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TMI Blog2020 (7) TMI 589X X X X Extracts X X X X X X X X Extracts X X X X ..... t Trust, along with Central Excise authorities and Central Railway, was vested with the responsibility under Mumbai Municipal Corporation (Levy of Octroi) Rules, 1965 to collect octroi on entry of goods for consumption and use in the municipal area within their respective operational jurisdictions for which 3% of such collections was retained as recompense. The tax liability was computed on the retained amount of Rs.186,11,14,303/- as the ostensible consideration for having rendered service, taxable under section 65(105)(zn) read with section 66 of Finance Act, 1994 until 30 June 2012 and under section 66B read with section 65B(44) of Finance Act, 1994 for the period thereafter, to Municipal Corporation of Greater Mumbai (MCGM) between 1st October 2007 and 31st January 2013. It is on record that though, in the pre-negative list regime, taxability could also have arisen under section 65(105)(zzb), taxing 'business auxiliary service', of Finance Act, 1994, liability was determined as provider of 'port service' by recourse to section 65 A of Finance Act, 1994 for, so to speak, breaking the tie. It is also on record that, besides the transition to 'negative list' with effect from 1st J ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion and having to rely only one of these after 1st July 2010, was inevitable as the amount withheld from the Municipal Corporation was for an activity undertaken, admittedly, by 'a port' and 'in relation to goods' that could be taken out only after discharge of octroi liability. For the confirmation relating to the period after 1st July 2012, the adjudicating authority, while taking note of the exclusion of services provided by government/local authority, held the noticee to be neither but, on the contrary, being by a trust, is a commercial organisation and that section 66F(1) of Finance Act, 1994, demarcating the rendering of main service from the provision of such services that enable such provider in rendering their output service, distanced them from any claim to sovereign function of tax collection. 6. To deny coverage of the clarification offered in circular no. 897/7/2006-ST dated 18 December 2006 and no. 96/07/2007-ST dated 23 August 2007 of Central Board of Excise & Customs (as it then was), the adjudicating authority derogated the collection of octroi from exclusion devolving on exercise of 'sovereign function' characterised by the entity being a public authority, provid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al, on the aspect of eligibility for this exemption, was denied applicability with the observation that '3.31. I further find that reference to this notification by the Hon'ble Tribunal in the case of UTI Technology Service ltd. and Intertoll India Consultants (P) Ltd. cannot be taken as findings of the Tribunal as the Tribunal did not examine the exact wording of the notification to come to the conclusion. Therefore these judgements with reference to this notification should be treated as per incuriam.' 8. As we shall presently be taking up the issue of levy of octroi by municipalities, the views of the adjudicating authority will necessarily be subject to appropriate analysis then. Insofar as the declaration of the adjudicating authority on the decisions of the Tribunal are concerned, even disdainful silence in response to the revealed ignorance, demonstrated lack of grace and blatant want of discipline expected from a judicially subordinate authority is too dignified, and undeserving, a reaction. It is apparent that the reviewing authority established by the statute are equally complicit by not taking note of this aberration. We can only hope that other adjudicating authoriti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Service Tax, Mumbai [2012-TIOL-73- CESTAT-MUM]. The applicability of notification no. 13/2004-ST, he argues, has also been confirmed by the decision of the Tribunal in Intertoll India Consultants (P) Ltd v. Commissioner of Central Excise, Noida [2011 (24) STR 611 (Tri-Del)]. We take note that the latter two decisions were also before the adjudicating authority in that proceeding. 11. Learned Authorised Representative drew our attention to the several opportunities afforded to the appellant in adjudication proceedings and the lack thereof in participation which, according to her, warranted discarding of the plea that principles of natural justice had not been complied with. Since that aspect has not been seriously pressed on behalf the appellants, we are in agreement. On behalf the respondent, it is submitted that the decision of the Tribunal in re Homa Engineering Works does not advance the case of the appellant because it was concerned with the chargeability to tax prior to 2010 and in relation to repairs effected by a private party and not by the port. It is a further contention that the decision of the Tribunal in Kandla Port Trust v. Commissioner of Central Excise & Service ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t rendered a decision on the nature and scope of the impugned taxable service. Learned Authorised Representative also placed before us the decision of the Hon'ble High Court of Rajasthan in Municipal Board v. Industrial Tribunal and Labour referred to supra in our summary of the findings of the adjudicating authority to which we shall presently address ourselves. 14. Learned Counsel countered the reliance on the decision in re Kandla Port Trust by pointing out that the decision in re Homa Engineering Works was not argued in the proceedings before the Tribunal. 15. From a perusal of the impugned order, it is apparent that the adjudicating authority has proceeded on the assumption that the collection of octroi was the service rendered by the appellant and the sole aspect that remained in dispute was the fitment within the proposed taxable service. In doing so, the plea of having discharged sovereign function that was beyond the ambit of tax laws was taken up to sustain the finding that taxable service had been rendered. There can be no cavil that sovereign functions are not intended to be taxed; sovereignty of a State has its genesis in either divine right or upon entrustment by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... trust. Perhaps, he was unaware that the appellant, entrusted with the conservation and operation of the harbour in Bombay (as it then was) as a successor of the several departments of the pre-independence provincial administration, including the Customs, was constituted under the Bombay Port Trust Act, 1879 almost contemporaneously with the administration of Calcutta (as it then was) Port and that the Indian Trusts Act, 1882, enacted subsequently, was intended to regulate the functioning of only private trusts. The scope of entrustment with the appellant, from inception and even after coverage under the Major Port Trusts Act, 1963 until much later, did not appear to have been appropriately appreciated in the impugned order. These were properties belonging to, and facilities offered by, the State, entrusted for administrative convenience with the Board of Trustees designated as the 'conservator', as required under the Indian Ports Act, 1908. 18. According to the adjudicating authority, octroi is not a collection envisaged in the budget of the Government of Maharashtra and, hence, excluded from the privileges that are appurtenant. At the same time, the impugned order makes reference ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dies and the other for appropriate financial devolution. Thus, the Constitution itself permitted the states to assign some of its taxing powers to these third level institutions. The adjudicating authority has erred in ignoring that the circumstances in which municipalities may have been perceived as industry had long since ceased to exist. 20. Considering these flaws of inferences in the impugned order leading to the conclusion that collection of octroi by the appellant, we, on examination of the legal framework, finding it useful to restate the foundations. That levy and collection of tax is a sovereign privilege and must have authority of law enacted by the Union Parliament or the legislatures of constituent states is not in dispute. It is also not in doubt that List II of the Seventh Schedule in the Constitution of India empowers the legislatures of the constituent states to levy and collect tax on 'entry of goods' which is, essentially, what octroi is. The collection of octroi for the entry and consumption of specified goods in Greater Mumbai has been legislated under the Mumbai Municipal Corporation Act, 1888 and, in terms of the Mumbai Municipal Corporation (Levy of Octroi) ..... X X X X Extracts X X X X X X X X Extracts X X X X
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