2014 (6) TMI 275 - AT - Service Tax

Waiver of pre-deposit - Mandap Keeper services - Sale of space or time for advertisement service - renting of immovable property service - Held that - the income or property of the State which is immune to federal taxation under the provision of article 289 of the Constitution does not accommodate the property of a body create by a statute, such as the appellant. The property and income of the State, in Article 289, connotes the State as enumerated in the first schedule of the constitution and not every authority or body falling within the scope of an the instrumentality of the State or other authority, in Article 12 of the Constitution. In respect of renting of immovable property, a sub-theme of the petitioner s defence was also that portion of its properties were given on lease to the Director General Special Protection Force; the A.P. Women s Commission and to the State Election Commission and these not being for or in furtherance of Commerce of Business are outside the purview of the definition of renting of immovable property in Section 65(105)(zzzz) of the Act. Clearly the enumeration of the taxable service of renting of immovable property restricts the taxable service only where such service is provided for use in the course of or furtherance of, business of commerce. With respect to the quantum of Service Tax assessed for the petitioner having provided Mandap Keeper Service we find no prima facie case in favour of the petitioner. There is strong prima-facie case in favour of the petitioner to the extent service tax liability is assessed for providing sale of time or space for advertisement. Entire service tax and interest liable to be pre-deposited in respect of activities which are liable to service tax - adjudicating authority to recompute the liability - stay granted partly.

Summary

Issues:
1. Service tax liability for alleged taxable services provided during 2009-10 and 2010-11.
2. Immunity of income derived from property belonging to a state entity from union taxation.
3. Taxability of renting of immovable property for specific purposes.
4. Service tax liability for Mandap Keeper Service.
5. Taxability of sale of space or time for advertisement.

Analysis:
1. The judgment addressed the service tax liability for taxable services provided during 2009-10 and 2010-11, amounting to Rs.84,61,038 and Rs.1,11,99,705 respectively. The appellant, a municipal corporation, argued for immunity from union taxation under Article 289 of the Constitution. However, the court rejected this argument, citing precedents that the immunity applies to the state as defined in the Constitution and not to bodies created by statutes.

2. Regarding the renting of immovable property, the appellant contended that leasing to specific entities not for commercial purposes falls outside the tax purview. The court noted that the taxable service of renting of immovable property applies only when used for business or commerce. The lack of demarcation in the consideration received hindered the exclusion of non-commercial leases, leaving the matter unresolved at the time of judgment.

3. The court found no prima facie case in favor of the appellant concerning the service tax liability for providing Mandap Keeper Service, indicating a lack of sufficient evidence or legal basis supporting the appellant's position.

4. Concerning the sale of space or time for advertisement, conflicting judicial opinions existed. One view supported levying service tax for such activities, while another suggested otherwise. Given this conflict, the court found a strong case in favor of the appellant regarding the assessed service tax liability for providing sale of time or space for advertisement.

5. As a result of the analysis, the court granted a waiver of pre-deposit and stayed further proceedings on the condition that the appellant remits the entirety of the service tax liability, excluding a specific amount, within a specified timeframe. The appellant was instructed to provide proof of previous remittances for renting of immovable property and Mandap Keeper Services to adjust the tax liability accordingly. Failure to comply would lead to the dissolution of the stay and rejection of the appeal.