Statutory functions and compulsory levies: industrial estate charges were treated as non-taxable, not service consideration.

Charges collected by an industrial development corporation for amenities, maintenance, management and repairs in industrial estates were treated as part of its statutory duties under the Maharashtra Industrial Development Act, 1961. Applying the distinction in the Board circular between sovereign or statutory functions and taxable services rendered for consideration, the court held that receipts collected in discharge of compulsory statutory obligations amount to a levy and not consideration for taxable service. As the record did not show any activity outside the statutory framework, the service tax demand was held not sustainable.

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Issues: Whether the service charges collected by the industrial development corporation for providing amenities, maintenance, management and repairs in industrial estates constituted taxable service under the Finance Act, 1994, or were part of statutory functions giving rise only to a compulsory levy.

Analysis: The service tax demand was based on the allegation that the charges recovered from plot holders were consideration for management, maintenance and repairs. The relevant Board circular drew a distinction between services performed by sovereign or public authorities in discharge of statutory obligations, for which the fee collected is a compulsory levy and no service tax is leviable, and services rendered outside statutory activity for consideration, which may attract tax. The Corporation's functions under the Maharashtra Industrial Development Act, 1961 include establishing and managing industrial estates and providing amenities such as roads, water supply, street lighting, drainage and allied facilities. These activities were held to be part of its statutory duties, and the receipts were treated as charges collected in discharge of those obligations. The record also did not show any finding that the activity was outside the statutory framework.

Conclusion: The charges were held not to constitute taxable service; they were treated as compulsory levies collected in the course of statutory functions, and the demand of service tax was not sustainable.

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