TMI Blog2019 (12) TMI 1486X X X X Extracts X X X X X X X X Extracts X X X X ..... rrangements 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 INS ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rvice Tax along with interest under the provisions of Section 73(1) and 75 of the Act, respectively. In addition, the penalty under Section 77 and 78 of the Act was also proposed to be imposed upon the appellant for their act of omission and commission and intentional evasion of Service Tax and Cesses. The notice also proposed to impose penalty upon the Director under Section 78A of the Act. 3. As per the notice, during investigation, Shri Vijay Kumar Sinha, Project Lead of BSEDC vide his letter bearing 2257/11 dated 04.04.2011 forwarded the copy of the agreement dated 10.09.2008 which was for the implementation of e-Muster (also known as e-Shakti project). According to him, the project was in relation to provision of Smart Card to the beneficiaries of National Rural Employment Guarantee Scheme, (NREGS in short) of Patna District. As per the agreement, the appellant had to provide biometric (fingerprint) module, digital photographs, hand held terminals, application software, smart card key management system, beneficiary module, project management module, data entry and storage module, workflow measurement module, MIS module, grievance redressal module, GIS module, electronic p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... formation like photograph, biometric fingers print, data entry of records, issuance of smart card, hand held terminals, integration of electronic payment mechanisms were covered by management of information technology resources. Thus, the over-all characteristics of the services provided by the appellant were covered by Management Consultant service as defined under sub-clause (r) of erstwhile Section 65(105) of the Finance Act, 1994 which was neither covered in the negative list of Section 66(D) of the Finance Act, 1994 nor in Mega Exemption Notification 25/2012-ST dated 20.06.2012 both effective since 01.07.2012. 5. The notice further referred to Form 26AS and alleged that the CBI had deducted Income Tax at source under Section 194J of the Income Tax Act, 1961 on the amount of ₹ 1,72,23,480/- paid by them to the appellant during 2010-11 (Sept.,10-March,11), 2011-12 and 2012-13. The said Section 194J stipulates deduction of Income Tax at source against the professional or technical fee paid. From such details of Form 26AS, it is alleged that the appellant had received ₹ 1,72,23,480/- during the said period for providing professional or technical service by way of ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lt members volunteer to do unskilled manual work. The goals of this legislation were to provide social protection for the most vulnerable people living in rural India by providing employment opportunities; to provide livelihood security for the poor through creation of durable assets; to improve water security, soil conservation and higher land productivity by drought-proofing and flood management in rural India; to empower the socially disadvantaged, especially women, Scheduled Castes (SCs) and Schedules Tribes (STs), through the processes of a rights-based legislation; to strengthen decentralised, participatory planning through convergence of various anti-poverty and livelihoods initiatives; to deepen democracy at the grass-roots by strengthening Panchayati Raj Institutions and to effect greater transparency and accountability in governance. Thus, MGNREGA is a powerful instrument for ensuring inclusive growth in rural India through its impact on social protection, livelihood security and democratic empowerment. Under the scheme, the Central Government bears the following costs: i) The entire cost of wages for unskilled manual workers; ii) 75 percent of the cost of material ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... S initiated under MNREGA, 2005. The cards had to become the identity proof for MNREGA workers of Bihar, providing them access to bank accounts to withdraw or to deposit money anytime he wanted. The project had also intended not only to ensure timely payment of wages but also to make the physical presence of the workers at the bank, unnecessary. It also intended to bring transparency and accountability by curbing the corruption so that the unprecedented employment guarantee scheme as envisaged by the Central Government could effectively be implemented without diversion of funds. With the help of biometrics-aided attendance, only a worker could withdraw money, nobody on his behalf could do so. 12. The learned Counsel further drew the attention of this court towards various clauses of the Agreement dated 10.09.2008 and emphasized that the appellant had in fact, acted as an executing agency for the generation of digital job cards (E-shakti cards) under the supervision of BSEDC which functioned as an implementing agency for and on behalf of the Government of Bihar. The Government of Bihar was the real service recipient who got the work executed under MNREGA, 2005 through its agency ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under MNREGA, 2005 and hence, was not be liable to service tax. 14. The learned Counsel also quoted Board Circular No.125/7/2010-ST, dated 30-07-2010 by which it has been clarified that the amount received for implementation of project under a centrally sponsored scheme cannot be presumed as consideration for providing a taxable service and levy and collection of service tax on State government agencies/departments implementing CSS under a central grant, is not legally tenable and therefore, in such cases service tax should not be demanded. The learned Counsel urged that MNREGS was conceptualized and implemented by the Central Government by MNREGA, 2005 and the generation of digital job cards (E-shakti cards) was done out of CSS and fund of State Government, hence not taxable as per above clarification. He further quoted the decisions of the Hon ble Supreme Court in Commissioner v. Apitco Ltd. 2011 (23) S.T.R. J94 (S.C.) whereby the Hon ble Supreme Court affirmed the decision of the Tribunal wherein the Tribunal had set aside the demand of Service tax on grants-in-aid received from Government for implementation of Welfare Schemes when the grants-in-aid were fully utilised ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arious 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. They had to create awareness about MNREGS and sensitization thereof and to undertake other ancillary work like opening of No Frills and Zero Balance Bank accounts for the MNREGS beneficiaries. The establishment cost and the cost of plant machinery/equipments/tools was to be paid back to the appellant in 20 (twenty) quarterly installments. The ownership of these assets was to be t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ax 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 Vs. CMC Limited, 2007 (7) S.T.R. 702 (Tri. Bang.), Instrumentation Ltd. Vs. Commissioner, Lucknow 2016 (45) S.T.R. 182 (Tri. All.) and Sukhmani Society For Citizen Services vs. C.C.E. S.T., Chandigarh - 2017 (47) S.T.R. 172 (Tri. - Chan.). 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. We further conclude that all the other activities on which the service tax has been demanded against the appellant are in or in relation to providing e-shakti cards to MGNREGA beneficiaries which is a sovereign activity and therefore no service tax can be demanded on such services also. 20. In view of the above findings, we set aside the impugned ..... X X X X Extracts X X X X X X X X Extracts X X X X
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