Case Details:-

Title: Metropolitan Event Management vs Commissioner Central Excise, Delhi

Case No.:Civil Appeal No(s). 3645/2020

Date of Order:13.01.2021

Coram: Hon’ble Justice AM Khanwilkar, Hon’ble Justice B.R Gavai and Hon’ble Justice Krishna Murari

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