The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Chennai, has set aside a service tax demand of over ₹19 lakh along with penalties on maintenance charges collected from tenants of the popular Chennai Citi Centre Mall at Mylapore.
The bench of Ajayan T.V. (Judicial Member) and Vasa Seshagiri Rao (Technical Member) have observed that the lessee shall be responsible to pay only the actual proportionate cost of maintenance charges and lessor by agreeing and undertaking not to have any profit element for the maintenance charges except pay and park system.
The case arose from a demand raised by the Service Tax Department, alleging that the mall owner was liable to pay service tax on monthly maintenance charges recovered from tenants under the category of “management, maintenance or repair service.” The Department had issued a Statement of Demand for the period February 2012 to June 2012, claiming non-payment of tax. The adjudicating authority had earlier confirmed the demand of ₹19,16,098 along with interest and penalties, a decision that was upheld by the Commissioner of Service Tax (Appeals).
Appearing for the appellant, counsel Ms. N. Asmitha argued that under the lease agreements, tenants were contractually bound to bear the actual cost of maintenance, and the mall management merely recovered these expenses on a reimbursement basis without any profit element. She pointed to Clause 8(c) of the lease deed, which specifically stated that the lessees would only pay proportionate actual costs, with any excess to be adjusted in subsequent years.
It was also highlighted that in earlier appeals involving the same issue, the Tribunal had ruled in favour of the appellant. Notably, Final Orders No. 41325-41327/2018 dated April 25, 2018, had already settled the matter, holding that such reimbursements could not be treated as taxable services.
The Bench noted that the amounts collected were purely reimbursements for actual expenses. There was no profit element involved in the recovery of maintenance charges. The principle laid down by the Supreme Court in Intercontinental Consultants Technocrats Pvt. Ltd. — that reimbursements cannot be subjected to service tax — was applicable.
The Tribunal concluded that the impugned order of the Commissioner (Appeals) could not be sustained, and it quashed the service tax demand, interest, and penalties.
Case Details
Case Title: M/s. Chennai Citi Centre Holdings Pvt Ltd. Versus Commissioner of GST & Central Excise
Case No.: Service Tax Appeal No. 40597 of 2016
Date: 26.08.2025
Counsel For Appellant: N. Asmitha, Advocate
Counsel For Respondent: N. Satyanarayana, Authorised Representative
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