2013 (9) TMI 588 - AT - Service Tax

Service tax demand - Renting of Immovable Property Service, Sale of place or time for Advertisement Service and Mandap Keeper Service, Section 65(19)(a), 65(105)(zzzm) and Section 65(105)(m) Held that - Indian Railways though part of the Union Government is liable to pay Service Tax in case the activities undertaken by them fall within the definition of taxable services - the Government is liable to pay indirect taxes for the activities undertaken by it if the activity undertaken comes within the scope of taxable event as decided in Re The Bill To Amend S. 20 of The Sea Customs Act (1963 (5) TMI 57 - SUPREME COURT). Pre deposit of duty One fifth of the duty was ordered to be submitted remaining amount was allowed to be stayed stay granted partly.

Summary

Issues:
1. Liability of Indian Railways to pay Service Tax
2. Definition of 'person' under the Finance Act, 1994
3. Invocation of extended period of time for confirmation of demand
4. Activities undertaken by Indian Railways falling within the scope of taxable services
5. Pre-deposit amount for the appellant

Issue 1: Liability of Indian Railways to pay Service Tax

The appellant, M/s Central Railway, Nagpur, a division of Indian Railways, did not discharge Service Tax liability for services rendered. The department issued a show-cause notice demanding Service Tax, interest, and penalties. The appellant argued that as a government department, Railways are exempt from tax as per the Constitution. However, the Revenue contended that Railways, operating on a commercial basis, are liable to pay Service Tax for commercial services. The Tribunal referenced a Supreme Court decision indicating that even the Government is liable to pay indirect taxes if activities fall within taxable services. Thus, the Tribunal held that Indian Railways are liable to pay Service Tax for taxable services provided.

Issue 2: Definition of 'person' under the Finance Act, 1994

The appellant contended that Chapter V of the Finance Act, 1994 does not define the 'person' liable to pay Service Tax. However, the Tribunal clarified that as per Section 68(1) of the Act, the service provider is primarily liable to pay Service Tax. The Tribunal highlighted that even if a person is notified under the rules as liable to pay Service Tax, the responsibility remains with the service provider. Referring to a Supreme Court case, the Tribunal emphasized that rules and notifications have the same force as law if approved by Parliament. Therefore, the Tribunal rejected the appellant's argument regarding the definition of 'person' under the Act.

Issue 3: Invocation of extended period of time for confirmation of demand

The appellant raised concerns about invoking the extended period for confirming the demand, stating that government departments do not engage in tax evasion. The Tribunal acknowledged the merit in this argument, noting that the question of time bar is both a legal and factual issue to be considered during the final appeal disposal. This issue remains open for further examination at the appropriate stage.

Issue 4: Activities undertaken by Indian Railways falling within the scope of taxable services

The Tribunal confirmed that the services provided by the appellant, such as renting of immovable property, sale of space for advertisements, and mandap keeper services, fall within the definition of taxable services under the Finance Act, 1994. The Tribunal indicated that the Service Tax liability is sustainable for demands made within the normal period of limitation. The Tribunal directed the appellant to make a pre-deposit of Rs.25 lakhs within eight weeks, with the balance of dues waived upon compliance, and recovery stayed during the appeal.

Issue 5: Pre-deposit amount for the appellant

The Tribunal directed the appellant to make a pre-deposit of Rs.25 lakhs within eight weeks and report compliance. Upon such compliance, the pre-deposit of the remaining dues would be waived, and recovery stayed during the appeal process, ensuring a fair resolution for the appellant.

This detailed analysis of the judgment addresses the key issues raised in the case concerning the liability of Indian Railways to pay Service Tax, the definition of 'person' under the Finance Act, 1994, the invocation of the extended period for demand confirmation, the taxable nature of services provided, and the pre-deposit requirements for the appellant.