2014 (9) TMI 75 - AT - Service Tax

Waiver of pre deposit - Renting of immovable property - Failure to obtain registration - Failure to file return and remit tax - Held that - Since the appellant Municipal Corporation had rented out its properties to poor and under-privileged sections of the society, in discharge of a Constitutional obligation flowing from the provisions of Article 243W (introduced by the 74th Amendment of the Constitution), it can be considered to have provided any taxable service liable to the levy of tax by the Union Legislature. Since the service provided by the appellant Municipal Corporation do not fall within the scope of the limitations on Union Legislative Power specified in Article 289 of the Constitution. However, the appellant appears to have an eminently arguable case with regard to the legitimacy of invoking the extended period of limitation, in the facts and circumstances of the case. - Partial stay granted.

Summary

Issues:
1. Liability to service tax on renting of immovable property service by Municipal Corporation.
2. Applicability of Board Circular No. F. No. - 255/1/2006-CX.4 dated 18/12/06.
3. Constitutional obligation of Municipal Corporation under Article 243W and 74th Amendment.
4. Legitimacy of invoking the extended period of limitation for tax liability.

Analysis:
1. The judgment deals with a case where a Municipal Corporation was issued a show cause notice for not obtaining registration, filing returns, and remitting service tax on renting of immovable property service provided during 2007-2008 and 2011-2012. The adjudication order confirmed a service tax demand of &8377; 70,08,745/- for the said period, with a portion of &8377; 12,75,580/- admitted by the petitioner for 2011-2012.

2. The appellant argued that they believed there was no liability to service tax based on a Board Circular dated 18/12/06. However, the Tribunal noted that the service provided by the Municipal Corporation did not fall within the limitations on Union Legislative Power specified in Article 289 of the Constitution, indicating a potential liability to service tax.

3. The petitioner contended that as the Municipal Corporation rented properties to the poor and underprivileged sections of society in discharge of a Constitutional obligation under Article 243W (introduced by the 74th Amendment), they should not be considered to have provided a taxable service. The Tribunal acknowledged the arguable nature of this contention, especially regarding the legitimacy of invoking the extended period of limitation for tax liability.

4. Considering the arguments presented, the Tribunal granted a waiver of pre-deposit and stayed further proceedings for recovery of the adjudicated liability, subject to the petitioner remitting &8377; 12,75,000/- plus interest within six weeks. Failure to comply would result in the appeal being rejected for non-payment. The judgment highlighted the need for the petitioner to report compliance by a specified date to avoid dismissal of the appeal.