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2019 (12) TMI 1486 - AT - Service TaxLevy of service tax - Management or Business Consultant Service - Business Auxiliary Service - project was in relation to provision of Smart Card to the beneficiaries of National Rural Employment Guarantee Scheme, (NREGS in short) of Patna District - Board’s Circular No. 96/7/2007-S.T., dated 23.08.2007 - HELD THAT:- From various clauses and terms and conditions of the agreement dated 10.09.2008, it transpires that the Government of Bihar, through its agency BSEDC, allotted the entire work of generation of digital job cards (E-shakti cards) for the workers of MNREGS to the appellant on turn-key basis. For the aforesaid purpose, the appellant had to set-up the entire infrastructure by supplying all kinds of plant & machinery/equipments/software/hardware. As per the Agreement, the appellant had to collect, process and store data of the beneficiaries of MNREGS like photographs, biometric fingers prints, along with names, address etc. in the database server installed for the purpose. They had to integrate electronic payment mechanism of various banks and to make proper arrangements for payments of wages to the beneficiaries. Board’s Circular No. 96/7/2007-S.T., dated 23.08.2007 issued by CBEC has clarified that the activities assigned to and performed by the sovereign/public authorities under the provisions of any law are undertaken as mandatory and statutory functions and cannot be treated as services provided for a consideration. The Appellant was acting as an implementing agency and implementing the government welfare scheme sponsored by the Government of Bihar, accordingly the entire demand against the Appellant is contrary to the Board’s Circular No.125/7/2010-ST dated 0.07.2010 which clarifies that levy and collection of service tax on State Government agencies/departments implementing the CSS under a central grant is not legally tenable and therefore, in such cases service tax should not be demanded. Since the Appellant has executed the project to facilitate the Government in discharging of its sovereign duty, the Appellant cannot be made liable for service tax. The appellant’s case is squarely covered by the Judgment of COMMISSIONER OF CUS. & C. EX., HYDERABAD-II VERSUS CMC LIMITED [2007 (7) TMI 17 - CESTAT, BANGALORE], M/S INSTRUMENTATION LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE & S. TAX, LUCKNOW [2016 (7) TMI 502 - CESTAT ALLAHABAD] and SUKHMANI SOCIETY FOR CITIZEN SERVICES VERSUS C.C.E & S.T., CHANDIGARH [2016 (9) TMI 588 - CESTAT CHANDIGARH]. The activity of the appellant is a sovereign activity and therefore out of the ambit of the Service Tax and no service tax can be demanded on such services. Appeal allowed - decided in favor of appellant.
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