2019 (2) TMI 1303 - AT - Service Tax

Extended period of limitation - Technical Testing and Analysis - services provided to the other departments of Government of Gujarat - case of the department is that the appellant being provider of service of Technical Testing and Analysis, they are liable to pay service tax - Held that - There is no dispute that the appellant are a part of the Government of Gujarat, providing services of Technical Testing and Analysis to the other departments of the same Government of Gujarat. Being a Government organization, the suppression of facts, mis-declaration, fraud, collusion, willful mis-declaration etc. cannot be alleged against the appellant for the reason that there is no individual s interest or benefit is involved and therefore, there cannot be an intention to evade payment of service tax. In respect of service provided other than the Government agencies, the appellant were admittedly paying the service tax. Therefore, there was a bonafide belief that being a Government organization and providing service to the government departments of the same Government of Gujarat, does not attract service tax. Hon ble High Courts and the Tribunal had taken a consistent view that in case of non-payment of duty/ tax, malafide intention cannot be alleged in the case of Government Agency - appeals are allowed on limitation only.

Summary

Issues:
1. Liability of a government entity to pay service tax for providing technical testing and analysis services.
2. Applicability of the extended period of limitation for raising a demand for service tax.
3. Consideration of malafide intention in cases involving government agencies for evasion of service tax.

Analysis:

Issue 1: Liability of a government entity to pay service tax
The case involved an appellant, an arm of the Government of Gujarat, providing Technical Testing and Analysis services to other government departments. The department contended that the appellant was liable to pay service tax for these services. The appellant argued that being a government entity, it collected mandatory fees as per prescribed rates and deposited them in the Government Treasury, thus not falling under the category liable to pay service tax. The appellant emphasized that there was no intention to evade payment of service tax, as they believed the advice given by the Deputy Secretary, Government of Gujarat. The Tribunal noted that the appellant paid service tax for services provided to entities other than government agencies, indicating a genuine belief that their services to government departments did not attract service tax.

Issue 2: Applicability of the extended period of limitation
Both parties relied on various judgments to support their arguments. The Tribunal, without delving into the merits of the case, decided to dispose of the appeals based on the issue of limitation. It found that as a government organization providing services to other government departments, allegations of suppression of facts, misdeclaration, fraud, or collusion could not be attributed to the appellant. The Tribunal cited judgments where the extended period of limitation was not applicable to government entities due to the absence of malafide intent to evade payment of service tax.

Issue 3: Consideration of malafide intention in cases involving government agencies
The Tribunal referenced judgments that consistently held that in cases involving government agencies, malafide intention cannot be alleged for non-payment of duty or tax. These judgments emphasized that being a government organization, it is challenging to infer evasion of duty or tax, especially when there is no individual benefit involved. The Tribunal set aside the impugned orders and allowed the appeals solely on the basis of limitation, without delving into the merits of the case, in line with the consistent view taken by higher courts and tribunals regarding government agencies and service tax liability.

In conclusion, the judgment highlighted the unique considerations surrounding government entities providing services and their liability for service tax, emphasizing the importance of assessing malafide intent and the applicability of the extended period of limitation in such cases.