2022 (8) TMI 610 - AT - Service Tax

Urban Development Authority fees not subject to service tax; other income liable but notice time-barred

The Tribunal held that the fees collected by the Urban Development Authority were not consideration for services rendered and thus not liable to service ... Non-payment of service tax - registration with the Service Tax Department not taken - Construction of residential complex service - renting of immovable property service - charitable activity or not - applicability of exemption under clause (4) of Mega Notification No. 25/2012 dated 20.06.2012 - failure to comply with the provisions of Section 68 of Finance Act, 1994 read with Rule 6 of Service Tax Rules, 1994 - Financial Year 2012-13 to 2014-15 - extended period of limitation. Whether the various fees collected by the appellant can be held as consideration for rendering any service by the appellant to someone else? - HELD THAT:- It is observed that the Adjudicating Authority has confirmed the demand on several kinds of fees collected by the appellant for the sole reason that as per clause (c) of Section 65 B (44) the fees taken in any Court or Tribunal only are excluded. The Section is silent about excluding any other fee. But the fact remains is that the appellant is an entity created as an Urban Development Authority in terms of Section 4 of Uttar Pradesh Urban Planning and Development Act, 1973 for development work of Haridwar & Roorkee prior to creation of state of Uttrakhand with the objects to promote and secure the development of the area and accordingly, to execute works in connection with the supply of water and electricity, sewage and to provide and to maintain other services and amenities for purposes of development. There is no denial that the appellant therefore is a statutory authority - no Revenue benefits have been incurred by the appellant from the amounts of several different kind of fees collected by them, the entire amount so received been deposited in the Government Treasury, irrespective for any specified purpose. Reliance on the Circular No. 192/02/2016 dated 13.04.2016 is absolutely wrongly on the part of the Adjudicating Authority. It is Circular No. 89/7/2006-ST dated 18.12.2006 according to which the fee and charges since are collected as per statute, they cannot be termed as consideration - the confirmation of demand of Rs. 2,31,84,581/- as a liability towards various amount received by the appellant on account of various fee is not sustainable. The order to that extent is hereby set aside. Whether income under free hold lease rent, miscellaneous receipt and Harilok Maintenance are consideration towards providing a service by the appellants? - HELD THAT:- The amounts received by appellant towards free hold lease rent, maintenance charges are received as quid pro quo to providing Renting and Maintenance Services, hence are the monetary benefits to the appellant. Irrespective it being statutory body, these amounts are liable to tax. We further observe that the findings of adjudicating authority “regarding misc. receipts and the service tax liability there upon has not contested by the appellant. Accordingly, it is held that on the income under heads of ‘Free Hold Lease Rent, Miscellaneous Receipt and Harilok Maintenance Service’, the appellant was liable to pay service tax. Extended period od limitation - HELD THAT:- The demand in question pertains to the period 2012-13 and 2013-14. The show cause notice is given in April 2018 i.e. much beyond the period of normal limitation. The extended period can only be invoked in terms of proviso to Section 73 (1) of Finance Act, 1994 i.e. only in the cases where ingredients of fraud, collusion, willful mis-statement, suppression of facts etc. with an intent to evade tax are present - No positive act of the appellant is brought to the notice by the department which may be sufficient to hold that the act amounts to committing fraud or collusion etc. Above all, as already held that appellant is a public entity acting under the mandate of statute for the infrastructural development in these areas of Haridwar and Roorkee, question of suppression of facts by such public entity otherwise does not arise. The Hon’ble High Court Calcutta in the case of INFINITY INFOTECH PARKS LTD. VERSUS UNION OF INDIA [2014 (12) TMI 36 - CALCUTTA HIGH COURT] has held that once there is no allegation in the show cause notice of any conscious act on the part of the assessee that constitutes fraud, collusion, willful mis-statement, suppression of facts or contravention of any provision of the Finance Act, 1994 or any rule made their under with intent to evade service tax, the extended period of time while issuing said show cause notice cannot be invoked. Thus, the show cause notice raising demand for the year 2012 to 2014 cannot be issued in the year 2018. Such show cause notice is definitely barred by time. Appeal allowed - decided in favor of appellant. Issues Involved:1. Whether the various fees collected by the appellant can be considered as consideration for rendering any service.2. Whether income under free hold lease rent, miscellaneous receipts, and Harilok maintenance are consideration towards providing a service.3. Whether the show cause notice was barred by limitation.Issue-wise Detailed Analysis:Issue 1: Whether the various fees collected by the appellant can be considered as consideration for rendering any service.The appellant, an Urban Development Authority, was created under the Uttar Pradesh Urban Planning and Development Act, 1973, for development work in Haridwar and Roorkee. The department alleged that various fees collected by the appellant constituted consideration for services rendered, thus liable to service tax. The appellant argued that these fees were statutory levies deposited in the Government Treasury and should not be considered as consideration for services.The Tribunal referred to Section 65 B (44) of the Finance Act, 1994, which defines 'service' and 'consideration.' It emphasized that for service tax to be levied, there must be a service provider, a service recipient, and a quid pro quo. The Tribunal noted that the fees collected by the appellant were deposited in the Government Treasury and did not result in any revenue benefit to the appellant. The Tribunal relied on Circular No. 89/7/2006-ST, which clarified that fees collected by sovereign/public authorities under statutory obligations are not consideration for services. The Tribunal also referred to several judicial precedents supporting this view.The Tribunal concluded that the fees collected by the appellant were not consideration for services rendered and thus not liable to service tax. The demand of Rs. 2,31,84,581/- was set aside.Issue 2: Whether income under free hold lease rent, miscellaneous receipts, and Harilok maintenance are consideration towards providing a service.The Tribunal examined whether the income from free hold lease rent, miscellaneous receipts, and Harilok maintenance was for discharging a sovereign function or for commercial gain. It observed that the amounts received as lease rent and maintenance service were quid pro quo for providing renting and maintenance services, thus constituting monetary benefits to the appellant. The Tribunal referred to the decision of the Allahabad High Court in the case of Greater Noida Industrial Development Authority, which held that services provided for consideration by a statutory body are liable to service tax.The Tribunal concluded that the income under free hold lease rent, miscellaneous receipts, and Harilok maintenance was liable to service tax. However, the Tribunal found that the show cause notice was issued beyond the normal limitation period, and there was no evidence of fraud, collusion, or suppression of facts by the appellant to justify the extended period.Issue 3: Whether the show cause notice was barred by limitation.The demand pertained to the period 2012-13 and 2013-14, but the show cause notice was issued in April 2018, beyond the normal limitation period. The extended period under Section 73 (1) of the Finance Act, 1994, can only be invoked in cases of fraud, collusion, willful mis-statement, or suppression of facts with intent to evade tax. The Tribunal found no evidence of such conduct by the appellant. The receipts were duly recorded, deposited in the designated bank account, and regulated by government orders.The Tribunal referred to judicial precedents, including the Hon'ble High Court of Calcutta in Infinity Infotech Parks Ltd. and the Hon'ble Apex Court in NRB Bearings Ltd., which held that the extended period cannot be invoked without evidence of intent to evade tax.The Tribunal concluded that the show cause notice was barred by limitation and the demand for the period 2012 to 2014 could not be raised in 2018.Conclusion:The Tribunal set aside the order of the Adjudicating Authority, allowing the appeal. The demand of Rs. 2,31,84,581/- was found unsustainable, and the income under free hold lease rent, miscellaneous receipts, and Harilok maintenance was liable to service tax but barred by limitation. The appeal was allowed in favor of the appellant.