9911796707
TMI Blog2025 (1) TMI 1260X X X X Extracts X X X X X X X X Extracts X X X X ..... MMISSIONER OF GST AND CENTRAL EXCISE, CUDDALORE [2021 (4) TMI 500 - MADRAS HIGH COURT], and the subsequent decision in the case of ST. THOMAS MOUNT CUM PALLAVARAM CANTONMENT BOARD VERSUS ADDITIONAL COMMISSIONER, COMMISSIONER OF GST AND CENTRAL EXCISE, CHENNAI [2023 (4) TMI 1024 - MADRAS HIGH COURT].
Conclusion - It is required to take a detailed examination of whether the services in question fall within the scope of sovereign functions.
Appeal allowed by way of remand. X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 covered under the definition of the 'State' as enshrined under the Article 12 of Constitution of India. 5. The Ld. Authorised Representative Shri M. Selvakumar representing the Department has affirmed the findings of the impugned order and submitted that the Appellant is liable to pay service tax on the income generated out of renting out / leasing out immovable properties of the municipality under 'Renting of Immovable Property service' as upheld by various High Courts and the Tribunal. It was therefore prayed for dismissal of the appeal filed by the Appellant. 6. We have carefully considered the submissions made by both the sides and also evidences available on records especially Final Order No. 42129/2018 dated 19.07.2018 and also Final Order Nos. 40754-40755/2024 dated 25.06.2024. 7. The only issue that arises for determination in this appeal is whether the demand of service tax under the category of Renting of Immovable Property service on the appellant is sustainable or not? 8. We find that in simila ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vices / 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. 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 exempt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , 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) 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for me to go into the issue once again. Judicial discipline demands that I respectfully follow these binding precedents." 7.4 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. 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a) 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 W.P. (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 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 imp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es are in discharge of sovereign right / function, the levy of service tax cannot be attracted. 8. The Ld. Counsel has argued on the ground of the limitation also. The assessee being a local authority, which is a wing of the Government, it cannot be said that assessee has suppressed facts with intent to evade payment of service tax. So also, there is no positive act of suppression alleged in the Show Cause Notice against these Municipalities. As the matter is remanded, we direct the Adjudicating Authority to consider the issue on limitation also. 9. The Department has filed appeal aggrieved by dropping or reducing the demands. In case the demand of service tax is sustainable, the Adjudicating Authority is directed to quantify after looking into the actual amounts received in respect of each services. All issues are left open. 10. In the result, the impugned orders are set aside. The appeals are allowed by way of remand to the Adjudicating Authority. Cross objections are disposed, accordingly." 9. Further, the Hon'ble High Court in the case of St. Thomas Mount Cum Pallavaram Cantonment Board (supra) after referring to the above conflicting decisions, held it proper to remand ..... X X X X Extracts X X X X X X X X Extracts X X X X
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