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Parking facilities in malls liable to pay service tax: Supreme Court
An appeal was filed in the Supreme Court by MFG Event Management (Management) against the order passed by the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), directing the Management to pay service tax for services of parking provided to the visitors of the malls it operates in.
The appeal was heard by a three-judge bench comprising of Justices A.M. Khanwilkar, B.R. Gavai, and Krishna Murari. It was presented by the appellants that the operation of the Management in mall parking facilities cannot be considered as the rendering of service since no consideration for such operation is being paid to them by the malls. It was presented that they were merely an entity that provides parking to the visitors of the mall and has appointed a third-party to collect a sum of the amount as a fee for the same. The fee was said to be an invoice for the operating costs and management fees, upon which service tax was deducted and after such deductions, the remaining amount was given to the appellants. It was submitted that no portion of this amount was distributed to the mall and that the only interest of the mall was to ensure efficient use of parking space and provision of hassle-free parking to its visitors. They declared that no agreement was made by the mall or the Management towards rent payable or space allotted for its operation in the mall. Hence, the appellants, stating that no services were provided to the mall by them through their operation in its parking facility, submitted that the judgment passed by the CESTAT was faulty.
The Tribunal had observed in its judgment that the very act of provision of the parking space by the malls for the Management’s operation and collection of the parking fee, in order to fulfill its personal interest of providing comfort to its visitors and optimal utilization of the space is to be considered as ‘service’ according to the provisions under the Finance Act, 1994. Addressing the argument of no monetary consideration being paid, it was stated that the amount charged and received by the Management must be regarded as consideration for rendering services of operating the parking facility of the mall. Hence, it was held that the Management will be liable to pay Service tax on the amount it receives by rendering its services.
The Supreme Court, noting the grounds under which the CESTAT levied service tax on the Management for its operation in the parking facility, stayed the judgment passed by the Tribunal while also issuing a notice to the Revenue Department.
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