2012 (6) TMI 605 - AT - Service Tax

Waiver of pre-deposit - Services to Local Self Government bodies in the field of e-governance - contention of appellant is that they were discharging only a sovereign function of the State and hence their activity was not chargeable to service tax Held that - Recovery of service tax from service-recipients is ipso facto in the nature of demolishing the plea of sovereign function. Amount of over Rs.44 lakhs was collected by the appellant from the service recipients (local bodies) but only 50% thereof was paid to the Central Government as service tax. The balance amount required to be deposited.

Summary

Issues:
1. Whether the appellant's activity of providing services to Local Self Government bodies is chargeable to service tax.
2. Whether the appellant's activity can be considered a sovereign function of the State.
3. Whether the demand raised by the department is time-barred.

Issue 1:
The judgment discusses the appellant's engagement in providing services to Local Self Government bodies in Kerala, specifically training services authorized by the Government. The appellant contended that their activity was not subject to service tax as they were discharging a sovereign function of the State. However, the department demanded service tax under 'management consultancy service'. The appellant collected and paid a portion of the tax prior to the show-cause notice. The Tribunal found that the appellant's argument of sovereign function was not convincing, especially considering the collection of service tax from the service recipients. The Tribunal directed the appellant to deposit the balance amount for the appeal.

Issue 2:
The appellant argued that their activity should be exempt from service tax as they were performing a sovereign function of the State. However, the Tribunal did not find this argument compelling. They noted that the appellant, a society registered under the relevant statute, was nominated by the Government to provide services in e-governance to Local Self Government bodies. The Tribunal concluded that the recovery of service tax from service-recipients contradicted the appellant's claim of sovereign function. Therefore, the Tribunal did not uphold the appellant's contention of being exempt from service tax based on the sovereign function argument.

Issue 3:
Regarding the plea of time bar raised by the appellant, the Tribunal considered the facts of the case. The appellant highlighted that a part of the demand was time-barred. However, the Tribunal did not find any valid point in this regard. It was acknowledged that the appellant collected over Rs. 44 lakhs from the service recipients but only paid 50% to the Central Government as service tax. The Tribunal directed the appellant to deposit the balance amount under section 35F of the Central Excise Act for the purpose of the appeal, rejecting the plea of time bar and emphasizing the need for the deposit within a specified timeline.

This detailed analysis of the judgment from the Appellate Tribunal CESTAT, Bangalore covers the issues raised, the arguments presented, and the Tribunal's findings on each aspect of the case.