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TMI Blog2024 (6) TMI 767X X X X Extracts X X X X X X X X Extracts X X X X ..... rvice tax on various services provided by them. Show Cause Notices were issued to the appellants proposing to demand service tax mainly under the category of Renting of Immovable Property Service for different periods from the date of introduction of the service (June 2007). After due process of law, the Original Authority confirmed the demand, interest and imposed penalty. On appeal, the Commissioner (Appeals) upheld the same. Aggrieved by such orders, the appellants are now before the Tribunal. 3.1 The Ld. Counsel Shri M. Karthikeyan appeared and argued for the appellants in the case of Krishnagiri Municipality. It is submitted that the in the said case, the Original Authority had confirmed the demand of service tax along with interest and imposed penalty. The Commissioner (Appeals) had set aside part of the demand and the appeal is filed against such order passed by the Commissioner (Appeals). The Ld. Counsel argued that in this appeal, the appellant is contesting the leviability of service tax on services provided by the municipality as a legal plea can be raised at appeal stage also. It is submitted that a Municipality is a sovereign body constituted under Article 243 Q of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of births and deaths; 17. Public amenities including street lighting, parking lots, bus stops and public conveniences; 18. Regulation of slaughter houses and tanneries; 3.3 The Ld. Counsel submitted that the municipalities have to deal with diverse functions as above and there is lack of man power for discharging these functions which are in the nature of welfare and facilities to the citizens. Certain functions are out sourced by these municipalities in the form of assigning rights to individuals to carry out the specific work. These outsourced functions include the right to collect entry fee on each cattle brought in for slaughter, the right to collect entry fee to the public market, the right to collect fee on each head load of vegetables brought in to the market, parking fee for parking vehicles etc. Such rights to collect fees and levies are assigned to the bidders through open bidding and by floating of tenders. The bidders with highest bidding will get the right to collect the levies and fees as per the norms laid down by the municipality in the Municipalities Act. 3.4 The Ld. Counsel submitted that main part of the demand in the Show Cause Notices is that these munici ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 65 B (37) w.e.f. 01.07.2012 reads as under: "person" includes - (i) An individual, (ii) A Hindu undivided family, (iii) A Company, (iv) The society, (v) A limited liability partnership, (vi) A Firm, (vii) An association of persons or body of individuals, whether incorporated or not, (viii) Government, (ix) A local authority, or (x) Every artificial juridical person not falling within any of the preceding sub clauses 3.7 Again, 'local authority' is defined under Section 65 B (31). It is submitted by the Ld. Counsel that though local authority (Municipality) were brought within the definition of person w.e.f. 01.07.2012, as per the Mega Exemption Notification Municipalities are exempted from payment of service tax in terms of Sl. Nos. 38 & 39 of the Mega Exemption Notification no.25/2012-ST dated 20.06.2012. The Hon'ble Jurisdictional High Court considered the issue as to whether Municipality is liable to pay Service tax under Renting of Immovable Property Service prior to 01.07.2012 as well as post 01.07.2012. In the decision of Cuddalore Municipality case, it was held by the Hon'ble High Court that the demand of service tax cannot sustain. 3.8 In a recen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n issue that arises for consideration in all these appeals is whether the demand of service tax under the category of 'Renting of Immovable Property Service' as well as other services is sustainable against appellants (Municipalities). 6.2 The Hon'ble High Court of Madras in the case of Cuddalaore Municipality (supra) had analysed the matter in detail for the period prior to 01.07.2012 and post 01.07.2012. It was held that prior to 01.07.2012, the word 'person' was not defined in the Finance Act, 1994. The definition of the taxable service used the word 'person' and so did not include Municipality prior to 01.07.2012. The definition of 'Renting of Immovable Property Service' introduced w.e.f. 01.06.2007 under Section 65 (90a) reads as under: ''Renting of Immovable Property' includes renting, letting, leasing, licensing or other similar arrangements of immovable property for use in the course of furtherance of business or commerce but does not include- (i) renting of immovable property by a religious body or to a religious body; or (ii) renting of immovable property to an educational body, imparting skill or knowledge or lessons on any subject or field, other than a commercia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2009 however struck down this levy by observing that the renting of immovable property for use in the course of furtherance of business or commerce did not involve any value addition and therefore, cannot be regarded as service. 28. The tenants all over the country therefore stopped reimbursing the tax element to the land owner. Since landlords were receiving regular demand notices from the department but such notices were being subjected to stalemate, the Finance Act. 2010 amended the provision with retrospective effect and attempted to cure the defect pointed cut by the Delhi High Court. 29. Thus, definition of taxable service of "renting of immovable property" and "renting of immovable property was amended to read as follows- Definition of Taxable Service taxable service of in "renting of immovable property" Section 65(105) (zzzz) ) of the Finance Act, 1994 Definition of "renting of immovable property" 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 the use in the course of or furtherance of business or commerce. Explanation 1: For the purpose of this s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of the transfer of possession or control of the said immovable property. 30. The Delhi High Court in the 2nd Home Solutions Retails (India) Ltd. v. Union of India 2011 (24) STR 129 (Del) upheld the constitutional validity of the amended definition in Section 65(105)(zzzz) in 2010 with retrospective effect with the following observation- "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 | What is being taxed is an activity, and the activity denotes the letting or leasing with a purpose, and the purpose is fundamentally for commercial or business purpose and its furtherance. The concept has to be read in conjunction. As we have explained that service tax is associated with value addition as evolved by the judgments of the Apex 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erlap in the definition. The definitions are reproduced below- Section 65(88) Section 65(89) "Real Estate Agent" means a person who is engaged in rendering any service in relation to sale, purchase, leasing or renting, of real estate and includes a real estate consultant "Real estate consultant" means a person who renders in any manner, either directly or indirectly, advice, consultancy or technical assistance, in relation to evaluation, conception design, development, construction, implementation, supervision maintenance marketing, acquisition or management, of real estate Definition of taxable service in Section 65(105)(v) any service provided or to be provided to a client, by a real estate agent in relation to real estate 37. Since the interpretation 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... operations directly related to production of any agricultural produce including cultivation, harvesting, threshing, plant protection or testing; (ii) supply of farm labour; (iii) processes carried out at an agricultural farm including tending, pruning, cutting, harvesting, drying, cleaning, trimming, sun drying, fumigating, curing, sorting, grading, cooling or bulk packaging and such like operations which do not alter the essential characteristics of agricultural produce but make it only marketable for the primary market; (iv) renting or leasing of agro machinery or vacant land with or without a structure incidental to its use; (v) loading, unloading, packing, storage or warehousing of agricultural produce; (vi) agricultural extension services; (vii) services by any Agricultural Produce Marketing Committee or Board or services provided by a commission agent for sale or purchase of agricultural produce; The relevant para of the judgement in the case of Cuddalore Municipality reads as under: "52. Services which are provided by government in terms of their sovereign right to business entities, and which are not substitutable in any manner by any private entity, ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oms, 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-Original issued by the respondent in the light of the above discussion, demand proposed in the impugned S.C.N.No. 04/2018 (ST) inC.No.V/ST/15/2/2018-ST. Adjn. Dated 07.03.2018 and demand confirmed in Order-in-original No 3/2017- STC 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 06.04.20/18 are able to be quashed and are accordingly quashed. 61. In the result, i. W.P.No.3969 of 2018 as mentioned above is dismissed as infructuous ii.W.P.No.890 of 2018, W.P.No.31799 of 2017 and W.P.No.12489 of 2007 are allowed. iii. No cost. Consequently, connected Miscellaneous Petitions are closed." 6.6 The above decision was rendered by the Hon'ble High Court on 22.03.2021. However, prior to this, the Hon'ble jurisdictional High Court at Madurai Bench in the case of Madurai Corporation had considered the issue of taxability of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r furtherance of, business or commerce and it includes vacant land given on lense or license and the test is as to whether it is used in the course of of furtherance of business of commerce. Admittedly, the petitioner is a licensee of the first respondent Municipality and the property has been used in the course of business or commerce. As noticed above, Section 65(90a)) defines renting of immovable property including renting, letting. leasing, licensing or other similar arrangements of immovable property for use in the course or furtherance of business or commerce. 15 Admittedly, the properties in question de not fall within the two exemptions provided under Section 65(90) http://www.judis.nic.in of the Act. Explanation 2 under Section 65(90a) makes it more clear that renting of immovable property includes allowing or permitting the use of space in an immovable property, irrespective of the transfer of possession or control of the said immovable property. The duty performed by the first respondent Municipality would clearly fall within the ambit of the provisions referred above and therefore they have been remitting service tax to the Department. Further, Section 66D(a)(iv) o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tioner therein was a licensee of the Tenkashi Municipality and challenged the demand notice of service tax served by the Municipality upon him. In these cases, the taxability in general was considered. The issue as to whether local authority (Panchayat, Municipality, Corporation) would be liable to discharge service tax as these services are provided in discharge of sovereign function was not considered. The Hon'ble High Court in the case of Cuddalore Municipality has considered this specific issue. 8. In a recent judgement, the Hon'ble High Court in the case of ST. Thomas Mount Cum Pallavaram Cantonment Board (supra) had referred to the decision in the case of Cuddalore Municipality (supra) and remanded the matters to consider a fresh the issue as to whether Municipality / Cantonment Board is liable to pay tax. The relevant paragraph reads as under: "4. The petitioner claims that as a Cantonment Board and being a Municipality they are exempted from paying Service Tax. The petitioner had earlier challenged the Show cause notice issued by the respondents in WP. Nos 28468 and 28080 of 2021. 5. A learned Single Judge of this Court by her common order dated 10-8-2022 disposed of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cipality v. Joint Commissioner of GST and Central Excise WP. No 8900 of 2017, dated 22-3-2021 as well as (b) St Thomas Mount Cam Pallavaram Cantonment Board v. The Additional Director's and others in WP Nos 28468 and 28080 of 2021 dated 10-8-2022, within a period of twelve weeks from the date of receipt of a copy of this order. 9. With the aforesaid directions, this writ petition is deposed of No costs Consequently, connected miscellaneous petition is closed 9. It is represented before us that the department has filed appeal upon the decision passed by the Ld. Single Judge in the case of Cuddalore Municipality and that the assessee has filed appeal upon the decision passed in the case of Madurai Corporation. These appeals are pending before the Hon'ble High Court. Since the Hon'ble High Court in the case of St. Thomas Mount Cum Pallavaram Cantontment Board has remanded the matter for considering the issue afresh, we are of the considered opinion that in the interest of justice, these matters also require to be remanded to the adjudicating authority to consider afresh the issue as to whether Municipality is liable to pay service tax under Renting of Immovable Property Service ..... X X X X Extracts X X X X X X X X Extracts X X X X
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