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2024 (6) TMI 1182 - AT - Service TaxIssues Involved: 1. Whether the demands of service tax under various services, including 'Renting of Immovable Property Services,' are sustainable. 2. Whether the services provided by the Municipality while discharging sovereign functions are subject to service tax. 3. Applicability of reverse charge mechanism. 4. Consideration of limitation and suppression of facts for evading service tax. Issue-wise Detailed Analysis: 1. Sustainability of Service Tax Demands: The primary issue is whether the demands of service tax under various services, including 'Renting of Immovable Property Services,' are sustainable. The Tribunal referred to its earlier decision and the judgment of the Hon'ble High Court in the case of Cuddalore Municipality Vs. Joint Commissioner of GST and Central Excise, Tiruchirappalli, which held that municipalities discharging sovereign functions are exempt from service tax. The Tribunal noted that the Hon'ble High Court had quashed demands on similar grounds, emphasizing that services provided by a government or local authority are exempt under Section 65D(1)(a) of the Finance Act, 1994, and the Mega Exemption Notification No. 25/2012-S.T. 2. Services Provided by Municipality as Sovereign Functions: The appellants argued that the services provided, such as renting immovable property, collecting fees for public amenities, and other charges, are part of their sovereign functions as per Article 243W of the Constitution of India. The Tribunal acknowledged the importance of determining whether these activities are sovereign functions, as this would exempt them from service tax. The Tribunal cited the Cuddalore Municipality case, which held that municipalities performing sovereign functions are not liable for service tax. 3. Reverse Charge Mechanism: The appellants contended that they are not liable to pay service tax under the reverse charge mechanism, as the service recipient is responsible for discharging the tax. This aspect was not extensively discussed in the judgment, but it was noted as one of the arguments presented by the appellants. 4. Limitation and Suppression of Facts: The appellants argued that being a local authority, they cannot be accused of suppressing facts with the intent to evade service tax. The Tribunal agreed that there was no positive act of suppression alleged in the show cause notice against the municipalities. The Tribunal directed the adjudicating authority to consider the issue of limitation afresh, taking into account that the appellants are a wing of the government. Conclusion and Directions: The Tribunal set aside the impugned orders and remanded the matters to the adjudicating authority for fresh consideration. The adjudicating authority was directed to examine whether the municipalities are liable to pay service tax for renting immovable property and other services, considering the functions listed in the 12th Schedule and the provisions of the Coimbatore City Municipality Corporation Act, 1981. The adjudicating authority was also instructed to address the issue of limitation and quantify the actual amounts received for each service if the demand is found sustainable. All issues were left open, and the appellants were to be given an opportunity to present evidence and for a personal hearing.
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