Statutory levy versus taxable consideration: public function receipts escaped service tax, while extended limitation failed without suppression.

Receipts collected by a statutory development authority while performing mandatory public functions were treated as compulsory statutory levies, not consideration for a taxable service, and the exemption under Notification No. 25/2012-S.T. was applied; the demand on those fees was therefore unsustainable. By contrast, free hold lease rent, miscellaneous receipts and maintenance charges were held to arise from non-statutory services for consideration and were taxable. The show cause notice was also held time-barred because the extended limitation period under the Finance Act, 1994 could not be invoked without proof of fraud, suppression or intent to evade tax. The demand and adjudication were set aside in full.

---

---

Issues: (i) Whether the various fees collected by the statutory development authority constituted consideration for a taxable service and whether exemption under Notification No. 25/2012-S.T. was available; (ii) Whether receipts towards free hold lease rent, miscellaneous receipts and maintenance charges were liable to service tax; (iii) Whether the show cause notice was barred by limitation.

Issue (i): Whether the various fees collected by the statutory development authority constituted consideration for a taxable service and whether exemption under Notification No. 25/2012-S.T. was available.

Analysis: Service tax under Section 65B(44) of the Finance Act, 1994 requires an activity carried out for another for consideration, implying a service recipient, service provider and quid pro quo. The authority collected map fee, development fee, compounding fee, supervision fee, stacking fee, information fee, subdivision fee and form fee while performing statutory functions under the Uttar Pradesh Urban Planning and Development Act, 1973, and the amounts were deposited in the Government treasury. Such collections were held to be compulsory statutory levies and not consideration. The activities were also treated as falling within the exempted public functions covered by Notification No. 25/2012-S.T. dated 20.06.2012.

Conclusion: The fees were not taxable consideration and the demand on this count was unsustainable, in favour of the assessee.

Issue (ii): Whether receipts towards free hold lease rent, miscellaneous receipts and maintenance charges were liable to service tax.

Analysis: These receipts were treated as arising from services rendered for monetary benefit and not merely from sovereign or mandatory statutory duties. Free hold lease rent and maintenance charges were considered quid pro quo for renting and maintenance related services, and the liability on miscellaneous receipts was not disputed on facts. The statutory character of the assessee did not by itself exclude taxability where the receipts were for non-statutory services for consideration.

Conclusion: The receipts under free hold lease rent, miscellaneous receipts and maintenance service were held taxable, against the assessee.

Issue (iii): Whether the show cause notice was barred by limitation.

Analysis: The demand related to 2012-13 and 2013-14, while the notice was issued in April 2018 beyond the normal period. Invocation of the extended period under Section 73(1) of the Finance Act, 1994 required fraud, collusion, wilful misstatement or suppression with intent to evade tax. No such material was established, and the receipts were found to have been recorded in the books and deposited in the designated account. Absence of suppression or intent to evade meant the extended period could not be invoked.

Conclusion: The show cause notice was time-barred, in favour of the assessee.

Final Conclusion: The demand and adjudication were set aside in entirety and the appeal succeeded.

Ratio Decidendi: Receipts collected by a statutory authority while discharging mandatory public functions and deposited in the Government treasury do not constitute consideration for taxable service, and the extended limitation period under service tax law cannot be invoked without proof of suppression or intent to evade tax.

---