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2025 (4) TMI 108 - AT - Service TaxExemption from service tax - providing services of construction of complex building civil structure or a part thereof and works contract service to Rajasthan Housing Board - governmental authority or not - applicability of Serial No. 12 of the Mega Exemption N/N. 25/2012-ST dated 20.06.2012 - HELD THAT - Rajasthan Housing Board has not been set up by an Act of a State Legislature. This is clear from the State Act. Section 4 deals with the establishment of the Rajasthan Housing Board. It provides that the State Government may by the notification in the official gazette establish for the purposes of the Act a board to be called the Rajasthan Housing Board with effect from such date as may be specified in the notification. The State Government had therefore to issue a notification in the official gazette to establish the Rajasthan Housing Board and indeed such a notification was issued by the State Government. The Rajasthan Housing Board has not been constituted or set up by a State Act. The appellant is therefore not justified in placing reliance upon (i) of clause (s) to contend that the Rajasthan Housing Board would be a governmental authority because Rajasthan Housing Board has not been set up by a State Legislature. The notification itself distinguishes between a board set up by an Act of a State Legislature or a board established by the State Government. Thus for the period w.e.f. 30.01.2014 the appellant cannot contend that the Rajasthan Housing Board is a governmental authority . What remains to be examined is whether Rajasthan Housing Board would be a governmental authority under the unamended notification dated 20.06.2012. This unamended clause (s) is more or less the same as (ii) of clause (s) of the amended definition. It again emphasises that the board must be established with 90% of more participation by way of equity or control by the Government - the Rajasthan Housing Board has been established under a State Act and has not been set up by an Act of the State Legislature. Conclusion - The appellant did not lead any evidence to substantiate that the Rajasthan Housing Board was established by the State Government with 90% or more participation by way of equity or control by the Government to carry out any function entrusted to a municipality under article 243W of the Constitution. There is no error in the order dated 27.01.2016 passed by the Commissioner holding that Rajasthan Housing Board is not a governmental authority and the services provided to it by the appellant are not exempt from service tax. Appeal dismissed.
ISSUES PRESENTED and CONSIDERED
The primary issue considered in this judgment was whether the Rajasthan Housing Board qualifies as a "governmental authority" under the Mega Exemption Notification No. 25/2012-ST dated 20.06.2012, thereby exempting the appellant, M/s. A.S. Construction Co., from paying service tax on the services provided to the Board. This determination hinges on the interpretation of the term "governmental authority" as defined in the Exemption Notification and its subsequent amendment. ISSUE-WISE DETAILED ANALYSIS Relevant legal framework and precedents: The legal framework primarily involves the interpretation of the Exemption Notification No. 25/2012-ST and its amendment by Notification No. 2/2014 dated 30.01.2014. The term "governmental authority" is defined in these notifications, and the interpretation of this term is crucial to the case. The appellant relied on the Supreme Court judgment in Commissioner of Cus., C. Ex. & S.T., Patna vs. Shapoorji Pallonji & Company Pvt. Ltd, which interpreted the amended definition of "governmental authority." Court's interpretation and reasoning: The Tribunal examined whether the Rajasthan Housing Board qualifies as a "governmental authority" under both the original and amended definitions in the Exemption Notification. The original definition required a board to be "established with 90% or more participation by way of equity or control by Government and set up by an Act of the Parliament or a State Legislature to carry out any function entrusted to a municipality under article 243W of the Constitution." The amended definition, effective from 30.01.2014, broadened the scope to include authorities or boards "set up by an Act of Parliament or a State Legislature" or "established by Government" with the same level of government participation. Key evidence and findings: The Tribunal found that the Rajasthan Housing Board was established under the Rajasthan Housing Board Act, 1970, which required a notification by the State Government for its establishment. This indicated that the Board was not "set up by an Act of the State Legislature" but rather established by the government through a notification. The appellant failed to provide evidence that the Board was established with 90% or more government participation by way of equity or control. Application of law to facts: The Tribunal applied the definitions of "governmental authority" to the facts, concluding that the Rajasthan Housing Board did not meet the criteria under either the original or amended definitions. The Board was not set up by an Act of the State Legislature, and there was no evidence of the required level of government participation or control. Treatment of competing arguments: The appellant argued that the Board should be considered a "governmental authority" based on its establishment under a State Act and relied on the Shapoorji Pallonji judgment. However, the Tribunal distinguished the facts of the present case from the precedent, emphasizing the lack of evidence for government participation and the method of the Board's establishment. Conclusions: The Tribunal concluded that the Rajasthan Housing Board does not qualify as a "governmental authority" under the relevant notifications, and thus, the services provided by the appellant to the Board are not exempt from service tax. The appeal was dismissed. SIGNIFICANT HOLDINGS The Tribunal held that the Rajasthan Housing Board is not a "governmental authority" as it was not set up by an Act of the State Legislature and lacked evidence of 90% or more government participation by way of equity or control. The Tribunal emphasized the distinction between bodies "established or constituted under a statute" and those "formed and registered" under a statute, noting that the former may qualify as governmental authorities under certain conditions. Core principles established: The judgment reinforces the principle that for an entity to qualify as a "governmental authority" under the Exemption Notification, it must either be set up by an Act of Parliament or a State Legislature or be established by the government with significant government participation. The method of establishment and the level of government control are critical factors in this determination. Final determinations on each issue: The Tribunal determined that the Rajasthan Housing Board does not meet the criteria for a "governmental authority," and therefore, the services provided to it by the appellant are not exempt from service tax. The appeal was dismissed, upholding the Commissioner's order confirming the demand for service tax with penalties.
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