2023 (1) TMI 1185 - AT - Service Tax

Levy of service tax - services provided by the public sector undertaking formed by the Government especially for the purpose of soil conservation and land reclamation - exemption to specified service including conservancy as per N/N. 25/2012 - scope of the term conservancy - supply of tangible service - rent-a-cab service - HELD THAT - The activity undertaken by the appellant would be specifically covered by the Notification No. 25/2012 ST dated 20.06.2012 under Sr No.25 thereof. In view of services provided by the appellant would be exempt with effect from 20.06.2012 onwards under the notification. It is also noticed that the entire amount received by the appellant from the government in the shape of grant is in the nature of reimbursement i.e. to say the actual expenditure incurred for the provision of the service is reimbursed by the Government of Gujarat. For that reason also the amount paid by the Government to the appellant cannot be taxed as does not fall within the definition of consideration for service. In these circumstances, there are no merit in the demand of service tax under the head of business auxiliary service against the appellant. The demand on this count is set aside and the appeal on this count is allowed. Demand under the head of supply of tangible service - HELD THAT - Neither show cause notice nor the impugned order gives any grounds to substantiate the claim that the physical possession and effective control of the equipment is not transferred to the clients but is retain to the appellant. In these circumstances, there are no evidence to support the charges levied on the appellant in regard to supply of tangible goods service - Demand on this count is also set aside and appeal is allowed. Demand under the category of rent-a-cab service - HELD THAT - There are substantial force in the argument of the appellant that this is not a service provider/ service recipient relationship. The appellants are not in the business of rent a-cab providing rent a cab service and any recovery is made for private use of vehicle are in terms of the employment agreement. Thus, there are no merit in the argument of the Revenue - Demand on this count is also set aside and appeal is allowed. Appeal allowed.

Summary

Issues Involved:
1. Demand of service tax under the category of Business Auxiliary Service.
2. Demand of service tax under the category of Supply of Tangible Goods Service.
3. Demand of service tax under the category of Rent-a-Cab Service.
4. Invocation of extended period of limitation.

Detailed Analysis:

1. Demand of Service Tax under Business Auxiliary Service:

The appellant, a public sector undertaking of the state of Gujarat, argued that their primary function is to assist the government in soil conservation and land reclamation, funded entirely by government grants. They contended that the government of Gujarat, which is not engaged in any business, cannot be considered a client for Business Auxiliary Service. The appellant emphasized that the grants received are reimbursements for salaries and administrative expenses, not consideration for services rendered. The tribunal noted that the appellant's activities fall under "conservancy" as defined by Notification No. 25/2012-ST, which exempts such services from service tax. Therefore, the demand for service tax under Business Auxiliary Service was set aside.

2. Demand of Service Tax under Supply of Tangible Goods Service:

The appellant was accused of supplying bulldozers on rent, which the Revenue categorized under Supply of Tangible Goods Service. The appellant argued that the bulldozers were leased out with possession and control transferred to the lessee, constituting a contract of bailment. The tribunal found no evidence in the show cause notice or the impugned order to support the claim that the appellant retained possession and control of the equipment. Consequently, the demand under this category was also set aside.

3. Demand of Service Tax under Rent-a-Cab Service:

The Revenue demanded service tax on amounts charged to employees for private use of official vehicles. The appellant argued that they are not in the business of renting vehicles but merely allow employees to use official vehicles for private purposes as part of their employment benefits. The tribunal agreed, noting that the relationship was not that of service provider and recipient, and the vehicles were not available to the public. Thus, the demand under Rent-a-Cab Service was set aside.

4. Invocation of Extended Period of Limitation:

The appellant argued that as a government entity, there was no suppression or misdeclaration with the intent to evade duty, making the invocation of the extended period of limitation inappropriate. The tribunal did not find merit in the Revenue's argument for invoking the extended period.

Conclusion:

The tribunal set aside the impugned order and allowed the appeal, concluding that the demands under Business Auxiliary Service, Supply of Tangible Goods Service, and Rent-a-Cab Service were not justified. The tribunal also allowed the Miscellaneous Application (MA). The judgment was pronounced in open court on 20.01.2023.