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TMI Blog2024 (11) TMI 403X X X X Extracts X X X X X X X X Extracts X X X X ..... with a Show Cause Notice No. 18/ST/ADC/2011 dated 20.09.2012 which was adjudicated by the Joint Commissioner vide Order-in-Original No. 13/JC/ST/2013 dated 19.12.2013 demanding Service Tax amount of Rs.13,39,667/- and also imposing equal penalty. 2.2 On appeal being filed before the Commissioner (Appeals), the Lower Adjudicating Authority have confirmed the tax but set aside the penalty imposed on the ground that the Appellant being the statutory body of State Government. The Lower Adjudicating Authority have held that the Appellant is liable to pay service tax on the income received from the renting of immovable property as the levy of immovable property is constitutionally valid relying on the decisions rendered in the cases of M/s. Shubh Timb Steels Ltd. Vs. UOI and another [2010 (20) STR 737 P & H)], M/s. Retailers Association of India and another, M/s. Multiplex Association of India V UOI [2011 (23) STR 561 (Bom)] and M/s. Cinemax India Ltd vs. UOI [2011 (204) STR 0003 (Guj)]. The Hon'ble Punjab and Haryana High Court in the case of M/s. Shubh Timb Steels Ltd Vs UOI and another [2010 (20) STR 737 P & H)] held that 'Renting of property for commercial purpose is a serv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s a creature of an Act of the Tamil Nadu Legislature and is the statutory body being governed by the Tamil Nadu District Municipalities Act, 1920 and it is an autonomous self-government in terms of the Article 243Q of the Constitution of India. He has submitted that the law is well settled that municipalities are covered under the definition of the 'State' as enshrined under the Article 12 of Constitution of India. He has stated that the Appellant owns number of properties both the movable and immovable, vacant land, markets, etc., which have been leased and given on license on monthly or annual basis for one year or for three years by tender-cum-public auction as per the State Government orders and the object of the creation of a municipal body is to promote and to develop the quality of small-scale businesses and economic status of the people. So, the Appellant established Shopping Complex, Kept Tv sets for advertisement purposes and etc., apart from leasing or renting of the immovable properties, vacant lands, etc. He has argued that it is well settled by the constitutional courts that the municipalities are covered under Article 12 of the Constitution of India and imposing tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... blic amenities including street lighting, parking lots, bus stops and public conveniences. 18. Regulation of slaughterhouses and tanneries. 3.3 In terms of Article 289 Constitution of India, the Ministry of Finance had issued the Mega Exemption Notification No. 25/2012-ST and amending Notification No. 02/2014 which excludes governmental authority from the purview of paying Service Tax. The relevant portion of the Notification reads as follows: - "(s) Governmental authority means an authority or a board or any other body; (i) Set up by an Act of Parliament or a State Legislature; or (ii) Established by the Government, With 90% or more participation by way of equity or control, to carry out any function entrusted to a municipality under article 243 W of the Constitution" 3.4 The Ld. Counsel has explained that the Appellant was not keeping any telephone booths and many of the shops were let out for educational purpose and assessing to tax, on such properties is against the Finance Act, 1994. Section 66D of the Finance Act, 1994 provides a negative list and many of the shops which were run in their immovable properties come under the negative list and the Lower Appellate Au ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e taxable service as under Section 65 (105) (zzzz) reads as:- 'to any person, by any other person in relation to renting of immovable property for use in the course or furtherance of business or commerce'. The definition underwent a small amendment in 2010 and reads as: 'to any person, by any other person, by renting or immovable property or any other service in relation to such renting, for use in the course of or for furtherance of, business or commerce'. 6.4 The definition uses the words 'to any person, by any other person'. It was held by the Hon'ble High Court in the case of Cuddalore Municipality that service tax was payable only if such services were provided 'by any other person' which means other than the owner to any person. In the case of Cuddalore Municipality, the Hon'ble High Court set aside the demand for the period prior to 30.06.2012. The relevant discussion of the Hon'ble High Court reads as under: "22. I have considered the arguments advanced by the learned counsel for the petitioner and the respective learned Senior Standing Counsel for the respective respondents in the respective Writ Petitions. 23 Since the dispute pertains to the period prior to J ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... udes- (i) building or part of a building, and the land are pertinent thereto; (ii) land incidental to the use of such building or part of a building, the common or shared areas and facilities relating thereto, and (iii) the common or shared areas and facilities relating thereto: and (iv) in case of a building located in a complex or an industrial estate, all common areas and facilities relating thereto, within such complex or estate, but does not include- (a) vacant land solely used for agriculture, aquaculture, farming forestry animal husbandry, mining purposes (b) vacant land, whether or not having facilities clearly incidental to the use of such vacant land, (c) land used for educational sports circus entertainment and parking purposes, and (d) building used solely for residential purposes and buildings used for the purposes of accommodation, including hotels, hostels boarding houses, holiday accommodation tents, camping facilities (v) vacant land given on lease or license for construction of building or temporary structure at a later stage to be used for furtherance of business or commerce". Explanation 2 For the purposes of this sub-clause, and immovabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enth Schedule of the Constitution and falls under the residuary entry, that is, Entry 97 of List I 31. This Court has also upheld the validity of the above provision Similar view has been taken by the other High Courts also There is no doubt that the petitioner municipality was renting immovable property to various person in the course of or furtherance of business or commerce of the lessee as defined in Section 65(90) of the Finance Act 1994 as it stood during the period between April 2012 and June 2012. However, merely because there was renting of immoveable property by itself was not sufficient to attract the levy 32. To attract levy under Section 65(105) (zzzz) of the Finance Act 1994 there should be renting of immovable property or provision any other service in relation to such renting, for use in the course of or furtherance of business or commerce to "any person. Only if service was provided by "any other person", le, by a person other than the owner, such service was liable to service tax 33. The expression "any other person" can only mean any other person other than the owner of the property Therefore, owner of the immoveable property is not liable to pay tax under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ovided "by any other person" other than the owner, to any person by such renting, for use in the course of or in furtherance of, business or commerce. 39. As the owner of the immovable property who rents out the property simplicitor was not in contemplation in the definition of taxable service of "renting of immovable property" in Section 65(105(zzzz) of the Finance Act. 1994, demand against the petitioner was without jurisdiction 40. Since the petitioner municipality is the owner of property, question of it being made liable to pay service tax for any service in relation to such renting of immoveable property does not arise even if it had rented out its immoveable property for use in the course of or for furtherance of, business or commerce of the person who was renting it. 41 In the light of the about discussion, W.P. No. 12489 of 2017 filed Vridhachalam Municipality for the period April 2012 June 2012 deserves to be allowed. To that extent impugned Order-in-Original No. 5/2018-ST in C No V/ST/15/21/2017-ST. Adjn, is liable to be quashed straight away 6.5 In the very same judgement the Hon'ble High Court has considered the demand proposed and confirmed for the period afte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Education Guide, list of activities such as grant of mining or licensing rights or audit of government entities established by a special law, which are required to be audited by CAG under Section 18 of the Comptroller and Auditor-General's (Duties, Powers and Conditions of Service) Act, 1971 and therefore such services are performed by CAG under the statue and cannot be performed by the business entity themselves and thus do not constitute support services. 54 If the activity carried out by the Petitioner Municipalities are categorised as "Support Service", it cannot be held that there was a provision of taxable service and such service was liable to tax under Section 66B of the Finance Act, 1994 as in force with effect from 01.07 2012. 55. However, for such support services, service tax was payable by the recipient of such service in terms of Rule 2(1)(d)(E) of the Service Tax Rules, 1994 as amended by notification No.36/2012-ST dated 20.6.2012 with effect from 1.17.2012 56. For support service provided, the recipient was liable to pay tax on reverse charge basis under Rule 2(1) (d)(E) of the Service Tax Rules, 1994 as amended by notification No. 36/2012-ST dated 20.06.2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat Municipality is liable to pay service tax. The relevant paragraph of the judgement in the case of Madurai Corporation reads as under:" "This Court heard the learned counsel for the petitioner at considerable length. Though I found the contentions to the worthy of http://www.judis.nic.in consideration, as rights pointed out by the learned standing counsel, the issue is no longer res integra. The Division Bench of the Madras High Court had already decided the issue in the decision reported in 2014-TIOL-2545-HC-MAD-ST (G.V.Matheswaran vs the Union of India and others) after upholding the validity of Section 65(105)(zzzz) of the Act, in Paragraph No 56, the Hon'ble Division Bench observed that it is open to the local body to pass on the burden to the recipient of the service. It is necessary to note that among the petitioners in that batch of writ petitions, there were a few local bodies also. That is why, in R. Nambi vs. Tenkasi Municipality (2015) (37) STR 696 (Mad, a learned Judge of this Court observed as follows "13 At the out set it has to be pointed out that the petitioner it not a service provider The first respondent Municipality is the service provider, who has be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es and Clause (a) provides services by Government or a local authority excluding the following services to the extent they are not covered elsewhere and the relevant clause would be Clause (IV) namely support services, other than services covered under Clauses (i) to (iii), provided to business entities. Therefore the Municipality is bound to pay service tax on the nature of transaction, which they have entered into with the petitioner". 5. When the Division Bench of the Madras High Court has already held that the local bodies are also liable to pay service tax for rendering "renting of immovable properties" service mandap keeper services etc, then, it is not for me to go into the issue once again. Judicial discipline demands that I respectfully follow these binding precedents http://www.judis.nic.in 7. It is to be noted that the Hon'ble High Court in the case of Madurai Corporation has followed the decision of the Hon'ble High Court rendered in batch case of G.V. Matheswaran Vs. UOI 2014-TIOL-2545-HC-MAD-ST. In the case of G.V. Matheswaran the constitutional validity of the levy of service tax of renting of immovable property was under challenge. The main ground raised was tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the stage of Show cause notice, writ petitions cannot be entertained. But, however the learned Single Judge has made it clear that the respondent will have to consider the decision rendered by another learned Single Judge of this Court in a batch of wit petitions in WP No 8900 of 2017 in the case of Cuddalore Municipality v. The Joint Commissioner of GST and Central Excise, before passing final orders 6. However the Learned Senior Panel Counsel appearing for the respondent would submit that the order passed in the Cuddalore Municipality case referred to (supra) is the subject matter of challenge in a writ appeal. He would also submit that a contrary view has been taken by another learned single Judge of this Court in another batch of writ petitions in WP (MD) Nos 7599 of 2018 etc batch in its decision dated 9-9-2020. According to him in the said decision, it has been held that a Municipality is liable to pay ServicеТаx. 7. The learned Standing Counsel for the respondent would also submit that the decision of the Hon'ble Supreme Court in the case of Krishi Upaj Mandi Samiti v. Commissioner of C Ex &S.T. Alwar reported in 2022 GSTL 129[2022] 135 laxmann com 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the above observations and judgements rendered by jurisdictional High Court. 10. It is to be seen that some of the amounts falling within the demand pertain to fees and charges collected for carrying out functions specifically listed in 12th schedule. Further, services are carried out as per the provisions of Panchayat Act, Municipalities Act etc. by which State has bestowed the local authority to carry out such functions and services. These issues require to be examined. If sovereign functions, the levy of tax cannot be attracted. 11. The Ld. Counsel has argued on the ground of limitation also. The appellants being local authority, which is a wing of the Government, it cannot be said that appellants had suppressed facts with intention to evade payment of service tax. So also there is no positive act of suppression alleged in the Show Cause Notices against these municipalities. As the matter is remanded, we direct the adjudicating authority to consider the issue of limitation also. All issues are left open. 12. In the result, the impugned orders are set aside. The appeals are allowed by way of remand to the adjudicating authority." 8. We find that the Lower Appellate Autho ..... X X X X Extracts X X X X X X X X Extracts X X X X
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