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TMI Blog2024 (4) TMI 1125X X X X Extracts X X X X X X X X Extracts X X X X ..... CENTRAL EXCISE SERVICE TAX AND VIRUDHACHALAM MUNICIPALITY VERSUS THE ASSISTANT COMMISSIONER, OFFICE OF THE ASSISTANT COMMISSIONER OF GST AND CENTRAL EXCISE, CUDDALORE [ 2021 (4) TMI 500 - MADRAS HIGH COURT] had analysed the issue as to whether demand of service tax can be raised in regard to services / facilities provided by Municipality / Corporation. It was held that Municipalities (local authority) were rendering such services as sovereign function and therefore the amounts received is outside the purview of levy of service tax. In the said judgment, the Hon ble High Court considered the liability to pay service tax for the period prior to 01.07.2012 as well as after 01.07.2012 - It was held that the Government or local authority is exempted from payment of service tax on Renting of Immovable Property Services or for other services. The above decision was rendered by the Hon ble High Court on 22.03.2021. However, prior to this decision, the Hon ble Jurisdictional High Court at Madurai Bench in the case of Madurai Corporation Vs. The Commissioner of Central Excise [ 2020 (9) TMI 1303 - MADRAS HIGH COURT] had considered the issue of taxability of renting of immovable property and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ity Municipal Corporation has five zonal offices. These zones are separately registered with the Department for service tax purposes. The assessee through its zones provide various services which according to the Department are taxable under the provisions of Finance Act, 1994. The assessee did not discharge appropriate service tax and did not file ST-3 Returns. Show Cause Notices were issued separately proposing to demand the Service Tax for the period from 01.04.2007 to 30.06.2014 under the category of Renting of Immovable Property Services, Selling Space for Advertisement Services, Mandap Keeper Services, Demolition Charges for Unauthorised Construction, Garbage Removal Fees, Market Fees, Bus Stand Fee, Slaughter House Fee, etc. After due process of law, the Original Authority confirmed the demand, interest and imposed penalties. Against such order, assessee filed appeal before the Tribunal as ST/40187-40206/2017. As per the Final Order No. 40465-40484/2017 dated 13.03.2017, the matter was remanded to the Adjudicating Authority for fresh consideration. After denovo adjudication, the demand, interest and penalties were again confirmed though some amount was dropped. Aggrieved by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble High Court as well as the applicability of the State Legislature while providing such services. 3.3 The third argument put forward by the Ld. Counsel is that part of the demand is raised on reverse charge basis. The assessee is not liable to pay service tax under Reverse Charge Mechanism because in regard to such services, the service recipient is liable to discharge the service tax. 3.4 The Ld. Counsel put forward arguments on the ground of limitation also. It is submitted that though the assessee had raised the plea of limitation, the Adjudicating Authority has not rendered any finding in this regard. The assessee being a local authority which is a wing of the Government cannot be saddled with the guilt of suppression of facts with intent to evade payment of service tax. The assessee has accounted the entire income received which is subject to Audit by the Government. It is submitted that the demand raised invoking the extended period therefore cannot sustain and the same has to be considered with clear finding by the Adjudicating Authority. The Ld. Counsel prayed that the matters may be remanded. 4. The Ld. Authorised Representative Shri M. Ambe appeared for the Department. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... refore the amounts received is outside the purview of levy of service tax. In the said judgment, the Hon ble High Court considered the liability to pay service tax for the period prior to 01.07.2012 as well as after 01.07.2012. The relevant paragraphs of the judgment in the case of Cuddalore Municipality supra reads as under:- 58. As far as renting of immovable property is concerned, though under Rule 2(1)(d)(E) of the Service Tax Rules, 1994, service tax is payable by the service provider, 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 1-7-2012. Only ancillary service provided by a third party towards renting of immovable 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-S.T., dated 20-6-2012 vide Sl. Nos. 38 and 39. They are reproduced below :- 38. Services by way of public conveniences ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ners in that batch of writ petitions, there were a few local bodies also. That is why, in R.Nambi vs. Tenkasi Municipality (2015) (37) S.T.R 696 (Mad.), a learned Judge of this Court observed as follows : 13.At the out set it has to be pointed out that the petitioner it not a service provider. The first respondent Municipality is the service provider, who has been registered with the Department. The onus is on the first respondent Municipality to remit the service tax. In turn, the first respondent Municipality has demanded the same from the petitioner, who is their licensee in respect of four contracts, wherein the petitioner has been given license to collect fees. Furthermore, the petitioner has not challenged the validity of the provisions of the Finance Act nor the notification issued by the second respondent and in such circumstances a challenge to a demand notice issued by the service provider under whom the petitioner is a licensee has to necessarily fail. Nevertheless, since this Court heard the learned counsel for the petitioner in great length, this Court proposes to consider the submissions made by the parties as regards the jurisdiction to levy the service tax. 14. Rent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... followed the decision of the Hon ble High Court rendered in batch case of G.V. Matheswaran vs. the Union of India [2014-TIOL-2545-HC-MAD-ST]. In the case of G.V. Matheswaran the constitutional validity of the levy of service tax on Renting of Immovable Property Service was under challenge. The main ground raised by the petitioner therein was that it is a tax on immovable property and that the Centre has no power to levy tax for the reason that immovable property (land) falls within the State list. There were various decisions passed by other High Courts upholding validity of the provisions of Section 65(105)(zzzz) and Section 65(90a) of the Finance Act, 1994. i. Shubh Timb Steels Ltd. Vs. Union of India [2011 (37) GST 46 (P H)] ii. Utkal Builders Ltd. Vs. UOI [2011 (22) STR 257 (Ori.)] iii. Entertainment World Developers Ltd. Vs. UOI [2012 (25) S.T.R. 231 (M.P.)] iv. Home Solution Retail (India) Ltd. Vs. UOI [2011 (24) S.T.R. 129 (Del.)], Home Solution II In these cases there was no specific discussion upon the issue whether local authority would be liable to pay service tax. In the case of Madurai Corporation, the Ld. Single Bench Judge sustained the demand mainly on the view tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... atch, in its decision, dated 9-9-2020. According to him, in the said decision, it has been held that a Municipality is liable to pay Service Tax. 7. The learned Standing Counsel for the respondent would also submit that the decision of the Hon ble Supreme Court in the case of Krishi Upaj Mandi Samiti v. Commissioner of C.Ex. S.T., Alwar reported in 2022 (58) G.S.T.L. 129 = [2022] 135 taxmann.com 354 (S.C.) applies to the case of the petitioner and therefore, they are liable to pay Service Tax as demanded under the impugned order. However, the same is disputed by the Learned Counsel for the petitioner, who would submit that the said decision is not applicable to the case of the petitioner. The matter will have to be examined by the respondent. Admittedly, the Cuddalore Municipality case rendered by a Learned Single Judge of this Court referred to (supra) has not been considered by the respondents in the impugned order and therefore, necessarily the impugned order has to be quashed and the matter will have to be remanded back to the respondent for fresh consideration on merits and in accordance with law within a timeframe to be fixed by this Court. 8. For the foregoing reasons, the i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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