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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 ..... 6 of the Finance Act, 1994 for the period up to 30.06.2012 - An owner can be held liable to pay tax for renting of immoveable property service only if there was an appropriate notification issued under Section 68(2) of the Finance Act, 1994 read with Rule 2(1)(d) of the Service Tax Rules, 1994. 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 - 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. 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. Period post 01.07.2012 - HELD THAT:- From 01.07.2012, ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , they are exempted under Section 65D(1)(a) of the Finance Act,1994 as amended and as in force from 01.07.2012. Only ancillary service provided by a third party towards renting of immoveable property of a non-governmental or local body will be liable to pay service tax like any other service provider. Therefore, service tax is payable by the service provider himself. 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 - it includes: Services by way of public conveniences such as provision of facilities of bathroom, washrooms, lavatories, urinal or toilets and 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. Petition disposed off. - W.P.Nos.8900, 3969 & 12489 of 2018 and 31799 of 2017 And W.M.P.Nos.10756, 4856, 14647 of 2018 and 34941 of 2017 - - - Dated:- 22-3-2021 - Hon'ble Mr.Justice C. Saravanan For the Petitioner : Mr.Joseph Prabakar For the Respondent : Mr.A.P.Srinivas, Senior Standing Counsel COMMON ORDER By this common ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t Serial No.3 passed against Cuddalore Municipality and Vridachalam Municipality are taken up for final hearing. 6. The impugned Show Cause Notice issued and the Orders-in- Originals passed by the respondent are challenged primarily on the ground that they are without jurisdiction. It is submitted that there is no question of proposing or demanding service tax on the activities undertaken by the respective municipalities under the provisions of the Finance Act, 1994. 7. For the sake of clarity, the activity undertaken by the petitioners which are subject matter of the impugned Show Cause Notices/Orders-in- Original are detailed as under:- (1) (2) (3) W.P.No.8900 of 2018 (Cuddalore Municipality) W.P.No.31799 of 2017 (Cuddalore Municipality) W.P. No.12489 of 2017 (Vridhachalam Municipality) Period 2015-2016 and 2016-2017 Our editorial 2014-2015 i. April 2012 June 2012; ii. July 2012 March 2013; iii. April 2013 May 2017 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 17 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 prior to 2012, i.e., the period between April 2012 and March 2013 covered by the challenge in W.P.No.12489 of 2018 wherein Order-in-Original dated 06.04.2018 has been challenged, no tax can be demanded as the petitioner was not a person providing any taxable service. 14. It is submitted that the petitioners are not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es 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, including the handicapped and mentally retarded. 10.Slum improvement and upgradation. 11.Urban poverty alleviation. 12.Provision of urban amenities and facilities such as parks, gardens, play-grounds. 13.Promotion of cultural, educational and aesthetic aspects. 14.Burials ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rther 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, Visakhapatinam and Others , 1963 AIR 1811 : 1964 SCR (4) 89. 22. I have considered the arguments advanced by the learned counsel for the petitioner and the respective learned Senior Standing Counsel for the respective respondents in the respective W ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g, 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, including hotels, hostels, boarding houses, holiday accommodation, tents, camping facilities; (v) vacant land, given on lease or l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nnot 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 commerce to any person . Only if service was provided by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terpretation given for the expression any other person in this order may have a large scale ramification, it is therefore made 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 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d as an employee before the commencement of this section. [ Explanation 2 . - For the purposes of this clause, the expression transaction in money or actionable claim 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 establish ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y Government or a local authority excluding the following:- i. services by the Department of Posts by way of speed post, express parcel post, life insurance, and agency services provided to a person other 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 ratio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated by the Parliament or a State Legislature is neither Government nor a local authority as would be evident from the meaning of these terms explained in point nos. 2.4.7 and 2.4.8 above respectively. Such statutory body, corporation or an authority 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll services provided by Government or local authority covered in the negative list? No. Most services provided by the Central or State Government or local authorities are in the negative list except the following : (a) services provided by the Department of Posts by way of speed post, express 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , it has to be held that if such services are provided by a Government or Local Authority, they are exempted under Section 65D(1)(a) of the Finance Act,1994 as amended and as in force from 01.07.2012. Only ancillary service provided by a third party towards renting of immoveable property of a non-governmental or local body will be 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-S ..... X X X X Extracts X X X X X X X X Extracts X X X X
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