9911796707
TMI Blog2025 (1) TMI 1258X X X X Extracts X X X X X X X X Extracts X X X X ..... tatutory body discharging the statutory function as per the statute KIAD Act, 1966 and hence are not liable to pay service tax in view of the ratios of the various decisions cited supra.' Thus, the assessee would be exempted from payment of Service Tax when they are performing sovereign functions. But it is also required to check if all the considerations received by ADDA would be in the course of sovereign function alone are if some of the services are commercial in nature. In the present case, though it stands established that ADDA is a statutorily created body, also recognized as such by ITAT for Income Tax purposes, and is seen to be performing some sovereign functions like collecting licensing fee and other fee on account the land development [which is required to be verified], the other services provided by them like that of Renting of Immovable property, Renting of Advertisement space, Leasing of Tangible goods like road roller are not eligible for Service Tax exemption - ADDA would be required to pay the Service Tax, since these services are not in any way on account of performing of any sovereign function. Quantification of the service tax demand - HELD THAT:- The L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ime bar in respect of the confirmed demand for the extended period. X X X X Extracts X X X X X X X X Extracts X X X X ..... rs the subject impugned adjudication proceedings, illegal, invalid and void ab initio 3.2 Services undertaken by a Sovereign/Government Department or Agency in pursuance of a statutory obligation, function or duty are not taxable under the Finance Act, 1994. The factual details one as under: (1) The Appellant, ASANSOL DURGAPUR DEVELOPMENT AUTHORITY it is a notified government agency constituted under Sections 11 (1) and 11 (3) of The West Bengal Town and Country (Planning and Development) Act, 1979 read with Notification No. 1881/T&CP/1R-6/80 dated March 17, 1980 (vide pages 54, 61, and 74 of the Compilation dt. 24.4.2024). (2) The Order of the Hon'ble Income Tax Appellate Tribunal (ITAT) dated September 8, 2017 (vide pages 34 and 43 of the Compilation dt. 24.4.2024), acknowledges in paragraph 7.1 thereof, that "the assessee is merely a disbursing authority and is required to oversee the proper utilization of the funds given for and on behalf of the ULBs (Urban Land Bodies) of the State Government. We also find that the State Government also directs the assessee to make use of the funds collected such as land premium, ground rent, etc on behalf of the Government and according ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 13(ii) and 58 thereof, empowers the assessee abovenamed to acquire, hold and manage such property, both movable and immovable as the Development Authority may deem necessary for the purposes of any of its statutory activities and to undertake "housing schemes for different income groups, commercial areas, industrial estates" among others. (see pages 54, 61, 62, 68 of the Compilation dt. 24.4.2024). (7) By several decisions of this Hon'ble Tribunal and the Apex Court, it is now a settled position of law that services provided by a Central/State Government authority/agency/department against a charge, in pursuance of a statutory obligation, function or duty, cannot be subject to liability under the Act. 3.3. Development Charges collected as an arrear of revenue and deposited in a Special Fund (1) Further, a perusal of Sections 106 and 107 of the TCP Act shall also reveal that development charges are to be collected thereunder "as arrears of land revenue" and that every development authority "shall keep in current account in any branch of the State Bank of India or any other Bank approved by the State Government in this behalf, such portion of its fund as may be prescribed and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated. There are various factors which will suggest a body could be a public authority, these are (a) it is linked to the Government or its function could be described as governmental, (b) it provides a public service, (c) the State regulates, supervises and controls [its] performance, (d) it is subject to judicial review or is publicly accountable for its action, (e) performs charitable objectives, (f) vested with statutory powers, with power to enforce its order by punitive consequences, (g) the legislature specifically intended by an Act to over its functions and responsibilities. In general without any possible dispute, it can be stated that a public authority is one which has a legal mandate to govern, or administer a part [of] some aspect of public life". (vide page 110 of Compilation dt. 24.4.2024) (3) Likewise, in CGST, Delhi III v. Delhi International Airport Ltd, 2023 (74) GSTL 129 (SC) (vide page 96 of Compilation dt. 24.4.2024), it was observed that that user development fee collected by private licensees of Airport Authority of India for providing services in passenger lounges, rest rooms and other facilities in airports or in relation to passenger ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the above submissions, the Ld AR prays that the Appeal filed by the assessee - ADDA may be set aside the Appeal filed by the Revenue may be allowed. 11. Heard both the sides and perused the Appeal papers and other documentary evidence placed before us. 12. In the present case, it would be important to go through the relevant statutory provisions to conclude as to whether Service Tax gets exempted or not. SECTION 66D. Negative list of services. -- The negative list shall comprise of the following services, namely : (a) services by Government or a local authority excluding the following services to the extent they are not covered elsewhere-- (i) Services by the Dept of Posts by way of Speed Post, express parcel post, life insurance and agency services provided to a person other than Government (ii) services in relation to an aircraft or a vessel, inside or outside the precincts of a port or an airport; (iii) transport of goods or passengers; or (iv) [Any service], other than services covered under clauses (i) to (iii) above, provided to business entities; SECTION 65B. Interpretations. -- In this Chapter, unless the context otherwise requires,-- '(26A) "Government ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts statutory activities and to undertake "housing schemes for different income groups, commercial areas, industrial estates". (6) Sections 106 and 107 of the TCP Act also clarifies that development charges are to be collected thereunder "as arrears of land revenue" and that every development authority "shall keep in current account in any branch of the State Bank of India or any other Bank approved by the State Government in this behalf, such portion of its fund as may be prescribed and any money in excess of the said sum shall be invested in such manner as may be approved by the State Government." 14. A careful and harmonious perusal of the above details, would clarify that the ADDA has been created under a specific statute and it performs all acts on behalf of the State Govt of West Bengal. Their accounts, income and expenditure etc. are all controlled by and are answerable to the State Government. Therefore, we have no hesitation to come to a conclusion that ADDA is performing sovereign functions on behalf of the State Government of West Bengal. 15. The Bangalore Bench of CESTAT in the case of Karnataka Industrial Areas Development Board v. CCT, Bangalore (North), 2020 (40) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such activities is in the nature of compulsory levy. Only if such authority performs service which is not in the nature of statutory activity and the same is undertaken for a consideration which is not in the nature of statutory fee, Service Tax would be leviable if the activity undertaken otherwise falls within the ambit of Taxable Service. 7. Going by the show cause notice, the allegation is that the Respondent - MIDC has collected service charges from the plot owners/plot allotters in consideration of having provided them various facilities including maintenance, management and repairs of the facilities in the MIDC area. As stated earlier, reliance is placed on clause (64) of Section 65 of the said Act. As pointed out earlier, MIDC is already registered under the category of "renting of immovable property" and for services covered by such category; MIDC is admittedly paying Service Tax. Further the Hon'ble Bombay High Court has held in MIDC case as under :- 11. The Apex Court categorically held that functions and powers of MIDC indicate that the said Corporation is acting as a wing of the Government. In the case of Managing Director, Haryana State Industrial Development C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A number of sovereign/public authorities (i.e. an agency constituted/set up by government) perform certain functions/ duties, which are statutory in nature. These functions are performed in terms of specific responsibility assigned to them under the law in force. For examples, the Regional Reference Standards Laboratories (RRSL) undertake verification, approval and calibration of weighing and measuring instruments; the Regional Transport Officer (RTO) issues fitness certificate to the vehicles; the Directorate of Boilers inspects and issues certificate for boilers; or Explosive Department inspects and issues certificate for petroleum storage tank, LPG/CNG tank in terms of provisions of the relevant laws. Fee as prescribed is charged and the same is ultimately deposited into the Government Treasury. A doubt has arisen whether such activities provided by a sovereign/public authority required to be provided under a statute can be considered as 'provision of service' for the purpose of levy of service tax. 2. The issue has been examined. The Board is of the view that the activities performed by the sovereign/public authorities under the provision of law are in the nature of statuto ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Charge Schedule-8 Water connection charge 2552259 Total 2007-08 18583702 0 18583702 12% 2230044 44601 22300 2008-09 Rental Income Ground rent, house rent 760451 License fees 7655211 Hire Charges of Road Roller 70400 Other Income Sche-18/1 Electricity Installation 1384921 Sewerage connection 1968279 Hording Charges 3163342 Sub-lifting & Way lease 1018750 Sche-12/2 Water connection charge 2663666 Total:- 2008-09 18685020 0 18685020 12% 2242202 44844 22422 2009-10 633835526 0 633835526 10% 63383 1267671 633836 2010-11 1381246670 17604744 1363641926 10% 136364 272728 1363642 2011-12 694903410 0 694903410 10% 69490341 138980 694903 Total 2747254328 17604744 2729649584 273710333 5474207 2737103 20. A careful reading of the Board Circular dated 18.12.2006, would clarify that all the amounts collected by the statutory body would not get automatically exempted from payment of Service Tax on a blanket basis. Only those charges / fees, which are compulsory / mandatory and which are levied and collected on behalf of the Govt. would be exempt from payment of Service Tax, since this would be in the nature of performing sove ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3. The quantification arrived service-wise is as per the Schedule to Balance Sheet as per the OIO. But we find from the SCN Annexure, such bifurcation for demanding the Service Tax on year-wise basis is missing in the Annexure B to the Show Cause Notice. In fact, for 2007-08 and 2008-08, the incomes have been bracketed under a generic heading, without giving the relevant amounts for the specific services. As has been observed above, the Licensing Fee, Land Development fee would be in the nature of compulsory fee / mandatory fee, being collected as part of sovereign function and hence would be exempted. But no bifurcation has been carried out in the Annexure B to SCN, wherein the quantification is done. 24. In respect of 2009-10, 2010-11 and 2011-12, even the above perfunctory work has not been undertaken. Simply the value shown in the Balance Sheet / Bank Statement have been taken to quantify the demand. Therefore, we see considerable force in the argument of the appellant that quantification of demand is neither scientific nor is properly backed by any concrete documentary evidence. More than Rs.28 crores demand has been made for the year 2009-10, 2010-11 and 2011-12 with absolut ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
