2024 (5) TMI 12 - HC - Service Tax

Levy of service tax - Renting of immovable property service - a person within meaning of Finance Act, 1994 as it stood prior to 01.07.2012 or not - period prior to July 2012 as well as post 01.07.2012 - HELD THAT - The issue decided in the case of CUDDALORE MUNICIPALITY VERSUS THE JOINT COMMISSIONER OF GST CENTRAL EXCISE, THE ASSISTANT COMMISSIONER OF CENTRAL EXCISE SERVICE TAX AND VIRUDHACHALAM MUNICIPALITY VERSUS THE ASSISTANT COMMISSIONER, OFFICE OF THE ASSISTANT COMMISSIONER OF GST AND CENTRAL EXCISE, CUDDALORE 2021 (4) TMI 500 - MADRAS HIGH COURT where it was held that 'though under Rule 2(1)(d)(E) of the Service Tax Rules, 1994, service tax is payable by the service provider, it has to be held that if such services are provided by a Government or Local Authority, they are exempted under Section 65D(1)(a) of the Finance Act,1994 as amended and as in force from 01.07.2012. Only ancillary service provided by a third party towards renting of immoveable property of a non-governmental or local body will be liable to pay service tax like any other service provider. Therefore, service tax is payable by the service provider himself.' The writ petition is allowed.

Summary

Issues Involved:

1. Definition and scope of 'Service' under Section 65B(44) of the Finance Act, 1944.
2. Applicability of Service Tax on services provided by Government or local authorities.
3. Exemptions under the Mega Exemption Notification No. 25/2012-ST dated 20.06.2012.
4. Liability of service tax on renting of immovable property by Government or local authorities.
5. Jurisdiction and validity of Show Cause Notices and Orders-in-Original issued by the respondent.

Summary:

1. Definition and Scope of 'Service':

The court highlighted that the definition of 'Service' u/s 65B(44) of the Finance Act, 1944 is broad, encompassing any activity carried out by one person for another for valuable consideration, including declared services as per Section 65B(22) read with Section 66E of the Act. However, certain activities like transfer of title in goods or immovable property, transactions in money or actionable claims, services by employees to employers, and court fees are excluded.

2. Applicability of Service Tax on Government or Local Authorities:

Most services provided by the Central or State Government or local authorities fall under the negative list per Section 66D of the Finance Act, 1994, and are thus not liable to service tax. The court referred to the Education Guide by the Central Board of Indirect Tax, which clarifies that only services substitutable by private entities are taxed to ensure a level playing field and avoid breaks in the Cenvat chain.

3. Exemptions under Mega Exemption Notification No. 25/2012-ST:

The court noted that certain services are exempted under the Mega Exemption Notification, including services by way of public conveniences and services by a governmental authority related to functions entrusted to a municipality under Article 243W of the Constitution.

4. Liability of Service Tax on Renting of Immovable Property:

While the service tax on renting of immovable property is generally payable by the service provider, services provided by the Government or local authorities are exempt u/s 66D(1)(a) of the Finance Act, 1994. Ancillary services provided by third parties towards renting of immovable property of non-governmental or local bodies are liable for service tax.

5. Jurisdiction and Validity of Show Cause Notices and Orders-in-Original:

The court quashed the impugned Show Cause Notices and Orders-in-Original, citing a lack of jurisdiction. The demands proposed and confirmed in the respective SCNs and Orders were found invalid. The court referenced a previous order dated 22.03.2021 in W.P.No.8900 of 2018, which supported the petitioner's case.

Conclusion:

The Writ Petition was allowed, and the court permitted the respondent to adjudicate the issue before the Division Bench. No costs were imposed, and connected miscellaneous petitions were closed.