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TMI Blog2018 (1) TMI 1464X X X X Extracts X X X X X X X X Extracts X X X X ..... of the specified amount as three months advance towards the market fee/slaughter house fee. The lessee shall remit the balance specified amount in nine monthly equal instalments starting April of the financial year. The three months advance amount paid by the lessee will be adjusted in the last three months of the financial year (January-March). The lessees shall collect the market fee/slaughter house fee as per Scheduled Rates already fixed and notified by the Municipality - collection of market fee/slaughter house charges were not towards renting of immovable property - Bench holds that no service tax is payable on slaughter house fee collected by the applicant during the impugned period. It is also seen that with respect to ‘market fee’, Board vide Circular No. 157/8/2012-S.T., dated 27-4-2012 had clarified that the services provided by Agricultural Produce Marketing Committee are classifiable under ‘Business Auxiliary services’. Para 5 of the said circular reads as “As statutory bodies, APMCs provide basic facilities in the market area out of the ‘market fee ’ collected from the licencees, mainly to facilitate the farmers, purchasers and others. APMCs provide a host of serv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1-2018 - Shri C. Rajendiran, Vice-Chairman and R.D. Negi, Member Shri R. Nageswara Rao, Consultant, for the Applicant. None, for the Respondent. ORDER The Commissioner, Mahaboobnagar Municipality, Near Clock Tower, Mahaboobnagar Head Post Office, Mahaboobnagar-509001 (hereinafter referred to as the applicant ), has filed application dated 12-5-2017 before the Additional Bench of Settlement Commission, Chennai for settlement of the case arising out of the Show Cause Notice O.R. No. 136/2015 dated 12-10-2015 (C. No. HQAE/V/17/2014-AE-II) issued by the erstwhile Commissioner of Customs, Central Excise Service Tax Hyderabad-II Commissionerate admitting the service tax liability of ₹ 45,23,283/- and interest thereon of ₹ 18,46,984/- out of the total demand of ₹ 51,72,663/- made in show cause notice towards service tax liability and interest thereon. The Notice also proposed to appropriate ₹ 51,69,268/- paid towards above liability and impose penalties under Sections 76, 77 and 78 of the Finance Act, 1994. 1.2 The brief facts of the case are as follows : The applicant are collecting amounts towards lease/rental charges for shops/co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndered during the said period and they were liable for payment of service tax of ₹ 51,72,663/-. 1.3 In view of the above, the applicant was issued with the aforesaid Show Cause Notice demanding total service tax of ₹ 51,72,663/- under Renting of Immovable Property Service under proviso to Sections 73(1) of the Finance Act, 1994 and interest thereon under Section 75 of the Finance Act, 1994. An amount of ₹ 51,69,268/- paid by the applicant during the course of investigation was sought to be appropriated towards the service tax demand. The Show Cause Notice also sought to impose penalty on the applicant under Sections 76, 77 and 78 of the Finance Act, 1994 apart from demanding late fee for belated filing of returns under Section 70 of the Finance Act, 1994. Applicant s disclosure : 2.1 The applicant filed the application before the Additional Bench of Settlement Commission, Chennai on 12-5-2017 which was numbered as S.A. (S.T.) 51/2017. Based on the reply received against the first notice, the application was allowed to be proceeded with by the Bench on 1-6-2017. 2.2 The applicant in their application admitted a total service tax liability of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s from 2010-11 to 2014-15 from contractors for allowing them to collect fees for slaughtering the animals in the open areas of the Municipality. The same was not leviable to service tax under renting of immovable property service, since the said areas were neither rented out nor leased out to the contractors, but the contractors were only allowed to collect fees, in terms of Section 271 of the Municipality Manual. Thus, allowing people to slaughter animals in the open areas of the Municipality amounted to service by way of slaughtering of animals. Prior to 1-7-2012, slaughtering of animals was not a specified taxable service. With effect from 1-7-2012, in terms of S. No. 33 of Notification No. 25/2012-S.T., services by way of slaughtering of animals fell under Negative list, not liable to service tax. Due to unmanageable situations, the applicant could not adhere to the due date of the above service tax payments. However, the entire service tax liability was discharged by 4-11-2015. They also paid the interest liability of ₹ 18,46,984/- on 9-5-2017. They fully cooperated with the departmental officers, furnished the entire information sought for by the officers, includi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for his report/comments on the application. The Commissioner of Central Tax, Ranga Reddy GST Commissionerate, Hyderabad submitted his report vide C. No. 140/2017-Adjn. (ST) (ADC), dated 6-10-2017. The jurisdictional Commissioner in his report submitted the following : The applicant admitted service tax liability to the extent of ₹ 45,23,383/-. The applicant did not admit service tax liability of ₹ 6,49,280/- on the ground that it pertained to Market fees and slaughtering of animals for the reasons stated in their application before the Hon ble Settlement Commission. However, the applicant paid the total Service Tax of ₹ 51,72,662/- demanded in the SCN for the taxable services provided by them during the period from April, 2010 to March, 2015. The interest on the service tax liability worked out to ₹ 21,23,728/- but the applicant paid ₹ 18,46,984/- only towards interest. The applicant paid the late fee of ₹ 1,95,400/- towards belated filing of ST-3 returns for the impugned period covered in the SCN. But for the investigation and verification taken up by the Anti-Evasion Wing of the Commissionerate, the alleged evasion of servi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ready made by them; and the remaining amount may be refunded to them. 4.5 He also made a plea before the Bench, that the municipality being a statutory body, has no intention of any tax evasion, and that the service tax has not been paid under bona fide belief. He, therefore prayed for complete waiver of penalty and immunity from prosecution proceedings. 4.6 The consultant was directed to file copy of the tender for collection of market fee and the offer of acceptance by the contractor within 15 days from today. 4.7 The jurisdictional Commissioner filed his report C.No. 140/2017-Adjn (ST) (ADC), dated 6-10-2017 confirming the payment as claimed by the applicant and stated that the interest payable on the service tax proposed to be demanded in the SCN is ₹ 21,23,728/- as against which the applicant has remitted only ₹ 18,46,984/-; that the applicant has admitted the entire service tax demanded in the SCN and are disputing ₹ 6,49,280/- before the Hon ble Settlement Commission; that penalty is imposable as but for the investigation and verification taken up by the Anti-Evasion Wing of the Commissionerate. Post-hearing submissions : 4.8 In pursuance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... obnagar Municipality) for right of collection of market fee and slaughter house charges submitted by the applicant. It is seen that the right to collect market fee/slaughter house fee were granted to individuals (lessees) for a financial year based on bids offered during auction conducted by the Municipal Council, Mahaboobnagar for a specified amount. The lessee shall deposit part of the specified amount as three months advance towards the market fee/slaughter house fee. The lessee shall remit the balance specified amount in nine monthly equal instalments starting April of the financial year. The three months advance amount paid by the lessee will be adjusted in the last three months of the financial year (January-March). The lessees shall collect the market fee/slaughter house fee as per Scheduled Rates already fixed and notified by the Municipality. From the above it is seen that collection of market fee/slaughter house charges were not towards renting of immovable property. 5.4 It is also seen that with respect to market fee , Board vide Circular No. 157/8/2012-S.T., dated 27-4-2012 had clarified that the services provided by Agricultural Produce Marketing Committee are clas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of immovable property service but more appropriately covered under Business Auxiliary Service and exempted in terms of Notification No. 14/2004 S.T., dated 10-9-2004. With effect from 1-7-2012, with the introduction of Negative List, the services provided by a local authority such as Panchayat, Municipality, Municipal Committee, etc., as well as services relating to agriculture and agricultural produce are covered under the Negative List. Further activity in relation to any function entrusted to a municipality under Article 243W of the Constitution are specifically exempt under mega exemption notification No. 25/2012-S.T., dated 20-6-2012. In any case, the charges collected by the applicant cannot be considered as consideration for services relating to renting of immovable property. Hence the Bench holds that the demand of Service Tax on market fee under Renting of Immovable property service in not sustainable. 5.6 In so far as demand of service tax on slaughter house charges/fee is concerned, the Bench is in agreement with the stand of the applicant that prior to 1-7-2012, the services related to slaughtering of animals was not a specified taxable service and with effect fro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cution : 5.10 In the facts and circumstances of the case, the Bench considers it as a fit case for grant of immunity from prosecution to the applicant. ORDER 6.1 In the light of the above, the Bench settles the case on the following terms and conditions under the Central Excise Act, 1944 made applicable to Service Tax by Section 83 of the Finance Act, 1994. (i) The additional amount of Service Tax is settled at ₹ 45,23,383/- (Rupees Forty-Five Lakhs Twenty-Three Thousand Three Hundred and Eighty-Three only). The same is appropriated from the service tax of ₹ 51,72,663/- already paid by the Applicant and the balance service tax of ₹ 6,49,280/- is refundable in accordance with the provisions of the law. (ii) The interest liability shall be worked out by the Applicant on the settled amount to the satisfaction of the jurisdictional Commissioner and after adjusting the amount of ₹ 18,46,984/- already paid by the Applicant towards the interest liability, the balance interest payable, if any, shall be adjusted from the excess paid service tax amount of ₹ 6,49,280/-. (iii) The Bench grants full immunity from imposition of penalt ..... 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