Commercial leasing of land by a statutory corporation is not a sovereign function and may attract service tax.

Leasing of land by a statutory corporation on commercial terms was treated as a non-sovereign activity and regarded as liable to service tax under renting of immovable property from the relevant statutory date. The corporation was viewed as a separate body corporate, with its property, funds and receipts governed by the State statute rather than forming part of the State consolidated fund, which weakened the claim that the activity was a sovereign function. As no strong prima facie case for complete waiver was shown and the appellant had substantial current assets, full pre-deposit relief was refused and only conditional waiver was considered appropriate.

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Issues: Whether the appellant had made out a prima facie case for complete waiver of pre-deposit in respect of the service tax demand raised on leasing of land, and whether the activity of leasing land by the corporation could be treated as a sovereign function not liable to service tax.

Analysis: The corporation was held to be a body corporate having its own identity, with its property, funds and receipts governed by the State statute and not forming part of the State consolidated fund. On that basis, the leasing of land on commercial terms to private parties was found not to be a sovereign function. The facts were also treated as comparable to earlier tribunal decisions concerning leasing of land in stages, and the activity was considered amenable to service tax under renting of immovable property, at least from the relevant statutory date. Since the appellant had substantial current assets and no strong prima facie case was shown, full waiver was refused and only conditional relief was warranted.

Conclusion: The appellant was not entitled to complete waiver of pre-deposit. A partial waiver was granted on condition of depositing Rs. 185 crores, with recovery of the remaining dues stayed on compliance.

Final Conclusion: The stay request was substantially rejected, but conditional protection was extended by directing pre-deposit of the service tax demand for the normal period and staying recovery of the balance during the appeal.

Ratio Decidendi: Leasing of land by a statutory corporation on commercial consideration is not a sovereign function, and where no strong prima facie case is shown, pre-deposit can be ordered with limited waiver of the balance demand.

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