Statutory levy for industrial estate amenities is not taxable service when collected to discharge mandatory public functions.

Charges collected by a statutory public authority for roads, water supply, street lighting, drainage, maintenance and allied amenities in industrial estates were treated as consideration for compulsory statutory functions, not taxable service. The tribunal noted that the corporation's governing legislation required it to establish and manage industrial estates and provide civic amenities, and that the amounts were collected as a compulsory levy to discharge those obligations. Relying on the corporation's earlier binding case, it held that activities performed as statutory obligations do not amount to taxable services. The service tax demand and related penalty were therefore set aside.

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Issues: Whether service charges collected by the statutory corporation for providing roads, water supply, street lighting, drainage, maintenance and allied amenities in industrial estates were exigible to service tax as taxable services.

Analysis: The statutory corporation's functions under the governing industrial development legislation include establishing and managing industrial estates and providing amenities such as roads, water supply, street lighting, drainage and sewerage. The charges collected from plot holders were towards discharge of these statutory obligations and were in the nature of a compulsory levy used for public functions. The earlier binding decision in the corporation's own case had already held that such activities are part of the statutory functions of the corporation and do not constitute taxable service where the activity is undertaken as a statutory obligation. The demand, therefore, could not be sustained.

Conclusion: The service tax demand and related penalty were set aside, and the appeal was allowed in favour of the assessee.

Ratio Decidendi: Charges collected by a statutory public authority for discharging mandatory statutory functions and providing prescribed civic amenities in industrial estates are not consideration for taxable service when the activity is in the nature of a statutory obligation and a compulsory levy.

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