Tribunal upholds service tax demand on municipal property renting, waivers pre-deposit.

The Tribunal upheld the service tax demand on renting of immovable property service by a Municipal Corporation for the periods 2007-2008 and 2011-2012. The appellant's argument based on a Board Circular was dismissed, indicating potential liability to service tax. While acknowledging the Constitutional obligation of the Municipal Corporation under Article 243W, the Tribunal granted a waiver of pre-deposit and stayed recovery proceedings, subject to the petitioner remitting a specified amount plus interest within six weeks to avoid appeal dismissal. Compliance reporting by a specified date was emphasized to prevent dismissal.

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Issues:
1. Liability to service tax on renting of immovable property service by Municipal Corporation.
2. Applicability of Board Circular No. F. No. - 255/1/2006-CX.4 dated 18/12/06.
3. Constitutional obligation of Municipal Corporation under Article 243W and 74th Amendment.
4. Legitimacy of invoking the extended period of limitation for tax liability.

Analysis:
1. The judgment deals with a case where a Municipal Corporation was issued a show cause notice for not obtaining registration, filing returns, and remitting service tax on renting of immovable property service provided during 2007-2008 and 2011-2012. The adjudication order confirmed a service tax demand of &8377; 70,08,745/- for the said period, with a portion of &8377; 12,75,580/- admitted by the petitioner for 2011-2012.

2. The appellant argued that they believed there was no liability to service tax based on a Board Circular dated 18/12/06. However, the Tribunal noted that the service provided by the Municipal Corporation did not fall within the limitations on Union Legislative Power specified in Article 289 of the Constitution, indicating a potential liability to service tax.

3. The petitioner contended that as the Municipal Corporation rented properties to the poor and underprivileged sections of society in discharge of a Constitutional obligation under Article 243W (introduced by the 74th Amendment), they should not be considered to have provided a taxable service. The Tribunal acknowledged the arguable nature of this contention, especially regarding the legitimacy of invoking the extended period of limitation for tax liability.

4. Considering the arguments presented, the Tribunal granted a waiver of pre-deposit and stayed further proceedings for recovery of the adjudicated liability, subject to the petitioner remitting &8377; 12,75,000/- plus interest within six weeks. Failure to comply would result in the appeal being rejected for non-payment. The judgment highlighted the need for the petitioner to report compliance by a specified date to avoid dismissal of the appeal.

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