Supreme Court to examine whether Service Tax is payable by Parking Facility Operators in Malls

Supreme Court to examine whether Service Tax is payable by Parking Facility Operators in Malls

The Supreme Court of India (SC) has put a stay on the judgment passed by the Customs Excise and Service Tax Appellate Tribunal (CESTAT) and it shall examine the issue of payment of service tax by parking operators in Malls

The Top Court has put a stay on the judgment of the CESTAT which had confirmed levy of Service Tax under the head "service of management, maintenance or repair of immovable properties" on the operation of parking facility provided by entities to Shopping Malls.

An appeal was filed by Metropolitan Even Management (Earlier known as MGF Event Management) [Appellants] against Commissioner of Central Excise, Delhi (Respondent). The appeal was filed before the SC against the judgment of the CESTAT.

The appellant is operating parking areas in five Malls by providing parking to the visitors of shopping malls. They also collect parking charges and have appointed a third-party agency for managing the parking area for collecting 'Parking Fees'.

The invoice was raised by the third-party agency for operating cost and its management fee and it also charged service tax on these amounts and pay the remaining amount of gross collection on monthly basis after deducting its direct operating cost and management fee.

The appellants claimed that the income earned from parking fees belongs to them and it shall not be remitted to the mall owners from the collections made or otherwise.

The appellants further contended that there was no written contract between them and the owners of the Mall. They also contended that they have not been paying any amount by way of rent or space allocation to the Mall owners for operating the parking area.

The appellant asserted 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.

The appellant filed the appeal before the SC under Section 35L of the Central Excise Act, 1944, and contended that the appellant's activity is the operation and it is not similar to management related activities.

The CESTAT's judgment was challenged by the appellant, on the grounds that while providing parking services to visitors is exempted, the Revenue is indirectly trying to tax an exempted service by bringing it under the head which is not applicable at all.

On behalf of the assessee, it was contended that the CESTAT's judgment was incorrect for the reason that no service is being rendered by the entities operating the parking facilities to the mall and neither there is any consideration received by them from the mall owners instead of any such services.

On the other hand, the CESTAT upholding the service tax demand, asserted that it cannot accept the appellant's plea that huge parking space area was given to the appellant without any agreement with respect to financial consideration or without an agreement with respect to contingent liabilities with respect to theft, injuries, fire or other liabilities.

The Tribunal asserted that the appellant's activity was in any case covered under the definition of ̳management, maintenance or repairs.

The Appellant in its statutory appeal filed in the Supreme Court under Section 35L of the Central Excise Act, 1944, appellant contended that the appellant's activity was 'operation', and is quite distinct from 'management'.

A Bench comprising Justices A.M. Khanwilkar, B.R. Gavai, and Krishna Murari, after hearing the submissions of the parties issued notice to the Revenue authorities. The SC directed the stay of the impugned judgment of the CESTAT.