TMI Blog2022 (1) TMI 798X X X X Extracts X X X X X X X X Extracts X X X X ..... ctors of the appellant. It appears only to be a ploy and an extravagant claim without supported by any legal fiction or rule nor even equity but only done to lure the AAAR into a trap of self-contradiction while answering further questions later and is therefore, highly condemnable. In view of the above, in respect of the question sought, the appeal is not entertained. Rent for locker provided in bus stand - HELD THAT:- The activities in relation to function entrusted to a municipality under 243W of the constitution are multitudinous and unless the provisions of respective state municipality acts are also read in conjoint with the functions entrusted under the constitution, it is not easy to fathom the activities undertaken by the municipalities in a state - Providing locker facility in a bus stand for the common man for which a fee is charged is only an activity ancillary to constructing a bus stand and therefore, there is no room for doubt in our minds that locker facility for common public in bus stand is an activity undertaken by the municipality as a function entrusted under 243W of the constitution and the services of rent or fee collection for such a facility is neit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cutting for the purpose of laying cables by telephone companies alongside roads on contract basis is a composite supply? - Composite supply or not - HELD THAT:- The question is answered in affirmative. Though two charges are collected by the appellant for road cutting and annual rent for cables running across the road, it can be seen that unless road is cut, cables cannot bo laid and mere road cutting without laying of cables is useless. Therefore, both the services have to run in tandem with respect to the telephone companies and the methodology of collection of money is immaterial to the fact of the activities of road cutting and laying of cables, which is indeed a composite supply, it must also be noted that this is a factual question and is restricted to the particular activity of road cutting followed by laying of cables by telephone companies and therefore, the same is not to be extended to all the types of road cutting activities. - TN/AAAR/20/2021(AR) - - - Dated:- 1-12-2021 - THIRU. M.V.S. CHOUDARY, AND THIRU. M.A. SIDDIQUE, MEMBER Represented by : Thiru. K. Sankaranarayanan, Advocate (Passed by Tamilnadu State Appellate Authority for Advance Ruling under S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Municipal Corporation (hereinafter referred to as 'Appellant'). The appellant is registered under GST vide GSTIN 33AAALT1781B1ZB. The appeal is filed against the Order No. 14/ARA/2021 dated 28.04.2021 passed by the Tamil Nadu State Authority for Advance Ruling on the application for advance ruling filed by the appellant. 2. The Appellant is a Municipality as defined in clause (e) of article 243P of the Constitution. They are rendering taxable services (viz) renting of immovable property service, mandeep keeper service and are doing the functions entrusted to a municipality under twelfth Schedule to Article 243W of the Constitution, they have stated to undertake the following services directly/ through contractors by tender process and have sought ruling on the application of Notifications specified in Column below: SI. No Description of the service Direct service by the corporation Service through contractors by tender process Advance ruling is required on the following whether the services mentioned in Column B are exempted vide Notfn No or SI No entry of the table to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed 28-06-2017 6 Slaughter house fees Some times in some months Three years lease Notfn No 14/2017 dt28-06-2017or sl no 56 of Notfn. No 12/2017 dt 28-06-2017. 7 Bunk stalls Three years lease SI No 7 of Notfn No 12/2017 subject to the satisfaction of condition since it is not covered under renting of immovable property. 8 Rent -Travelers' bungalows rest house (municipal lodge) Some times in some months Three years lease Notfn No 14/2017 dt28-06-2017or sl no 4 of Notfn. No 12/2017 dt 28-06-2017 Sl no 14 of the same Notfn/-since condition is satisfied. 9 Fees on pay use toilets Some times in some months Three years lease Notfn No 14/2017 dt28-06-2017(or) sl no 76 of Notfn. No 12/2017 dt 28-06-2017. 10 Avenue receipts Three years leas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d /or exempted under the Notfn. No mentioned against each SI No. Q2. In respect of services rendered by them from SI No 1 to 13 through tender contractors, whether they are covered under Twelfth Schedule to Article 243W of the Constitution and/or exempted vide the Notfn. no. mentioned against each SI No. Q.3. In respect of SI No 14 they are collecting charges for laying of cables alongside roads and collecting road cutting charges as well as annual rent. They require advance ruling whether composite supply can be applied for classifying the said service as renting of immovable property service and reverse charge can be applied for collecting GST as per entry SI No 5A of the table to Notfn No 13/2017 (CE rate) dated 29-06-2017 as amended from the telephone operators who are GSTIN holders Q.4. In respect of SI No 15 w.e.f. 25-01-2018, instead of reverse charge they collected tax under direct charge from the service availers who are registered with GSTIN and whether it can be regularised, (to be treated as technical lapse and condoned since the service rendered by us had suffered tax and Govt, revenue is not affected) Q.5. In respect of SI No 16 the renting of immovable pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as amended vide Notfn. No. 16/2018 dated 26.07.2018 (E)Providing room for rent for temporary stay (E) This is exempted from tax as per SI. No. 14 of Notification 12/2017 CT(R)- dated 28.06.2017 for the reason that their room rent/day/person is not exceeding rupees 1000/-. 6 Providing Slaughter house facilities Not a Supply of Service as per Notification. No 14/2017 - CT(R) dt 28-06-2017 as amended vide Notfn. No. 16/2018 dated 26.07.2018 8 Providing travellers bungalows rest house This is exempted from tax as per SI. No. 14 of Notification 12/2017 CT(R)- dated 28.06.2017 for the reason that their room rent/day/person is not exceeded rupees 1000/-. 9 Providing Toilet facilities Not a Supply of Service as per Notification. No 14/2017 - CT(R) dt 28-06-2017 as amended vide Notfn. No. 16/2018 dated 26.07.2018 13 Entry of vehicle in the market Not a Supply of Service as per Notification. No. 14/2017 - CT(R) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pure Central Govt offices (viz) post offices are fully exempted or not as per entry SI no 8 of the table to Notfn. No 12/2017 dated 28-06-2017. (ii) Co-operative society (viz) Chindhamani Super Market, Jeeva Co-Op Society, TNSTC Staff Society, Jeeva Co-Op Society and transport corporation TNSTC are exempted or not as per entry SI no 8 of the table to Notfn. No 12/2017 dated28-06-2017. (iii) Nationalised Banks are exempted or not as per SI no 8 of the table to Notfn. No 12/2017 dated 28-06-2017. Service of renting of immovable property by the applicant to another Central/State government/Union territory or Local authority alone is exempted from tax as per SI. No. 8 of Notification 12/2017 dated 28.06.2017 and the services of renting of immovable property to other than Central/State Government, Union Territory or Local authority, are not exempted under SI. No. 8 of the table to Notification No. 12/2017- C.T. (Rate) dated 28.06.2017. 5. Based on the above decision, the Appellant has filed the present appeal. The grounds of appeal are paraphrased as follows: 5. GROUNDS OF APPEAL (i) Sl No 6- Slaughter house fees - In the application to the ARA it was pleaded t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 06-2017 but also under SI No 76 of the Notfn No. 12/2017 dated 29.06.2017 as amended. (iii) In respect of SI No SB- locker rent provided in bus stand it has been decided in the above order by ARA that, it is taxable. In our application it was pleaded that the said service is covered under Twelfth Schedule to Article 243W of the Constitution and hence it is exempted. It is now submitted that the said activity locker rent is a Cloak room activity . 2. The functions entrusted to a municipality under the Twelfth Schedule to Aritcle 243W of the Constitution are as under................... The words, ''such as under (1) and ,''including under (q) of the functions entrusted to Municipality in twelfth schedule to Article 243 W have vide coverage and it could not be restricted to the definition as ordered of the ARA. Hence it, is submitted the looker rent may be declared as an activity covered under Twelfth Schedule to Article 243W of the Constitution and covered under Notfn No. 14/2017 and it may be declared as not a service . While discussing the following services rendered by the appellant direct lo the public it was declared by the ARA as not a supp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on for the purpose of levy of GST since it is outside the scope of levy. Hence the order of the ARA is not correct and the contention of appellant may be accepted and orders of the ARA may be overruled. 1. Maintenance of park is covered under (1) of Twelfth Schedule to Twelfth Schedule to Article 243W of the Constitution which read as follows : (1) Provision of urban amenities and facilities such, as parks, gardens, playgrounds. 2 3. Market fee daily weekly are covered under (c), (i) and (1) a of Twelfth Schedule to Article 243W of the Constitution which read as follows : [c] Planning for economic and social development (i) Safeguarding the interests of weaker sections of society, including the handicapped and mentally retarded. (1) Provision of urban amenities and facilities such as parks, gardens, playgrounds. (b) It has been order by the ARA w. r. [S] No. 2 3. Market fee daily Market fee weekly that direct collection by municipal corporation are covered Twelfth Schedule to Article 243W of the Constitution and as per Notification No. 14/2017 Central Tax (Rate) New Delhi, the 28th June, 2017 the services by way of any activity in relation to a functio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 43W of the Constitution which read as follows: (q) Public amenities including street lighting, parking lots, bus stops and public conveniences. (1) Provision of urban amenities and facilities such as parks, gardens, playgrounds. It has been order by the ARA w. r. t SI No.4. Fees for bays in bus stand done direct collection by municipal corporation are covered Twelfth Schedule to Article 243W of the Constitution and as per Notification No. 14/2017-Central Tax (Rate) New Delhi. the, 28th June, 2017 the services by way of any activity in relation to a function entrusted to a municipality under article 243W of the Constitution is not a service. Hence the service is not chargeable to Tax. The same ruling will apply to tender contractors also . It may please be noted exemption is granted to the activity and not to the person (ie) whether it is done by X or Y or by the appellant it is outside the scope of service. When the activity is out the scope of service there is no need examine the details of the activity receiver (tender contractors) and the consideration towards the activity (tender money) Hence the above activity may be declared as not a service but an activity in rela ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as detailed in para C above it is a fact that the contractors of municipal corporation are public servants and the services rendered by the municipal corporation to the contractors (public servants) could not be termed as service and the contractors could not be termed as business entities but they are agents of the municipality Hence the collection and maintenance work entrusted by the municipality to the contractors could not be termed as service since it is arrangement between principal and agent (ie) in this case Govt. and public servant and amount paid by the contractor to Govt. towards rendering of work entrusted under Section 374 and other provisions of the Tamil Nadu District Municipality's Act, 1920 and the functions entrusted to a municipality under the twelfth schedule to article 243W of the constitution could not be termed as service. As there is no service the question of payment of GST will not arise on all those lease contracts since the rate fixed by Govt. was adopted and the activity is rendered by the contractor to the public in the name of the local authority and receipt has been issued in the name of the local authority to the public; C) flower shop in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fees. Maintenance of Slaughter house are covered under (r) of Twelfth Schedule to Article 243W of the Constitution which reads as follows : (r) Regulation of slaughter houses and tanneries. It has been ordered by the ARA that direct service by the municipal corporation w.r. t. slaughtering of animals is covered under of Twelfth Schedule to Article 243W of the Constitution and hence covered under Notification No. 14/2017-Central Tax (Rate) New Delhi, the 28th June, 2017and hence it. is not a service and it is not chargeable to tax. When it is out side the scope of service there is no need to examine who is the service availer and consideration received etc. When it is not a service the same contention of the Notfn. is applicable to tender contractors also due to the following reasons. As per the Tamil Nadu District Municipalities Act, 1920 as detailed in para C above it is a fact that the contractors of municipal corporation are public servants and the services rendered by the municipal corporation to the contractors (public servants} could not be termed as service and the contractors could not be termed as business entities but they are agents of the municipality Henc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ities such as parks, gardens, playgrounds. (q) Public amenities including street lighting, parking lots, bus stops and public conveniences. The wordings, 'such as' and 'including' have vide coverage and applying the above definition the activity of room rent for temporary stay is covered under the above definition under (1) and (q) of Twelfth Schedule to Article 243W of the Constitution. 9. Fees on pay use toilets Fees on pay use toilets is covered under (q) of Twelfth Schedule to Article 243W of the Constitution which reads as follows : q) Public amenities including street lighting, parking lots, bus stops and public conveniences. As per Notification No. 14/2017-Central tax (Rate) New Delhi, the 28 th June, 2017 Services by way of any activity in relation to a function entrusted to a Panchayat under article 243G of the Constitution or to a Municipality under article 243W of the Constitution is not a service. Hence it is not chargeable to tax. While discussing the services rendered by the appellant direct to the public it was declared by the ARA as not a supply of service. It may please be noted that it is not an exemption Notfn/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... public. (i) Reserving our right to claim the benefit of Notfn/ No. 14/2017 the following, submissions are made. In the application to the ARA it was pleaded that Services by way of, Fees on pay use toilets /is exempted vide entry Sl No 76 of the Notfn No 12/2017 dated 29-06-2017 as amended which reads as follows: 76 Heading 9994 Services by way of public conveniences such as provision of facilities of bathroom, washrooms, lavatories, urinal or toilets. Nil Nil Even though AAR in the order has given a ruling that services by way of slaughtering of animals is exempted as per Notfn. No 14/2017 df 28-06-2017 it was requested that the exemption under SI No 76 of the Notfn No 12/2017 dated 29-06 2017 may also be considered and extended. It may please be noted that exemption is granted to the service and not to the person. (ie) whether it is done by the Municipality to the tender contractors or by any other person to any body and whatever may be the consideration it is fully exempted unconditionally and hence exemption has to be granted to the appellant in respect of the tende ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e essential characteristics of agricultural produce but make it only marketable for the primary market; (d) renting or leasing of agro machinery or vacant land with or without a structure incidental to its use; (e) loading, unloading, packing, storage or warehousing of agricultural produce; (f) agricultural extension services; (g) services by any Agricultural Produce Marketing Committee or Board or services provided by a commission agent for sale or purchase of agricultural produce. (h) services by way of fumigation in a warehouse of agricultural produce. Nil Nil it may please be noted that exemption is granted to the service and not to the person, (ie) whether it is done by the Municipality to the tender contractors or by any other person to any body and whatever may be the consideration it is fully exempted unconditionally and hence exemption has to be granted to the appellant in respect of the tender contractors 11. Right to fishing in bond- Enjoyments of right - fishing in a particular bond. i) Three years tender contracts by tender notice for the purpose of right to fishing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . It has been ordered by the AAR that direct service by the municipal corporation w.r. t maintenance of park is covered under of Twelfth Schedule to Article 243W of the Constitution and hence covered under Notification No. 14/2017-Central Tax (Rate) New Delhi, the 28th June, 2017and hence it is not a service and it is not chargeable to tax. When it is out side the scope of service there is no need to examine who is the service availer and consideration received etc. When it is not a service it is applicable to tender contractors also due to the following reasons. As per the Tamil Nadu District Municipalities Act, 1920 as detailed in para C above it is a fact that the contractors of municipal corporation are public servants and the services rendered by the municipal corporation to the contractors (public servants) could not be termed as service and the contractors could not be termed as business entities but they are agents of the municipality Hence the collection and maintenance work entrusted by the municipality to the contractors could not be termed as service since it is arrangement between principal and agent (ic) in this case Govt. and public servant and amount paid by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are not supplied in conjunction with each other in the ordinary course of business and therefore the same is not a composite supply. The decision of the AAR is based on the accounting head of the two services which is not at all correct. It is true that road cutting charges is one time supply and the rental charges are periodical. But both the services are conjunction with each other in the ordinary course of business because without road cutting optical cable could not be laid. Without laying the cable rent could not be collected. Hence conjunction is there for road cutting and collecting rent for cable laid alongside road and hence it is composite supply. Principal supply is renting and supplementary supply is road cutting in view of the above the contention of the appellant, that, composite supply has to be adopted for road cutting charges may be accepted. 6. PERSONAL HEARING: The Appellant was granted personal hearing through Virtual Personal Hearing as required under law before this Appellate Authority on 23-09-2021. The Authorized representatives of the Appellant Tvl. K. Sankaranarayanan , Advocate of the appellant company appeared for hearing. They reiterated t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CGST/TNSGST Act, 2017. It, is submitted the above decision of Commissioner of Central Tax/Salem is not only applicable to the above services but also to all the activities SI no 1 to 13 mentioned in the appeal as per the grounds of appeal submitted, Hence it is prayed the ratio of the decision of the Commissioner/Salem may be applied for the GST period also and the our appeal be allowed for all the activities from SL No 1. to 13 in case of the activities rendered by the appellant to tender contractors covered under Question 9. and also to the items covered under Question 1 in the present appeal. 3. Moreover the following decisions pertaining to the service tax /GST may also be taken into consideration and it is submitted that the ratio of the decisions is also applicable to the present appeal. (i) 2018 (364) E.L.T. 768 (Sett. Comm.) BEFORE THE SETTLEMENT COMMISSION, CUSTOMS, CENTRAL EXCISE AND SERVICE TAX, CHENNAl|ADDITIONAL BENCH]S/Shri C. Rajendiran, Vice-Chairman and R.D. Negi, Member IN RE : COMMISSIONER, MAHAEOODNAGAR MUNICIPALITY, TELANGANA Final Order No. 3/2018 S.T., dated 10-1-2018 in Application No. S.A. (S.T.) 51/2017 SC] wherein it was decided that Service Tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in as much the applicability of SI.No. 56/76 of Notification No. 19/2017 dated 28.06.2017' was not considered and ordered by the LA; b. In respect of Q.No. 1, SI.No. 5B-loeker rent provided in bus stand was ordered as taxable while the contention of the appellant is the said service is not taxable c. In respect of Q.No. 2 in respect of SI.No. 1 to 10, it. has been held that the appellant supply the rights held by them to the contractors through the tender process which is a supply made by them to the contractors who are business entities for furtherance of their business and it is not an activity in relation to the function entrusted under Article 243 G/W of the Constitution d. The LA has ruled that road cutting charges is one time supply; the rental charges are periodical; Both the supply are not in conjunction with earn other in the ordinary course of business and therefore the same is not a composite supply The above are taken up for consideration and ruling as under. 8.1 In respect of Q1 (SI. No. 6 and 9), the AAR has given a ruling that services by way of slaughtering of animals / fees on pay use toilets is neither a supply of goods nor a supply of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... undertaken in the capacity of a public authority. Providing locker facility in a bus stand for the common man for which a fee is charged is only an activity ancillary to constructing a bus stand and therefore, there is no room for doubt in our minds that locker facility for common public in bus stand is an activity undertaken by the municipality as a function entrusted under 243W of the constitution and the services of rent or fee collection for such a facility is neither a supply of goods nor a supply of service as per notfn. No.14/2017-CT(R) and hence exempt. 9. 1 With respect to the same set of services raised in Q1 if not done directly by the municipal corporation but by the tender contractors (Q2), the appellant is aggrieved of the fact that the AAR had answered in negative for exemption and hence the appeal. The argument of the counsel for the municipal corporations is that section. 7(2)(b) allows the government, on the recommendation of the council, to notify such activities of transactions undertaken by the central government, state government or any local authority in which they are engaged as public authorities, to be treated neither a supply goods nor a supply of serv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and in open space SI.No. 7 Bunk Stall') and the underlying functions under Art..243W. The functions are clearly identifiable to be the one from or in respect which the activity is received or supplied. Thus there is a close link or association between the activity and the functions. It is not the proportionality of the activity which determines whether it is in relation to the function but the implications of the legislative assessment of the term 'in relation to' is more tilted towards nexus, inseparability and identity of the activities involved with the functions and not merely on other parameters. However, in this case, the tender contractors appear to render back to back services to the municipal corporation. Needless to say, this exemption will not apply if the contractor has performed an activity that only has an indirect connection with the functions entrusted or if the activity is only an incidental component of a more comprehensive supply of other services. Clearly, the transaction between the corporation and the contractor is an activity/transaction undertaken by the local authority, engaged as public authority. The requirement explicitly stated in secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appeal is not entertained for the reasons stated in para 8. 1 above b. In respect of Q.No. 1, SI. No. 5 -B (Rent for locker provided in bus stand by the appellant) it is held to be an activity undertaken by the Municipality as a function entrusted under 243 W of the Constitution and the service of rent or fee collection for such a facility is neither a Supply of Goods nor a supply of Service as per Notification No. 14/2017-CT (Rate) c. in respect of Q.No. 2, the transaction between the corporation and the contractor as listed in SI.No. 1 to 9 and .13, except at SI.No. 5A Charges for TV advl. in Bus Stand; 5C- flower shop in bus stand in open space SI.No. 7 Bunk Stalls' of the said question, in the factual matrix presented, it is held to be an activity/transaction in relation to the activity/transaction undertaken by the appellant engaged as Public authority and the same are covered under Notification No. 14/2017-C.T.(Rate) as amended d. In respect of Q.No. 2, SI.No. 5A-Charges for TV advt. in Bus Stand; 5C flower Shop in bus stand in open space SI. No. 7 -Bunk Stall of the said question, the same is covered under SI.No. 7 of Notification No. 12/2017-CT (Rate) as wel ..... X X X X Extracts X X X X X X X X Extracts X X X X
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