2014 (9) TMI 815 - AT - Service Tax

Supply of Tangible Goods service - rental charges/hiring charges on the water meters installed in the places where water is supplied - appellant submitted that, the appellant is performing statutory function and within the meaning of statute, appellant has to be treated as State. What is collected by them is a statutory levy and he submits the charges collected by them are prescribed by the statute and therefore it cannot be liable to tax at all - Held that - It is nobody s case at present that there is an exemption notification applicable to water supply meters. In such a situation the Board circular would not be applicable. The fact of the matter is that requirements of statutory definition of supply of tangible goods are fulfilled in this case. In this case there is no dispute that the right of possession and effective control has not been transferred to the customer and are retained by the Board itself. - The meter installed in the premises where the water is supplied and so long as the water is being supplied, the meter would be there and the ownership of the meter and effective control would be with the Board only since officials of the Board take the meter reading at frequent intervals. Prima facie we find that hiring charges collected for water meters fulfilled the requirement of definition. The discussion above would show that appellant has not been able to make a prima facie case at this stage. However as regards extended period, it requires a detailed consideration of statutory provisions, entitlement of the appellant to entertain a bona fide belief and applicability of circular etc. which can be done only at the time of final hearing. At this stage we consider that in the absence of prima facie case on merits, the appellant should be required to deposit at least the amount attributable to the normal period of limitation. - Partial stay granted.

Summary

Issues:
1. Liability to pay service tax on rental charges/hiring charges collected on water meters.
2. Appellant's argument of being a statutory body and the nature of charges collected.
3. Interpretation of Board's Circular and its applicability.
4. Consideration of prima facie case and requirement of depositing amount during appeal.

Analysis:
1. The judgment revolves around the issue of the appellant's liability to pay service tax on the rental charges/hiring charges collected on water meters installed for supplying water. The impugned order held the appellant liable for service tax amounting to &8377; 2,76,48,398/- with interest for the period from May 2008 to February 2010, treating the service as 'Supply of Tangible Goods' service.

2. The appellant argued that it is a statutory body performing a statutory function, thus not liable to tax. The charges collected were considered as a statutory levy prescribed by the statute, supported by a Board's Circular. However, the respondent contended that the charges were hiring charges for the meter, not a statutory levy, and the Board's circular was inapplicable. The Tribunal found that the requirements of the statutory definition of supply of tangible goods were met, as possession and control of the meters remained with the Board.

3. The Tribunal analyzed the Board's Circular, emphasizing that the activity should be in public interest and undertaken as a mandatory and statutory function to be exempt from tax. While the Circular stated that fees collected should be in the nature of a compulsory levy per relevant statute, it was noted that the service became taxable only from May 2008. The Tribunal concluded that the appellant failed to establish a prima facie case on merits, requiring a deposit for the normal period of limitation.

4. Due to the lack of data on the actual amount attributable to the normal period and the absence of the show-cause notice, the Tribunal directed the appellant to deposit &8377; 50 lakhs within 6 weeks for the purpose of hearing the appeal. Compliance with the deposit would result in a waiver of pre-deposit of the balance dues and a stay against recovery during the appeal period.

This detailed analysis of the judgment provides a comprehensive understanding of the issues involved and the Tribunal's decision regarding the liability to pay service tax on rental charges collected on water meters.