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TMI Blog2024 (4) TMI 430X X X X Extracts X X X X X X X X Extracts X X X X ..... ad with Twelfth Schedule of the Constitution and undertakes public services. Local Authority cannot be considered as a commercial organisation, as held by the Tribunal in the case of COMMISSIONER OF CEX ST BHOPAL versus SUNIL SHRIVASTAVA [ 2018 (7) TMI 1212 - CESTAT NEW DELHI ]. GHMC is not so registered either under the Andhra Pradesh Societies Registration Act or Companies Act 1956. On the other hand, it was brought in to existence by a special enactment i.e. GHMC Act 1955, passed by the Andhra Pradesh State Legislature. GHMC is not a body corporate within the meaning of Section 65(14) of the Finance Act, 1994, read with clause (7) of Section 2 of the Companies Act, 1956 - the appellant is neither a business entity nor a body corporate. Consequently, the appellant is not liable to pay service tax on Manpower Supply services and Rent a Cab service, under Reverse Charge in terms of Notification No. 30/2012-ST dated 20.06.2012. Accordingly, this ground is allowed in favour of the appellant and set aside the demand of Rs Rs.30,71,27,798/- on Manpower Supply services and Rs.1,49,02,365/- on Rent a Cab service under Reverse Charge, in terms of Notification No. 30/2012-ST dated 20.06.20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder section 66B of the Finance Act, 1994,during the period commencing on and from the 1st day of July, 2012 and ending with the 30th day of June, 2017, on the services by way of granting of right of way by local authorities , as defined in Sub Section (7) of Section 3 of the Indian Telegraph Act, 1885, in the said period, but for the said practice, shall not be required to be paid - In terms of Sub Section (7) of Section 3 of the Indian Telegraph Act, 1885, local authority means any municipal committee, district board, body of port commissioner or other authority legally entitled to, or entrusted by the Central or any State Government with the control, management of any municipal or local fund. It is an admitted fact that the appellant is a Local Authority, as defined in Sub Section (7) of Section 3 of the Indian Telegraph Act, 1885, entrusted with the control, management of municipal fund, in terms of Section 169 of the GHMC Act 1955. The service tax demand on the services by way of granting of right of way by the appellant are not leviable to service tax during the period commencing on and from the 1st day of July, 2012 and ending with the 30th day of June, 2017 in terms of Noti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ervice tax on the activities of Road cutting restoring / Right of way for laying of cables provided by the appellant during the period from 2011-12 to 2015- 16, treating the said activity as taxable services viz. Renting of Immovable Property Service up to 30.06.2012 and under taxable service w.e.f. 01.07.2012. iii) demand an amount of Rs.1,49,02,365/- as service tax under reverse charge for taxable service viz. Rent-a-Cab Service availed by the appellant in terms of the proviso to Section 73(1) of Finance Act, 1994 read with Notification Nos. 26 and 30/2012-ST both dt.20.06.2012. iv) demand an amount Rs.1,70,83,907/- as service tax on the Cell Tower Verification activities provided by the appellant during the period 2011-12 to 2015-16 under Business Support Service / Taxable Service in terms of the proviso to Section 73(1) of Finance Act, 1994. v) appropriate an amount of Rs.7,98,52,484/-, paid by the appellant against the amount of Service Tax demanded. vi) demand interest at applicable rate(s) under Section 75 of Finance Act, 1994 on the amounts proposed to be demanded. vii) impose mandatory penalty on the appellant under Section 78 of the Finance Act, 1994 for suppression of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mitted that they had paid in total Rs. 15,49,70,564/- for the notice period and requested to appropriate the same towards service tax liability, only an amount of Rs.7,98,52,484/- which was paid during investigation was appropriated. However, jurisdictional officers may adjust the said payment against the amount confirmed subject to confirmation of the same. vii) Extended period of limitation is invokable in terms of proviso to Section 73(1) of the Finance Act, 1994, as GHMC was operating under selfassessment regime and the assessee is required to declare gross value of service consideration, value of exempted services etc. Such non-disclosure of facts to the department would tantamount to suppression of material facts by the assessee. But for the in depth investigation by the department, the fact of non-payment of service tax on their activities would not have come to light. All these facts indicate the intention of the assesses to evade payment of service tax. Hence, extended period of limitation is invokable. viii) GHMC had not filed the ST 3 Returns in accordance with Section 70 of the Finance Act, 1994 read with Rule 7 of the Service Tax Rules, 1994 for the period 2011-12 to 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... STAVA [2018(14) GSTL 257(Tri-Del)], where in the Tribunal held that Cantonment Board, which is local authority in cantonment area, is a statutory local body and is not a commercial organisation. Hence, the services provided by it are not subject to Service tax. ii) COMMR. OF C. EX. CGST, KANPUR versus INDIAN INSTITUTE OF TECHNOLOGY [2019 (27) G.S.T.L. 738 (Tri. - All.)], where in the Tribunal held that the recipient institute is providing instruction and research in various branches of engineering and technology, etc., and not ordinarily carrying out any activity relating to industry, commerce or any other business, hence is not liable to pay Service Tax under reverse charge as service recipient of manpower supply and Works Contract services, in terms of Rule 2(1)(d) of Service Tax Rules, 1994 read with Notification No. 30/2012-S.T. iii) SRM ENGINEERING CONSTRUCTION LTD. Versus COMMR. OF S.T., CHENNAI-II [2018 (11) G.S.T.L. 174 (Tri. - Chennai)], where in the Tribunal held that buildings constructed were predominantly used for educational activities and mere occurrence of some incidental activities of renting of space for Scientific or Technical Services or Manpower Recruitment or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Learned Counsel for the appellant has also contended that among the service providers under the category of Manpower Supply, there are many Government Departments like DG, SPF, AP Hyderabad, Director General Special Protection Force, Director General TSPF, Hyderabad, etc. No staff from these departments has been out sourced to GHMC, but working on deputation with GHMC and the expenditure is met from GHMC general funds. In fact, there is no service tax liability in respect of these transactions in view of the provisions contained in Section 66D(a) of the Finance Act, 1994. 8.10 The Learned Counsel has further argued that among the service providers of Manpower Supply Service, certain service providers are companies, in respect of whom GHMC is not liable to discharge service tax liability, under Reverse Charge Mechanism. 8.11 The Learned Counsel has further submitted that an amount of Rs.15,49,70,564/-, is collected without authority of law, needs to be returned to the appellant. Regarding the demand of Rs 1,70,83,907/- on Cell Tower Verification /Certification fee, under Business Support Services. 9.1 The Government of Telangana, Municipal Administration Urban Development Departme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and it is undertaken as mandatory and statutory function. These are not in the nature of service to any particular individual for any consideration. Therefore, such an activity performed by a sovereign/public authority under the provisions of law does not constitute provision of taxable service to a person and, therefore, no service tax is leviable on such activities. All the certification charges paid by Telecom operators are deposited in a separate account of GHMC, as permitted by the Government. 9.4 In support of the above submissions, the Learned Counsel for the appellant has relied on certain decisions. 9.5. The learned counsel for the appellant has also contended that the aforesaid activity did not fall under Business Support Services up to 30.06.2012 and under taxable service from 01.07.2012 on the following grounds: i) In terms of Definition of the Business Support Services in the prenegative list regime, under Section 65 (104c) of the Finance Act, 1994, as well as in the post negative list regime under Section 65 B (49) ibid, only those services envisaged in the definition and outsourced by business entities for use in Business and Commerce are liable to be classified unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt case, the Telecommunication Tower Operators cannot issue the certificates for themselves since it is a statutory/regulatory function. Hence, the question of out sourcing the same also does not arise. v) In respect of the services provided or agreed to be provided by Government or local authority by way of support services excluding, - (1) renting of immovable property, and (2) services specified in sub-clauses (i), (ii) and (iii) of clause (a) of section 66D of the Finance Act,1994,the recipient is liable to pay ST in terms of S.No.6 of Notification No.30/2012-ST dated 20.06.2012. 9.6 In view of the above factual and legal position, the learned counsel for the appellant has submitted that the demand of Rs.1,70,83,907/- on Cell Tower verification fee under Business Support Services is not legally sustainable. Regarding the demand of Rs.15,18,18,931/- on Road Cutting and Refilling Services (Right of Way of Laying Cables). 10.1 An amount of Rs.15,18,18,931/- has been demanded on road Cutting activity, under Renting of Immovable Property Service , covering the period 2011-12 to 2015-16. 10.2 The Government of Telangana issued G.O.Ms No. 12 dated 28-07- 2014 and 12 dated 16.09.2015. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted out for use in the course of or for furtherance of business or commerce of person renting property. iii) The activity is one of according permission by GHMC to the telecom operators for cutting the road and laying the cables i.e. granting of right of way . The activity being right of way has been admitted in the impugned order. 10.5 Assuming but not admitting, even if there is service tax liability in the case, it has to be discharged by the service recipients under Reverse Charge Mechanism, in terms of Sl. No.6 of Notification No. 30/2012-ST dated 20.06.2012 as amended, but not by GHMC. 10.6 In terms of Notification No. 1/2018- dated 30.11.2018, issued under section 11C of the Central Excise Act, 1944 read with Section 83 of the Finance Act, 1994, and clause (e) of sub-section (2) of Section 174 of the Central Goods and Services Tax Act 2017, it is notified that the service tax payable under Section 66B of the Finance Act, 1994, during the period commencing on and from the 1st day of July, 2012 and ending with the 30th day of June, 2017, on the services by way of granting of right of way by local authorities , as defined in sub Section (7) of Section 3 of the Indian Telegraph ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (a) Surat Municipal Corporation Vs. Commissioner of C.Ex., Surat- [2006(4) STR.44 (Tri-Del)] upheld by the Hon ble High Court of Gujarat [2017(50) STR.265(Guj)] (b) C.C.E, Bangalore Vs KPTCL [2010 (250) ELT 572 (Tri-Bang)] (c) Executive Engineer, Tube well Division Vs C.CE, Kanpur [2008(230) ELT.71 (Tri-Del)] d) Nagpur Municipal Corporation Vs CCE, Nagpur [2014 (33) S.T.R. 73 (Tri. - Mumbai)] e) Karad Nagar ParishadVersus Commissioner of C. EX. S.T., Kolhapur, [2019 (20) G.S.T.L. 288 (Tri. - Mumbai)] f) Commissioner, Komarapalayam Municipality Vs COMMR. (A-I) SALEM, [2018 (16) G.S.T.L. 610 (Mad.)] 13. Opposing the appeal, Learned AR for Revenue relied on the findings of the Learned Commissioner in the impugned order. He has also made the following submissions: 13.1 GHMC is a body corporate in terms of the GHMC Act, 1955 itself. 13.2 GHMC is a business entity as they rent out their premises and collect rents. 14. The Learned counsel for the appellant has assailed the above two submissions of the Learned AR on the following grounds: 14.1. Body Corporate is a legal fiction created by the GHMC Act ,1955, under Section 3(2) of the said Act, in terms of which The Corporation established ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itution and undertakes public services, but not business activities. In the case of SRM ENGINEERING CONSTRUCTION LTD. Vs COMMR. OF S.T., CHENNAI-II [2018 (11) G.S.T.L. 174 (Tri. - Chennai)], this Tribunal held that buildings constructed were predominantly used for educational activities and mere occurrence of some incidental activities of renting of space for Scientific or Technical Services or Manpower Recruitment or Supply Agency services, cannot be basis for demand. 15.1 From the record we find that the original authority has not given any finding in the impugned order whether the appellant is ordinarily a business entity, in terms of Section 65B (17) of the Finance Act 1994 or a body corporate in terms of Section 65 (14) of the Finance Act 1994 read with Clause (7) of Section 2 of the Companies Act, 1956,but simply held that GHMC being service recipient/Body Corporate is liable to discharge service tax liability in terms of Serial No. 8 of Notification No. 30/2012-ST dated 20.06.2012, as amended with effect from 01.07.2012 onwards. 15.2 Having considered the rival contentions, we find that the Greater Hyderabad Municipal Corporation is neither a business entity, ordinarily, in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ree that the profit motive is absent in the activities of GHMC. 15.6 We find from the Income and Expenditure Statement of GHMC for the period 01-04-2015 to 31-3-2016, submitted by AR for Revenue, as enclosure to synopsis, during hearing, bulk of the income comes from Tax Revenue, Assigned Revenues Compensation, Fees user Charges, Revenue Grants, Contributions Subsidies and Interest earned. Out of the total income of Rs. 2,38,172/- Lakhs, the rental income is only Rs. 857 Lakhs. Thus, the contribution of the rental income to the total income is only 0.36%. 15.7 We agree with the contention of the learned counsel for the appellant that even if a legal fiction is created by the Legislature, the court has to ascertain for what purpose the fiction is created, and it must be limited to the purpose indicated by the context and cannot be given a larger effect and accordingly the legal fiction of GHMC being body corporate created under GHMC Act 1955, cannot be applied to determine whether appellant is liable to pay service tax under Finance Act 1994, as held by the Hon ble Supreme Court in the case of Sant Lal Gupta [2010 (262) ELT 6 (SC)] and Imagic Creative Pvt. Ltd. [2008 (9) STR 337 (SC ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tower or telecommunication pole structures or accessory or make alteration or cause the same to be done without first obtaining a separate permission for each such tower or telecommunication pole structures from the Sanctioning Authority. The regulatory nature of the activity of the appellant is discernible from the fact that it requires a certificate of structural safety/stability of the tower and the building, if the tower or pole is constructed over a building and the permission is issued keeping various aspects like water bodies, railways, Airports etc in view. It is also pertinent to note that the fee payable by the applicants for the issuance of certificate is uniform in nature for all the applicants and the appellant, in discharge of its statutory function, was collecting the aforesaid fee uniformly from all the applicants who proposed to install Telecommunication Infra Structure Towers in the limits of the Municipal Corporation. There is neither rendition of any service nor realisation of service consideration, as the amount collected is only a statutory fee. Therefore, we hold that the activity of Cell Tower Verification and certification undertaken by the appellant is a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to, or entrusted by the Central or any State Government with the control, management of any municipal or local fund. It is an admitted fact that the appellant is a Local Authority, as defined in Sub Section (7) of Section 3 of the Indian Telegraph Act, 1885, entrusted with the control, management of municipal fund, in terms of Section 169 of the GHMC Act 1955. 17.3 Therefore, we hold that the service tax demand on the services by way of granting of right of way by the appellant are not leviable to service tax during the period commencing on and from the 1st day of July, 2012 and ending with the 30th day of June, 2017 in terms of Notification No. 1/2018- dated 30.11.2018. 17.4 We, further, hold that the demand for the period prior to 1st day of July, 2012 is also not sustainable under Renting of Immovable Property Service, as held by the Hon ble Madras High Court in the case of CUDDALORE MUNICIPALITY Versus JOINT COMMR. OF GST C. EX., TIRUCHIRAPPALLI, [2021 (55) G.S.T.L. 397 (Mad.)]. It is held by the Hon ble Court that in the pre negative list regime, merely renting of immovable property by itself is not sufficient to attract levy as owner of immovable property renting out proper ..... X X X X Extracts X X X X X X X X Extracts X X X X
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