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TMI Blog2024 (11) TMI 403X X X X Extracts X X X X X X X X Extracts X X X X ..... JUDICIAL) AND MR. VASA SESHAGIRI RAO, MEMBER (TECHNICAL) For the Appellant : Shri Abraham John Samuel, Advocate For the Respondent : Smt. Anandalakshmi Ganeshram, Authorised Representative ORDER M/s. Srivilliputhur Municipality (hereinafter referred to as the Appellant ) have filed this appeal No. ST/40559/2015 which is directed against the Order-in-Appeal No. 107/2014 dated 26.08.2014 passed by the Commissioner of Central Excise (Appeals), Madurai. 2.1 Brief facts of the case are that the Appellant is renting / leasing out their own immovable properties for commercial purposes which is taxable under the category of Renting of Immovable Property service under the Finance Act, 1994., but the Appellant had not registered with the Department nor paid the Service Tax and also had not filed ST-3 returns for the period from June 2007 to March 2012. As such the Appellant was issued with a Show Cause Notice No. 18/ST/ADC/2011 dated 20.09.2012 which was adjudicated by the Joint Commissioner vide Order-in-Original No. 13/JC/ST/2013 dated 19.12.2013 demanding Service Tax amount of Rs.13,39,667/- and also imposing equal penalty. 2.2 On appeal being filed before the Commissioner (Appeals), the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se it for a specific purpose. The value of the building gets accentuated because of scarcity of land or building, goodwill, accessibility and similar ancillary advantages which constitute value addition . The immovable properties of the appellants were utilised in the course or furtherance of business or commerce is well established and the above findings in the case laws are well applicable to the facts in this appeal. He has further observed that the appellants are well aware that the amendment came into effect 4 years back, but the Appellant has not bothered to register themselves with the department and pay service tax for the services provided by them. 3.1 The Ld. Advocate Shri Abraham John Samuel representing the Appellant has referred to the grounds of appeal and prayed for setting aside the service tax demand on the plea that the Srivilliputhur Municipality is a creature of an Act of the Tamil Nadu Legislature and is the statutory body being governed by the Tamil Nadu District Municipalities Act, 1920 and it is an autonomous self-government in terms of the Article 243Q of the Constitution of India. He has submitted that the law is well settled that municipalities are covere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... economic and social development. 4. Roads and bridges. 5. Water supply for domestic, industrial and, commercial purposes. 6. Public health, sanitation conservancy and solid waste management. 7. Fire services. 8. Urban forestry protection of the environment. and promotion of ecological aspects. 9. Safeguarding the interests of weaker sections of society, including the handicapped and mentally retarded. 10. Slum improvement and upgradation. 11. Urban poverty alleviation. 12. Provision of urban amenities and facilities such as parks, gardens, playgrounds. 13. Promotion of cultural, educational and aesthetic aspects. 14. Burials and burial grounds; cremations, cremation grounds and electric crematoriums. 15. Cattle ponds; prevention of cruelty to animals. 16. Vital statistics including registration of births and deaths. 17. Public amenities including street lighting, parking lots, bus stops and public conveniences. 18. Regulation of slaughterhouses and tanneries. 3.3 In terms of Article 289 Constitution of India, the Ministry of Finance had issued the Mega Exemption Notification No. 25/2012-ST and amending Notification No. 02/2014 which excludes governmental authority from the purview ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ior 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 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 cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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 inclu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 the purview of Entry 49 of List il of 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 Ju ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... state 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 payable only if such services were provided by any other person other than the 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al 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, are not support services. 53. In fact, in the Education Guide, list of activities such as grant of mining or licensing rights or audit 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 p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 renting of immovable property and held that Municipality is liable to pay service tax. The relevant paragraph of the judgement in the case of Madurai Corporation reads 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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) of the Act deals with negative list of services and Clause (a) provides services by Government or a local authority excluding the following services to the extent they are not covered 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upra) 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 the said writ petitions on the ground that at the stage of Show cause notice, writ petitions cannot be entertained. But, however the learned Single Judge has made it clear that the respondent will 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 contrar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Services as well as other demands on the basis of the above observations and judgements rendered by jurisdictional High Court. 10. 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. These issues require to be examined. If sovereign functions, the levy of tax cannot be attracted. 11. The Ld. Counsel has argued on the ground of limitation also. The appellants being local authority, which is a wing of the Gove ..... X X X X Extracts X X X X X X X X Extracts X X X X
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