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TMI Blog2021 (4) TMI 500X X X X Extracts X X X X X X X X Extracts X X X X ..... ce bearing ref. No/Dated. Period Amount Order in Original/Dated 1(i) 3969/2018 S.C.N. in C.No.V/ST/15/21/2 017-ST. Adjn. Dated 22.11.2017 (Virudhachalam Municipality) 2012-2013 to 2016-2017 Rs. 39,85,349/- As in Sl. No.1(ii) below. 1(ii) 12489/2018 Order-in- Original No.5/2018-ST in C.No.V/ST/15/21/2018-ST.Adj. dated 06.04.2018 2 8900/2018 S.C.N.No.04/2018 (ST) in C.No.V/ST/15/2/20 18-ST. Adjn. Dated 07.03.2018. (Cuddalore Municipality) 2015-2016 and 2016-2017 Rs. 55,35,216/- 3 31799/2017 i. S.C.N. No.01/2016 (ST) - R - IV-Cud Dated 12.05.16 (Range O.C.No.100/ 16) ii. S.C.N. No.2/17 (ST) Dated 13.02.17 (C.No.IV/09/ 04 /2017-ST. Adjn.) (Cuddalore Municipality) April 2014 to March 2015 Rs. 10,36,709/- + Penalty of Rs. 1,03,671/- Order-inoriginal No.3/2017-ST in C.No.IV/09/04/2017-ST. Adjn. (RO OC No.100/2016) dated 24.03.2017 4. Show Cause Notice at Serial No 1(i) issued to Virdhachalam Municipality has culminated in Order-in-Original No.5/2018-ST in C.No.V/ST/15/21/2017-ST. Adjn. at Serial No.1(ii). Therefore, W.P.No.3689 of 2018 in Sl.No.1(i) filed by Virdhachalam Municipality is dismissed as inf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... therefore submitted that the question of levying tax on services provided by the respective municipalities cannot be taxed under the provisions of the Finance Act, 1994. 10. Show Cause Notice dated 07.03.2018 issued to the Cuddalore Municipality impugned in W.P.No.8900 of 2018 covers the period between 2015-2016 and 2016-2017 while the Order-in-Original dated 24.03.2017 impugned in W.P.No.31799 of 2017 covers the period 2014- 2015. 11. These proceedings have to be examined in the light of the amended provisions of the Finance Act, 1994 with effect from 01.07.2012 read with, Negative List, Mega Exemption Notification No.25/2012 - ST dated 20.06.2012 and other provisions of the Finance Act, 1994. 12. As far as the challenge to Order-in-Original dated 06.04.2018 impugned in W.P.No.12489 of 2018 is concerned, Order-in-Original covers the period between 2012-2013 and 2016-2017. 13. The learned counsel for the petitioners submitted that the services rendered by the petitioners are either not taxable or otherwise exempted. He submitted that for instance, fees on pay and use toilets are exempted from tax under Sl.No.38 to the said Notification. He further submitted that for the period ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... trusted to a municipality under Article 243W of the Constitution of India. He further submitted that under Article 243W of the Constitution of India, the Legislature of a State may, by law, endow the Municipalities with such powers and authority as may be necessary to enable such Municipalities to function as institutions of self government and such law may contain provisions for the devolution of powers and responsibilities upon Municipalities, subject to such conditions as may be specified therein, with respect to. 16. He submitted that the following activities have been specified in the 12th Schedule to the Constitution of India for the purpose of Article 243W of the Constitution of India:- 1. Urban planning including town planning. 2. Regulation of land-use and construction of buildings. 3. Planning for economic and social development. 4. Roads and bridges. 5. Water supply for domestic, industrial and, commercial purposes. 6. Public health, sanitation conservancy and solid waste management. 7. Fire services. 8. Urban forestry protection of the environment. and promotion of ecological aspects. 9. Safeguarding the interests of weaker sections of society, includ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the respective Municipalities against the respective Order-in-Originals submitted that the respective petitioners have an alternate remedy by way of appeals before the appellate body and therefore, these writ petitions were liable to be dismissed. He further submitted that respective Municipalities were "persons" for the purpose of Finance Act, 1994. He further submitted that the period prior to 2012, even if there was no definition for the word "person", the definition of "person" in the General Clause Act would apply and therefore, the petitioners were liable to pay tax. 20. He further submitted that after 1st July, 2012, the definition of "person" in Section 65B(37) includes a "local authority". The definition of "local authority" includes the Municipality in Clause (e) of Article 243P of the Constitution of India. He further submitted that the definition of "person" includes the artificial and juridical person and there is no dispute that the respective petitioners were the "persons" for payment of service tax. 21. He also relied on the decision of the Hon'ble Supreme Court in The State Trading Corporation of India Limited and Others Vs. The Commercial Tax Officer, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roperty" in Section 65 (90a) of the Finance Act, 1994. To any person, by any other person, by renting of immovable property or any other service in relation to such renting, for use in the course of or furtherance of, business or commerce. Explanation 1: For the purpose of this subclause, "immovable property" includes- (i) building or part of a building, and the land are pertinent thereto; (ii) land incidental to the use of such building or part of a building; the common or shared areas and facilities relating thereto; and (iii) the common or shared areas and facilities relating thereto; and (iv) in case of a building located in a complex or an industrial estate, all common areas and facilities relating thereto, within such complex or estate, but does not include - (a) vacant land solely used for agriculture, aquaculture, farming, forestry, animal husbandry, mining purposes; (b) vacant land, whether or not having facilities clearly incidental to the use of such vacant land; (c) land used for educational sports, circus, entertainment and parking purposes; and (d) building used solely for residential purposes and buildings used for the purposes of accommodation, includi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court, the submission that the base of the said decisions cannot be taken away by a statutory amendment need not be adverted to. Once there is a value addition and the element of service is involved, in conceptual essentiality, service tax gets attracted and the impost gets out of the purview of Entry 49 of List II of the Seventh Schedule of the Constitution and falls under the residuary entry, that is, Entry 97 of List I. 31. This Court has also upheld the validity of the above provision. Similar view has been taken by the other High Courts also. There is no doubt that the petitioner municipality was renting immovable propertyto various person in the course of or furtherance of, business or commerce of the lessee as defined in Section 65(90a) of the Finance Act, 1994 as it stood during the period between April 2012 and June 2012. However, merely because there was renting of immoveable property by itself was not sufficient to attract the levy. 32. To attract levy under Section 65(105) (zzzz) of the Finance Act 1994 there should be renting of immovable property or provision any other service in relation to such renting, for use in the course of or furtherance of, business or comme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ade clear the interpretation given in this order for the expression "any other person" qua Section 65(105)(zzzz) cannot be uniformly applied to other provisions of the Finance Act,1994 unless they are examined separately and individually on case to case basis for the other services. 38. In my view, service tax was payable only if such services were provided "by any other person" other than the owner, to any person by such renting, for use in the course of or in furtherance of, business or commerce. 39. As the owner of the immovable property who rents out the property simplicitor was not in contemplation in the definition of taxable service of "renting of immovable property" in Section 65(105(zzzz) of the Finance Act, 1994, demand against the petitioner was without jurisdiction. 40. Since the petitioner municipality is the owner of property, question of it being made liable to pay service tax for any service in relation to such renting of immoveable property does not arise even if it had rented out its immoveable property for use in the course of or for furtherance of, business or commerce of the person who was renting it. 41. In the light of the about discussion, W.P.No.12489 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... laim" shall not include - (i) any activity relating to use of money or its conversion by cash or by any other mode, from one form, currency or denomination, to another form, currency or denomination for which a separate consideration is charged; (ii) any activity carried out, for a consideration, in relation to, or for facilitation of, a transaction in money or actionable claim, including the activity carried out - [(a) by a lottery distributor or selling agent on behalf of the State Government, in relation to promotion, marketing, organising, selling of lottery or facilitating in organising lottery of any kind, in any other manner, in accordance with the provisions of the Lotteries (Regulation) Act, 1998;]. (b) by a foreman of chit fund for conducting or organising a chit in any manner.;] Explanation 3. - For the purposes of this Chapter,- (a) an unincorporated association or a body of persons, as the case may be, and a member thereof shall be treated as distinct persons; (b) an establishment of a person in the taxable territory and any of his other establishment in a nontaxable territory shall be treated as establishments of distinct persons. Explanation 4. - A pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r than Government; ii. services in relation to an aircraft or a vessel, inside or outside the precincts of a port or an airport; iii. transport of goods or passengers; or iv. [Support Service]*, other than services covered under clauses (i) to (iii) above, provided to business entities; Note: * Substituted with Any service vide Finance Act, 2015 (20 of 2015), dated 14.05.2015. 49. In its publication dated 20.6.2012, titled the Taxation of Service, An Education Guide, the Central Board of Indirect Tax clarified as follows:- 2.4.5 Are Government and local authorities also liable to pay tax? Yes. However, most of the services provided by the Government or local authorities are in the negative list. 2.4.6 What is the rationale behind taxing certain activities of the Government or local authorities? Only those activities of Government or local authorities are taxed where similar or substitutable services are provided by private entities. The rationale is as follows- * to provide a level playing field to private entities in these areas as exemption to Government in such activities would lead to competitive inequities; and * to avoid break in Cenvat chain as the sup ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rity are normally created by the Parliament or a State Legislature in exercise of the powers conferred under article 53(3)(b) and article 154(2)(b) of the Constitution respectively. It is a settled position of law Government (Agarwal v. Hindustan Steel - AIR 1970 Supreme Court 1150) that the manpower of such statutory authorities or bodies do not become officers subordinate to the President under article 53(1) of the Constitution and similarly to the Governor under article 154 (1). Such a statutory body, corporation or an authority as a juristic entity is separate from the state and cannot be regarded as Central or State Government and also do not fall in the definition of 'local authority'. Thus regulatory bodies and other autonomous entities which attain their entity under an act would not comprise either government or local authority. 2.4.11 Would services provided by one department of the Government to another Department of the Government be taxable? If services are provided by one department of the Central Government to another department of the Central Government or by a department of a State Government to another department of the same State Government then such servic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ress parcel post, life insurance, and agency services carried out on payment of commission on non government business; (b) services in relation to a vessel or an aircraft inside or outside the precincts of a port or an airport; (c) transport of goods and/or passengers; (d) support services, other than those covered by clauses (a) to (c) above, to business entities. 4.1.2 Would the taxable services provided by the Government be charged to tax if they are otherwise exempt or specified elsewhere in the negative list? No. If the services provided by the government or local authorities that have been excluded from the negative list entry are otherwise specified in the negative list then such services would also not be taxable. 51. Only Support services provided by the government or local authorities that have been excluded from the negative list entry are in the negative list. Otherwise, all service of government and local authorities are not taxable. Support services was defined in Section 65B of the Act as 'infrastructural, operational, administrative, logistic marketing or any other support of any kind comprising functions that entities carry out in ordinary course of oper ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... liable to pay service tax like any other service provider. Therefore, service tax is payable by the service provider himself. 59. That apart, it is seen that some of the services provided are also exempted under the Mega Exemption Notification No.25/2012-ST dated 20.06.2012 vide Sl.Nos.38 and 39. They are reproduced below:- 38. Services by way of public conveniences such as provision of facilities of bathroom, washrooms, lavatories, urinal or toilets; 39. Services by a governmental authority by way of any activity in relation to any function entrusted to a municipality under article 243 W of the Constitution. 60. Thus, there is no jurisdiction in the impugned Show Cause Notices / Orders-in-Originals issued by the respondent. In the light of the above discussion, demand proposed in the impugned S.C.N.No.04/2018 (ST) in C.No.V/ST/15/2/2018-ST. Adjn. Dated 07.03.2018 and demand confirmed in Order-in-original No.3/2017-ST in C.No.IV/09/04/2017-ST. Adjn. (RO OC No.100/2016) dated 24.03.2017 and Order-in-Original No.5/2018-ST in C.No.V/ST/15/21/2018-ST.Adj. dated 06.04.2018 are liable to be quashed and are accordingly quashed. 61. In the result, i. W.P.No.3969 of 2018 as mention ..... X X X X Extracts X X X X X X X X Extracts X X X X
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