2024 (9) TMI 1359 - AT - Service Tax

Failure to pay service tax - Non-Utilization (NU) Penalty - Water Supply Charges - Miscellaneous Receipts - Transfer Charges - Infrastructure Up gradation fund - HELD THAT - It has been accepted in the impugned order that the Infrastructural up-gradation fund and transfer fees were covered under article 243W which is a statutory function of the state government covered under the expressions Regulation of land use and construction of buildings,' 'Roads and bridges,' and 'Planning for economic and social development and GIDC is a state undertaking which is performing these functions in the state for development of industry in the state. Once it is accepted that these are the statutory functions of the state, the same cannot be exigible to tax under the period prior to 01.07.2012 also. Further misc. receipts which are stated to be in respect of as sub- letting fees, subdivision charges, amalgamation fees, collateral fees are nothing but necessary for orderly regulation of industrial estate and are for of the infrastructural development activity only. It is an avowed statutory duty of the state to develop industry in the state and any charges collected for such making such development cannot be subjected to tax. The infrastructure up-gradation fund , transfer fees and other misc. charges in respect of in respect of as sub-letting fees, subdivision charges, amalgamation fees, collateral fees are necessary for maintenance, management and repairs of the industrial estate under Gujarat Industrial Development Corporation (GIDC), established under the Gujarat Industrial Development Act, 1962 and are not subject to service tax during the impugned period of either before or after 01.07.2012 - no service tax could be charged on the share of IUF which was collected from the leaseholders on behalf of the Industrial Associations and reimbursed to them as those does not qualify as consideration for any service provided by GIDC. The impugned order is set aside - appeal allowed.

Summary

Issues Involved: Service tax liability on (a) Non-Utilization Penalty, (b) Water Supply Charges, (c) Miscellaneous Receipts, (d) Transfer Charges, and (e) Infrastructure Upgradation Fund.

Issue-wise Detailed Analysis:

1. Non-Utilization (NU) Penalty:
The appellant collected the NU Penalty from leaseholders who did not meet the minimum construction requirements. The Commissioner dropped the demand for service tax on the NU Penalty amounting to Rs. 36,75,995/- for the period from 01.07.2012 onwards, considering it a statutory levy and not a taxable service.

2. Water Supply Charges:
The appellant collected water charges from business entities in the GIDC area. The Commissioner dropped the service tax demand of Rs. 13,08,905/- on water charges, categorizing them as sale proceeds of an essential commodity and covered under the Twelfth Schedule under Article 243W of the Constitution.

3. Miscellaneous Receipts:
The appellant collected various fees such as sub-letting fees, subdivision charges, amalgamation fees, collateral fees, etc. The Commissioner held that these charges, related to the renting of immovable property, were liable for service tax. However, the appellant argued that these receipts were necessary for the orderly regulation of the industrial estate and were part of the infrastructural development activity, thus not subject to service tax. The Tribunal agreed with the appellant, stating that these charges were statutory levies and not subject to service tax.

4. Transfer Charges:
The appellant collected transfer fees from leaseholders during property transfers. The Commissioner held that these fees were additional consideration related to the renting of immovable property and were subject to service tax. The Tribunal, however, found that these fees were statutory levies necessary for maintenance, management, and repairs of the industrial estate and thus not subject to service tax.

5. Infrastructure Upgradation Fund (IUF):
GIDC merged the Infrastructure Maintenance Fund and the Infrastructure Upgradation Fund into a single fund, collecting Rs. 5 per sq. meter from lessees. An audit raised objections about GIDC's failure to pay service tax on the share allocated to industrial associations. The Commissioner dropped the demand for service tax on the amount recovered as Infrastructure Upgradation Fund for the period from 01-07-2012 to March 2016, considering it covered under the Twelfth Schedule under Article 243W of the Constitution. The Tribunal upheld this view, stating that these charges were statutory levies and not subject to service tax.

Extended Period and Penalties:
The Commissioner invoked the extended period, alleging deliberate concealment of material information by the appellant. The Tribunal found no suppression of facts, noting that the appellant, being a governmental authority, should be presumed to act without malafide intent. Consequently, no interest or penalties were deemed applicable.

Conclusion:
The Tribunal concluded that the "infrastructure upgradation fund," "transfer fees," and other miscellaneous charges were statutory levies and not subject to service tax during the impugned period. The share of IUF collected from leaseholders on behalf of industrial associations and reimbursed to them did not qualify as consideration for any service provided by GIDC. The impugned orders were set aside, and the appeals were allowed.