2012 (9) TMI 852 - AT - Service Tax

Application for waiver of pre-deposit of the amount of service tax, interest and penalties - applicant is a statutory corporation established by the Maharashtra State Government - Revenue issued a show cause notice demanding service tax on the ground that the applicant was providing maintenance and repair service which is taxable - Held that - As per the Board s circular No.89/7/2006 dated 18.12.2006 that activities performed by a public authority under the provisions of law are not taxable under the Service Tax. Since applicant is a public authority hence pre-deposit of service tax, interest and penalties is waived and recovery of the same is stayed - Decided in favor of applicant

Summary

Issues:
1. Whether the applicant is liable to pay service tax on the amenities provided under a lease agreement.
2. Whether the applicant, being a public authority, is exempt from service tax as per relevant provisions and circulars.

Issue 1: Liability to pay service tax on amenities provided under a lease agreement

The applicant, a statutory corporation established by the Maharashtra State Government, provided amenities like roads, water, drainage, and street lights to lessees in an industrial estate. The Revenue issued a show cause notice demanding service tax, arguing that the maintenance and repair services provided were taxable under the Finance Act. The Revenue contended that the collection of fees for these amenities and their maintenance constituted a taxable service. However, the applicant argued that the activities performed by a public authority, as per the Commissioner (Appeals) findings, are not taxable under service tax laws. The Revenue maintained that the applicant's contractual obligations to provide and maintain amenities made them liable for service tax under the Finance Act.

Issue 2: Exemption from service tax as a public authority

The Commissioner (Appeals) determined that the applicant is indeed a public authority, a finding reiterated in the impugned order. The applicant relied on a Board's circular dated 18.12.2006, which stated that activities performed by a public authority are not subject to service tax. Considering this circular and the Commissioner's findings, the Tribunal concluded that the applicant had a strong prima facie case in their favor. Consequently, the Tribunal waived the pre-deposit of service tax, interest, and penalties, and stayed the recovery during the appeal's pendency. The Tribunal allowed the stay petition based on the applicant's status as a public authority and the provisions of the Board's circular exempting public authorities from service tax liability.

This judgment clarifies the liability of a statutory corporation providing amenities under a lease agreement for service tax and highlights the exemption available to public authorities under relevant circulars and legal provisions. The Tribunal's decision to waive the pre-deposit and stay recovery during the appeal showcases the significance of the applicant's status as a public authority in determining service tax liability.