2016 (6) TMI 367 - AT - Service Tax

Repair and Maintenance Service - liability of the agent or principal - leasing of Govt. land and consideration received towards Maintenance Charges and Street Light Charges - Demand of Service tax alongwith interest - Held that - there is no doubt that the service was provided by the appellant in relation to maintenance or repair of immovable property in terms of the written agreement ( lease deed ) and therefore is covered under Section 65(64) ibid both prior to 01.05.2006 and with effect therefrom. Thus, the service rendered by the appellant is squarely covered in the definition and we, therefore hold that the activities carried out by the appellant are taxable under MMR (or MR) service Section 65 (64) ibid . The charges collected by the appellant are on account of the said taxable service provided by it and therefore constitute consideration for taxable service. Once the taxable service is being provided against a consideration, service tax becomes payable. Thus the liability to pay service tax is either on the assessee himself or the agent of assessee. In the present case, the appellant is a company incorporated under Companies Act, 1956 and acted as agent on behalf of the Chhattisgarh Govt. which authorised it to lease out land to prospective entrepreneurs for setting up industry, etc. and to provide various services on behalf of State Govt. and it accordingly is covered under the definition of assessee. Invokation of extended period of limitation - Imposition of penalty - Section 76 & 78 of the Finance Act, 1994 - Wilful mis-statement of facts - Held that - mere non-disclosure of the facts to the department can sustain the said allegation. In view of various case laws, the extended period of limitation is not invocable in the present case, which renders (part of) the demand pertaining to the extended period beyond the normal period time-barred and penalty under Section 78 ibid non-imposable. The adjudicating authority has clearly held that penalty under Sections 76 and 78 ibid are imposable but penalty under Section 76 is not imposed as penalty under section 78 is imposed. As a corollary it follows that if penalty under section 78 ibid is not found imposable, penalty under section 76 would spring bad to life. However, we also note that the adjudicating authority waived the penalty prescribed under Section 76 ibid under Section 80 of Finance Act, 1994 by invoking extended period of limitation. - Decided partly in favour of appellant

Summary

Issues Involved:
1. Liability to service tax for statutory functions performed by a government agency.
2. Classification of services under the correct taxable category.
3. Invocation of extended period for demand and imposition of penalties.

Detailed Analysis:

1. Liability to Service Tax for Statutory Functions Performed by a Government Agency:
The appellant, Chhattisgarh State Industrial Development Corporation Ltd. (CSIDCL), argued that it performed statutory functions on behalf of the State Government and thus should not be liable to service tax. They contended that the maintenance and street light charges collected were on behalf of the State Government and should not be subjected to service tax. However, the Tribunal held that charges for rendition of taxable services, even if statutorily prescribed, are liable to service tax. The Tribunal referred to Section 66 and Section 65 of the Finance Act, 1994, which do not provide inherent exemptions for services rendered as part of statutory duties. The Tribunal also cited CBEC Circular No. 89/7/2006, which clarifies that activities performed by sovereign/public authorities under statutory obligations are not taxable if the fees collected are deposited into the Government Treasury. Since the appellant is a corporate entity and the charges were not deposited into the Government Treasury, the circular did not apply.

2. Classification of Services Under the Correct Taxable Category:
The appellant contended that their activities should fall under the taxable category of Commercial or Industrial Construction Service (CICS) and not under Repair and Maintenance Service. The Tribunal examined the documents and found that the services provided by the appellant related to the maintenance of industrial areas and street lights. The definition of "management, maintenance or repair" service (MMR) under Section 65(64) includes maintenance or repair of immovable property, which applied to the appellant's activities. Therefore, the Tribunal held that the services rendered by the appellant were correctly classified under MMR service and were taxable.

3. Invocation of Extended Period for Demand and Imposition of Penalties:
The appellant argued that there was no willful misstatement or suppression of facts, and therefore, the extended period for demand and mandatory penalties should not be invoked. The Tribunal referred to the Supreme Court judgments in Uniworth Textiles Ltd. Vs. CCE and CCE Vs. Chemphar Drugs Liniments, which held that mere non-disclosure does not equate to willful misstatement or suppression of facts. The Tribunal found that the department's allegation of suppression was based on non-disclosure during the audit, which was insufficient to invoke the extended period. Consequently, the demand for the extended period was set aside, and only the demand for the normal period was sustained. The penalty under Section 78 was also set aside, and the adjudicating authority's decision to waive the penalty under Section 76 was upheld.

Conclusion:
The appeal was partially allowed. The demand and interest for the extended period were set aside, sustaining only the demand and interest for the normal period. The penalty under Section 78 was set aside, and the waiver of the penalty under Section 76 was upheld. The Tribunal's decision emphasized the importance of correctly classifying services and the conditions under which statutory functions may be exempt from service tax.