2024 (3) TMI 16 - AT - Service Tax

Levy of service tax - Renting of Immovable Property service - fee charges recovered by the appellant - period from June 2011 to March 3012 - HELD THAT - The matter is no longer res-integra as this Tribunal in the case of NAGAR NIGAM VERSUS C.C.E. S.T. -MEERUT-I 2018 (12) TMI 1039 - CESTAT NEW DELHI where it was held that we are of the opinion that the authority below has wrongly considered it as a service being rendered by the appellant to the said traders. In such scenario, emphasis on the definition of renting of immovable property under the Finance Act has no more significance. Further we observe that the Government of India, Ministry of Finance has given the clarification on the issue regarding the levy of tax on the services provided by Government or the local authorities to be business entity vide circular dated 13th April, 2016. Perusal thereof makes it clear that tax on taxes/cesses or duties are not leviable. Following the above decision and because of the fact that the appellant have only collected fee and not rent, the impugned order-in-appeal is without any merit and the same is set-aside - appeal allowed.

Summary

Issues involved:
The issues involved in the judgment are whether the fee charges recovered by the appellant are taxable as 'Renting of Immovable Property' under the Finance Act, 1994, and whether the appellant, a Municipal Corporation, is discharging sovereign functions exempt from service tax.

Issue 1: Taxability of fee charges under 'Renting of Immovable Property':
The appellant had rented/leased shops to various persons, leading to a show cause notice for service tax. The impugned order confirmed the service tax, penalties, and interest. The appellant contended that they were not renting/leasing for commercial purposes but issuing licenses for statutory functions. The Municipal Corporation argued that it did not rent or lease its property, emphasizing statutory duties under the Bombay Provincial Municipal Corporation Act, 1949.

Issue 2: Exemption for sovereign functions of Municipal Corporation:
The appellant argued that the Municipal Corporation, under the Gujarat Provincial Municipal Corporation Act, 1949, was discharging statutory functions related to constructing and maintaining markets. They collected fees for providing licenses, not for commercial activities. The appellant relied on a CBEC Circular and a Tribunal decision to support their claim that such statutory functions are not taxable services. The Tribunal noted that the amount collected was a fee, not rent, and the Municipal Corporation's activities were sovereign acts exempt from service tax.

Conclusion:
The Tribunal, relying on precedent and legal provisions, held that the appellant's collection of fees for statutory functions did not constitute 'Renting of Immovable Property' for tax purposes. The impugned order-in-appeal was set aside, and the appeal was allowed in favor of the appellant, the Municipal Corporation.