The Customs Excise and Service Tax Appellate Tribunal (CESTAT) held that the right to collect parking fees given by the mall owners is nothing but a consideration provided to the appellant by the mall owners.
The appellant is operating parking areas in five Malls by way of providing parking to the patrons/visitors of shopping malls and collecting parking fees for which they have appointed an outside agency for managing the parking area who is collecting “Parking Fees” on behalf of the appellants and remitting the proceeds to the appellant.
The third-party agency raises the invoice for operating cost and its management fee and charges Service tax on these amounts and pays the remaining amount of gross collection on monthly basis after deducting its direct operating cost and management fee.
The entire revenue generated by way of selling parking tickets belongs to the appellant. Parking income is recorded as revenue by the appellant in its books of accounts. The appellants claim that the income earned from parking fees belongs to appellants entirely and nothing is remitted to the mall owners from the collections made or otherwise.
The claim of the appellant that it has no written contract with the Mall owners and is not paying any amount by way of rent or space allocation or by whatever name it may be called to the Mall owners for operating the parking area.
The appellant asserts that the only interest of Mall owners is that there should be hassle-free parking and that the space available for parking should be utilized to the maximum possible extent so that there is adequate parking space for the vehicles, otherwise it will affect the popularity of the Mall and may cause traffic.
An audit of the appellant was conducted by the service tax department and on the basis of the audit, the above three show-cause notices were issued to the appellants alleging that the activity of the appellant amounted to management, maintenance or repairs‘ which was leviable to service tax as per the provisions of Finance Act, 1994.
The allegations made in the show cause notice were confirmed vide the impugned Order-in-Original against which the appellant is in appeal before the Tribunal.
The division bench constituting of President, Justice Dilip Gupta and Technical Member, C.L Mahar based on an appeal filed by M/s MGF Event Management.
SECTION 67. Valuation of taxable services for charging service tax. —
(1) Subject to the provisions of this Chapter, where service tax is chargeable on any taxable service with reference to its value, then such value shall, —
(i) in a case where the provision of service is for a consideration in money, be the gross amount charged by the service provider for such service provided or to be provided by him;
(ii) in a case where the provision of service is for a consideration not wholly or partly consisting of money, be such amount in money as, with the addition of service tax charged, is equivalent to the consideration;
(iii) in a case where the provision of service is for a consideration which is not ascertainable, be the amount as may be determined in the prescribed manner.
The bench has observed that the income shown in the balance sheet as parking fees will be considered as cum-tax value for determination of service tax and eligible to avail the Cenvat credit of the service tax paid on input services, which have been provided to the appellant by third party agency or any other service providers in providing the said service of management, maintenance, and repairs of the parking area.
The bench further stated that the right to collect parking fees given by the mall owners is nothing but a consideration provided to the appellant by the mall owners and the measure of such consideration is the gross income generated through the parking fees.