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2024 (6) TMI 132 - AT - Service TaxLiability of Municipal Corporation - various services including Renting of Immovable Property Services - services / facilities while discharging sovereign functions or not - HELD THAT - The Tribunal in the appellant s own case 2024 (4) TMI 1125 - CESTAT CHENNAI had occasion to consider the similar issue. After taking note of the judgement passed by the Hon ble High Court in the case of Cuddalore Municipality Vs. Joint Commissioner of GST and Central Excise, Tiruchirappalli 2021 (4) TMI 500 - MADRAS HIGH COURT and St. Thomas Mount Cum Pallavaram Cantonment Board Vs. Additional Commissioner of GST and Central Excise, Chennai 2023 (4) TMI 1024 - MADRAS HIGH COURT wherein the Tribunal remanded the matte to the adjudicating authority to reconsider the issue afresh. After giving the appellant an opportunity to put forward evidence and also for personal hearing. The matter requires to be remanded to the adjudicating authority who is directed to consider the issue afresh after giving an opportunity to the appellant to furnish evidence and for personal hearing. All issues are left open including the issue on limitation. The impugned order is set aside - appeal allowed by way of remand.
Issues Involved:
1. Liability of Municipality to pay service tax on various services including 'Renting of Immovable Property Services'. 2. Whether the services provided by the Municipality are considered sovereign functions and thus exempt from service tax. 3. Applicability of Reverse Charge Mechanism. 4. Validity of invoking the extended period of limitation for demand of service tax. Detailed Analysis: 1. Liability of Municipality to Pay Service Tax on Various Services Including 'Renting of Immovable Property Services': The Tribunal considered whether the demands of service tax under various services, including 'Renting of Immovable Property Services', are sustainable. The original authority had confirmed the demand, interest, and penalties, which was contested by the appellant. The appellant argued that as a municipality, it provides services while discharging sovereign functions, hence the levy of service tax cannot be sustained. The Tribunal noted that the Hon'ble High Court in the case of Cuddalore Municipality Vs. Joint Commissioner of GST and Central Excise had held that municipalities rendering such services are performing sovereign functions and thus the amounts received are outside the purview of service tax. 2. Whether the Services Provided by the Municipality are Considered Sovereign Functions and Thus Exempt from Service Tax: The Tribunal referred to the judgment in Cuddalore Municipality, which analyzed whether the services provided by the Municipality, such as renting of immovable property, are sovereign functions. It was held that such services are exempt from service tax under Section 65D(1)(a) of the Finance Act, 1994, and the Mega Exemption Notification No. 25/2012-S.T., dated 20-6-2012. The Tribunal also noted conflicting judgments, such as the one in Madurai Corporation Vs. The Commissioner of Central Excise, where it was held that the Municipality is liable to pay service tax. Given these conflicting judgments, the Tribunal decided to remand the matter to the adjudicating authority to reconsider the issue afresh. 3. Applicability of Reverse Charge Mechanism: The appellant contended that some part of the demand was raised on a reverse charge basis and argued that the appellant is not liable to pay service tax under the Reverse Charge Mechanism as the service recipient is liable to discharge the service tax. The Tribunal did not provide a detailed analysis on this issue but included it as part of the remand for reconsideration by the adjudicating authority. 4. Validity of Invoking the Extended Period of Limitation for Demand of Service Tax: The appellant argued that as a 'local authority' and a wing of the Government, it cannot be accused of suppressing facts with intent to evade payment of service tax. The Tribunal noted that there was no positive act of suppression alleged in the Show Cause Notice against the Municipality. The Tribunal directed the adjudicating authority to consider the issue of limitation afresh, emphasizing that the demand raised by invoking the extended period cannot sustain without clear findings. Conclusion: The Tribunal set aside the impugned orders and remanded the matter to the adjudicating authority for fresh consideration. The adjudicating authority was directed to reconsider whether the Municipality is liable to pay service tax under various services, including 'Renting of Immovable Property Services', and to evaluate the applicability of the exemption for sovereign functions. The issue of limitation was also to be reconsidered. The Tribunal emphasized that all issues, including the quantification of the actual amounts received, should be examined afresh, and the appellant should be given an opportunity to present evidence and for a personal hearing.
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