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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 ..... did not include Municipality prior to 01.07.2012 - It was held by the Hon ble High Court in the case of Cuddalore Municipality that service tax was payable only if such services were provided by any other person which means other than the owner to any person. In the case of Cuddalore Municipality, the Hon ble High Court set aside the demand for the period prior to 30.06.2012. In the case of G.V. Matheswaran the constitutional validity of the levy of service tax of renting of immovable property was under challenge. The main ground raised was that it is a tax on immovable property and that Centre has no powers to levy tax as immovable property (land) falls within the State List. There were decisions passed by various High Courts upholding the validity of the provisions of Section 65 (105) (zzzz) and Section (90a) of the Finance Act. It is to be seen that some of the amounts falling within the demand pertain to fees and charges collected for carrying out functions specifically listed in 12th schedule. Further, services are carried out as per the provisions of Panchayat Act, Municipalities Act etc. by which State has bestowed the local authority to carry out such functions and services ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x 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 the Constitution of India. It caters to the civic needs of the people living within the Municipal jurisdiction. A Municipality is a Self-government for the administration of civic facilities to the public. The definition of Municipality is given under Article 243 P (e) of the Constitution of India and reads as under:- Municipality means an institution of self-government constituted under article 243Q. 3.2 As per Article 243 X, The Legislature of a State may, by law (a) authorize a Municipality to levy, collect and appropriate such taxes, duties, tolls and fees in accordance with such procedure and subject to such limits; (b) assign to a Municipality such taxes, duties, tolls and fees levied and collected by the State Government for such purposes and subject to such conditions and limits; (c) provide for making such grants-in-aid to the Municipalities from the Consolidated Fund of the State; and provide for constitution of such Funds for crediting all moneys received, respectively, by or on behalf of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ality in the Municipalities Act. 3.4 The Ld. Counsel submitted that main part of the demand in the Show Cause Notices is that these municipalities have rented immovable property to tenants and received rental charges and thereby rendered Renting of Immovable Property Services as defined under Section 65 (105) zzzz of the Finance Act 1994. It is submitted that some activities are not at all in the nature of renting of immovable property. The demand in the Show Cause Notice has been raised on the fees and levies collected by the municipality as explained above by employing outsourced persons. In such situations there is no taxable service rendered by the municipality which attracts levy of service tax. The fees collected are itself in the nature of tax and therefore there cannot be a levy of tax again on such amounts. The Ld. Counsel adverted to the demand raised for the disputed period and submitted that the Department has demanded service tax on entry fee collected for bus stand, market fee, parking fee and slaughter fee etc. These activities are not taxable and do not fit into the definition of Renting of Immovable Property Service. The assignment of rights and issue of permission ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eld by the Hon ble High Court that the demand of service tax cannot sustain. 3.8 In a recent decision the Hon ble High court in the case of St. Thomas Mount Cum Pallavaram Cantonment Board Vs. Additional Commissioner of GST and Central Excise, Chennai decided on 23.01.2023 reported in [2023 (71) GSTL 123 (Madras)] referred to the decision of the single member judge in the case of Cuddalore Municipality (supra) and remanded the matter for fresh consideration. The Ld. Counsel prayed that the matters may be remanded to the adjudicating authority to consider the issue of taxability afresh. 3.9 It is submitted that in a recent decision, the Hon ble High Court of Madras in the case of The Commissioner, Kanyakumari Vs. The Joint Commissioner while considering the writ petition filed by the Municipality as W.P/(MD) No. 6371 of 2022 vide judgment dated 24.04.2024 as reported in [2024 (5) TMI 12- Madras High Court] has held that demand service tax against municipality cannot sustain for the period prior to July 2012 as well as post 01.07.2012 under the category of Renting of Immovable Property Service. 3.10 The Ld. Counsel put forward the arguments on the ground of limitation also. It is sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nowledge or lessons on any subject or field, other than a commercial training or coaching centre . 6.3 The taxable service as under Section 65 (105) (zzzz) reads as:- to any person, by any other person in relation to renting of immovable property for use in the course or furtherance of business or commerce . The definition underwent a small amendment in 2010 and reads as: to any person, by any other person, by renting or immovable property or any other service in relation to such renting, for use in the course of or for furtherance of, business or commerce . 6.4 The definition uses the words to any person, by any other person . It was held by the Hon ble High Court in the case of Cuddalore Municipality that service tax was payable only if such services were provided by any other person which means other than the owner to any person. In the case of Cuddalore Municipality, the Hon ble High Court set aside the demand for the period prior to 30.06.2012. The relevant discussion of the Hon ble High Court reads as under: 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 i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r 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 license for construction of building or temporary structure at a later stage to be used for furtherance of business or commerce . Explanation 2 For the purposes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 property to various person in the course of or furtherance of business or commerce of the lessee as defined in Section 65(90) 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 any other person , le, by a person other than the owner, such service was liable to service tax 33. The expression any other person can only mean any other person other than the owner of the property Therefore, owner of the immoveable property is not liable to pay tax under Se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 of or for furtherance of, business or commerce of the person who was renting it. 41 In the light of the about discussion, W.P. No. 12489 of 2017 filed Vridhachalam Municipality for the period April 2012 June 2012 deserves to be allowed. To that extent impugned Order-in-Original No. 5/2018-ST in C No V/ST/15/21/2017-ST. Adjn, is liable to be quashed straight away 6.5 In the very same judgement the Hon ble High Court has considered the demand proposed and confirmed for the period after 30.06.2012 also. It was held that a Government or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of government entities established by a special law, which are required to be audited by CAG under Section 18 of the Comptroller and Auditor-General s (Duties, Powers and Conditions of Service) Act, 1971 and therefore such services are performed by CAG under the statue and cannot be performed by the business entity themselves and thus do not constitute support services. 54 If the activity carried out by the Petitioner Municipalities are categorised as Support Service , it cannot be held that there was a provision of taxable service and such service was liable to tax under Section 66B of the Finance Act, 1994 as in force with effect from 01.07 2012. 55. However, for such support services, service tax was payable by the recipient of such service in terms of Rule 2(1)(d)(E) of the Service Tax Rules, 1994 as amended by notification No.36/2012-ST dated 20.6.2012 with effect from 1.17.2012 56. For support service provided, the recipient was liable to pay tax on reverse charge basis under Rule 2(1) (d)(E) of the Service Tax Rules, 1994 as amended by notification No. 36/2012-ST dated 20.06.2012 as in force from 01.07.2012 57. Therefore, the Petitioner Municipalities can be held liable to p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds as under: This Court heard the learned counsel for the petitioner at considerable length. Though I found the contentions to the worthy of http://www.judis.nic.in consideration, as rights pointed out by the learned standing counsel, the issue is no longer res integra. The Division Bench of the Madras High Court had already decided the issue in the decision reported in 2014-TIOL-2545-HC-MAD-ST (G.V.Matheswaran vs the Union of India and others) after upholding the validity of Section 65(105)(zzzz) of the Act, in Paragraph No 56, the Hon'ble Division Bench observed that it is open to the local body to pass on the burden to the recipient of the service. It is necessary to note that among the petitioners in that batch of writ petitions, there were a few local bodies also. That is why, in R. Nambi vs. Tenkasi Municipality (2015) (37) STR 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 res ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red elsewhere and the relevant clause would be Clause (IV) namely support services, other than services covered under Clauses (i) to (iii), provided to business entities. Therefore the Municipality is bound to pay service tax on the nature of transaction, which they have entered into with the petitioner . 5. When the Division Bench of the Madras High Court has already held that the local bodies are also liable to pay service tax for rendering renting of immovable properties service mandap keeper services etc, then, it is not for me to go into the issue once again. Judicial discipline demands that I respectfully follow these binding precedents http://www.judis.nic.in 7. It is to be noted that the Hon ble High Court in the case of Madurai Corporation has followed the decision of the Hon ble High Court rendered in batch case of G.V. Matheswaran Vs. UOI 2014-TIOL-2545-HC-MAD-ST. In the case of G.V. Matheswaran the constitutional validity of the levy of service tax of renting of immovable property was under challenge. The main ground raised was that it is a tax on immovable property and that Centre has no powers to levy tax as immovable property (land) falls within the State List. There ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ill have to consider the decision rendered by another learned Single Judge of this Court in a batch of wit petitions in WP No 8900 of 2017 in the case of Cuddalore Municipality v. The Joint Commissioner of GST and Central Excise, before passing final orders 6. However the Learned Senior Panel Counsel appearing for the respondent would submit that the order passed in the Cuddalore Municipality case referred to (supra) is the subject matter of challenge in a writ appeal. He would also submit that a contrary view has been taken by another learned single Judge of this Court in another batch of writ petitions in WP (MD) Nos 7599 of 2018 etc batch 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 ServicеТаx. 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 GSTL 129[2022] 135 laxmann 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 d ..... X X X X Extracts X X X X X X X X Extracts X X X X
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