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TMI Blog2023 (8) TMI 252X X X X Extracts X X X X X X X X Extracts X X X X ..... rovisions of statutes. This is clear when we refer to Article 289 in Part XII of the Constitution, which deals with Finance, Property, Contracts and Suits, including taxation. Article 289 (2) permits the Union to tax the States in respect of a trade or business of any kind carried on by or on behalf of such States. Therefore, the fact whether a particular assessee is a State or not within the meaning of Article 12 has no bearing on whether Service Tax could be levied on that assessee. The Hon ble Apex Court had an occasion to consider Sovereign in the context of the Industrial Disputes Act, 1947, in the case of AGRICULTURAL PRODUCE MARKET COMMITTEE VERSUS ASHOK HARIKUNI [ 2000 (9) TMI 930 - SUPREME COURT] has held that Hence even if some of the functionaries under the State Act could be said to be performing sovereign functions of the State Government that by itself would not make the dominant object to be sovereign in nature or take the aforesaid Act out of the purview of the Central Act. Thus the issue decided against appellant. Renting of immovable property service - HELD THAT:- There is a clear finding by the adjudicating authority that the appellant had in fact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pellant stands examined in the context of such service, mere allegation alone is not sufficient to fasten with tax liability. Hence, to this extent, the impugned order cannot sustain and the impugned order is set aside to this extent. Consequently, the grounds-of-appeal relating to this issue stand allowed. Technical Inspection and Certification Agency (TIC) - HELD THAT:- Even if it is accepted that the above service is not rendered to outsiders, but nevertheless, the appellant has collected service charges by deducting from the total consideration being paid to the contractors. That means, the said service was rendered to the contractors, for which payment is also made. The income so generated is thus shown as income under the category of Quality Control inspection testing fees in Schedule-4 to their P L Account. In any case, it is not the case of the appellant that such contractors were not on their rolls and that what was paid to them was only salary. If it is their view that it is not taxable, then why the service charges were deducted from payments and under which provision did they do so has not been explained anywhere by the appellant - The finding and the consequenti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s; (2) Supervision charges collected as a percentage of the maintenance charges; (3) Testing charges for testing materials like steel, cement, etc. from the Chennai Corporation for the works undertaken by the appellant. 2.3 From the above, it appeared to the Revenue that the above activities of the appellant for which income was received, were liable for Service Tax under: - (1) Renting of Immovable Property (2) Management, Maintenance or Repair (MMR) (3) Business Auxiliary Service (BAS) and (4) Technical Inspection and Certification Agency (TIC) It is a fact borne on record that the assessee had not registered with the Department for the above services under the respective categories and had also not paid any Service Tax on such services rendered by them to various clients. 2.4 In the light of the above, it appears that the following Show Cause Notices were issued proposing inter alia to demand Service Tax on the above services: - 1) Show Cause Notice No. 289/2010 dated 21.04.2010 for the period from 2004-05 to 2008-09; 2) Show Cause Notice No. 167/2011 dated 08.04.2011 for the period from April 2009 to March 2010. 2.5 There is no dispute tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ner observes that the assessee had received rental income by renting out commercial complexes and community centres belonging to them and such receipts from rental income had been accounted for and duly stated in their P L Account. He thereafter observes that the assessee, by renting out immovable property such as commercial complexes and community centres to others, have provided taxable service of renting of immovable property as per Section 65(105)(zzzz) ibid. 5.1.3 Ld. Commissioner also observes that even though the appellant had stated that they came to know about the levy only on 25.02.2008, but however, registered with the Department only after nearly a ten-month delay, i.e., on 12.12.2008. MMR Service: 5.2.1 With regard to MMR, the Ld. Commissioner has analysed the reply filed by the assessee vis- -vis Section 65(105)(zzg). 5.2.2 At paragraph 4.10, he observes that the assessee, in support of its claim as to non-payment of Service Tax, which is meant for water charges collected from tenements, which is a reimbursement, but however, also observes that the assessee had not produced any evidence to prove that such income shown under the category of maintenance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e impugned order that there is also an observation, at paragraph 4.15, that the appellant did not contest the issue of invoking of extended period of limitation in their submissions. 6. It is against this order that Service Tax Appeal Nos. 438 and 439 of 2012 have been filed before this forum by the assessee-appellant. 7. In the appeals filed before us, the appellant has raised the following grounds-of-appeal: - (a) Invoking the extended period of limitation under Section 73(1) is invalid and it is against the provisions of law. (b) The same cannot be invoked for renting of immovable property service for the period from 2004-05 to 2008-09 since the very service was not under the statute before 01.06.2007. For the later period i.e., after 01.06.2007, it has been held by courts that renting of immovable property itself could not be taxed, but only the services in relation to the service of renting of immovable property could be taxed. (c) They have raised similar contentions with regard to the services of MMR, BAS and TIC. (d) Without prejudice to the above, even on merits, following grounds have been urged: Tax on renting of immovable property was introduced o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y performing duties which are in the nature of statutory and mandatory obligations. The fee they were collecting was in terms of the respective provision of law and the fee / amount so collected was deposited into Government treasury. (v) The appellant falls under the definition of State as defined under Article 12 of the Constitution of India, being a local authority. In this regard, he also referred to the amendment with effect from 01.07.2012 [Negative Regime] wherein the definition of Government was inserted. (vi) Accounts of the appellant were subjected to audit by the Comptroller and Auditor General of India (C AG) under Article 150 of the Constitution of India and therefore, the appellant would squarely fall under the term Government and hence, exempted from Service Tax. (vii) The appellant is a charitable institution having obtained registration under Section 12AA of the Income Tax Act, 1961. It was canvassed before us that even post Negative List, the services by an entity registered under Section 12AA of the Income Tax Act by way of charitable activities are exempt from Service Tax. (viii) The Department has nowhere found that there was any diversion of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom adjudicating on this issue. 9.3 She would also seriously contend with regard to the appellant s claim as to its status being State under Article 12 ibid., that the same is being taken for the first time before this forum. Further, there is also no finding on this ground nor is there any discussion since this ground was not at all urged before the lower authority. 10. We have heard the rival contentions and we have carefully perused the documents placed on record. We have also gone through the documents and decisions/ orders relied upon during the course of arguments. 11. After hearing both sides, we find that the following issues are to be decided by us: - (1) Whether the appellant is a State discharging / performing sovereign duty and hence, not amenable to Service Tax? (2) If the answer to the first question is against the appellant, then: (a) Whether the service of renting of immovable property by the appellant is correctly taxed? (b) Whether the demand of Service Tax under MMR service is correct? (c) Whether the demand of Service Tax under BAS is sustainable? (d) Whether the demand of Service Tax under TIC service is justified? ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce of the country, raising armed forces and maintaining it, making peace or war, foreign affairs, power to acquire and retain territory, are functions which are indicative of external sovereignty and are political in nature. They are, therefore, not amenable to the jurisdiction of ordinary civil court inasmuch as the State is immune from being sued in such matters. But then, according to this decision the immunity ends there. It was then observed that in a welfare State, functions of the State are not only the defence of the country or administration of justice or maintaining law and order but extends to regulating and controlling the activities of people in almost every sphere, educational, commercial, social, economic, political and even martial. Because of this the demarcating line between sovereign and non-sovereign powers has largely disappeared . 21. In other words, it all depends on the nature of power and the manner of its exercise. What is approved to be Sovereign is defence of the country, raising armed forces, making peace or war, foreign affairs, power to acquire and retain territory. These are not amenable to the jurisdiction of ordinary civil courts. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... India Ltd. v. Union of India [2009 (14) S.T.R. 433 (Del.)], wherein, it has been held that Section 65(105)(zzzz) does not in terms entail that the renting out of immovable property for use in the course or furtherance of business of commerce would by itself constitute a taxable service and be exigible to service tax under the said Act. 14.3 But the very same Hon ble Delhi High Court in the subsequent / second Home Solutions Retails (India) Ltd. v. Union of India [2011 (24) S.T.R. 129 (Del.)] [3-Judges Bench] has set aside the above decision and the following observations are most crucial: - 68. When premises is taken for commercial purpose, it is basically to subserve the cause of facilitating commerce, business and promoting the same. Therefore, there can be no trace of doubt that an element of value addition is involved and once there is a value addition, there is an element of service. 69. In view of our aforesaid analysis, we are disposed to think that the imposition of service tax under Section 65(105)(zzzz) read with Section 66 is not a tax on land and building which is under Entry 49 of List II. What is being taxed is an activity, and the activity denotes the le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pay any Service Tax. It has been explained by the appellant that having constructed its own buildings, they had let out on rent and collected only water charges from the tenements for supply of water, which was in turn remitted to the concerned State Government department. A sample agreement between the appellant and the Commissionerate Division III has been placed on record along with sample receipts, apparently to demonstrate that the demand notices were issued to the appellant for paying water charges. This, according to them, was a mere reimbursement of expenditure. 15.3 There is a specific finding by the Ld. Commissioner that the appellant did not file any supporting evidence before him. Here, though certain documents were filed for the first time before us, we do not see any application being made for filing such/fresh documents before us nor is there any application made as prescribed under the CESTAT Procedure Rules for admitting fresh evidence before the CESTAT. We do not also see anywhere in the pleadings or even the written submissions as to why such documents were not filed before the lower authority. Moreover, there is also no request in the prescribed format pla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ental or auxiliary to any activity specified in sub-clauses (i) to (vi), such as billing, issue or collection or recovery of cheques, payments, maintenance of accounts and remittance, inventory management, evaluation or development of prospective customer or vendor, public relation services, management or supervision, and includes services as a commission agent, [but does not include any activity that amounts to manufacture of excisable goods. But however, the Revenue has not specifically pointed out as to which limb of the above categories covers scope of the alleged services rendered by the appellant. In the impugned order also, the Ld. Commissioner has only referred to Section 65(105)(zzb) which only states - a service to be rendered to a client, by any person, in relation to BAS; and that limb of BAS is not specifically identified by him. 16.4 We are of the opinion that unless a specific charge/service is alleged, put across in the Show Cause Notice and the scope of the services alleged to have been rendered by the appellant stands examined in the context of such service, mere allegation alone is not sufficient to fasten with tax liability. Hence, to this extent, the im ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s a clear case of suppression of facts, collecting / deducting Service Tax but withholding the same without remitting to the appropriate Government account, the same has also established the intent to evade payment of tax. 18.3 In view of the above, the extended period of limitation has been rightly invoked and hence, to this extent also, the impugned order is correct. Consequently, the grounds-of-appeal relating to this issue lack merit and they are dismissed. 19.1 The Ld. Advocate has also urged that the services by an entity registered under Section 12AA of the Income Tax Act, 1961 as a charitable institution, is granted exemption subsequent to 2012 by placing the said service under the Negative List. This, according to him, makes the intention of the legislature clear, to grant immunity from taxation, which applies even to the period prior to 2012; the intention was only incorporated into the statute. 19.2 We do not agree with the said contention of the Ld. Advocate. If the intention of the Government was to exempt such activities from the levy of Service Tax, then, perhaps, there was no need for specifically including the activities of the appellant under the Negati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o 41528 of 2017 are concerned, the same arise against the common Orders-in-Original Nos. CHN-SVTAX-002-COM- 4 to 7 -2016-17 dated 25.01.2017. The above common adjudication order was passed in respect of four SCN/SODs for different periods, which are tabulated hereinbelow: - S. No. SCN/SOD No. Date Period Service Tax demanded (in Rs.) Demand/Interest/Penalty proposed under 1 98/2013 15.04.2013 2011-12 64,91,045/- Section 73(1) Section 75 Sections 76 77 2 152/2014 23.05.2014 2012-13 35,16,188/- -do- 3 17/2015 10.03.2015 2013-14 77,85,557/- -do- 4 14/2016 04.04.2016 2014-15 55,69,648/- Section 73(1) Section 75Sections 76(1) The ..... X X X X Extracts X X X X X X X X Extracts X X X X
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