2023 (7) TMI 363 - AT - Service Tax

Tribunal rules Adda Fees are statutory levies, not taxable services. No service tax on Government activities.

M/s Chandigarh Transport Corporation Versus Commissioner of Central Excise, Chandigarh-I

The tribunal ruled in favor of the appellant, holding that Adda Fees collected for bus stands are statutory levies for maintenance, not taxable services ... Classification of services - Support Services of Business and Commerce or not - Adda Fees/ bus stand fee - management and maintenance of non-commercial Government business - time limitation - penalty - HELD THAT:- It is evident from the records of the case that the appellants are paying service tax on account of selling space for advertisement purposes on the premises of the bus stand as well as on the buses. The appellants have paid the amount of Rs.27,25,073/-(for the period 01.05.2006 to 30.06.2008) and Rs.6,86,145/- (for the period May 2009 to June 2010) on being pointed out for provision of space for advertisement. The dispute is in relation to the Adda Fees collected by the undertaking - collection of Adda Fee cannot be equated to “Business Support Service” as they are discharging their functions as a statutory authority rather than promoting the business of bus operators - the demand on this count cannot be sustained. However, the appellants are already discharging the service tax on space rented out for advertisement. Time Limitation - Penalties - HELD THAT:- Whereas the demands are relatable to the period 01.05.2006 to 30.06.2008. Show cause notice has been issued on 21.01.2010, clearly beyond the limitation. On this count too, major portion of the demand raised in the show cause notice cannot be upheld. More so, penalties imposed cannot be sustained. Appeal allowed. ISSUES PRESENTED AND CONSIDERED 1. Whether the levy of service tax on Adda Fees/bus-stand fees collected by a statutory transport undertaking can be characterized as 'Support Services of Business and Commerce'. 2. Whether collection of Adda Fees by the undertaking in discharge of statutory obligations constitutes a taxable service or is non-taxable as a statutory/sovereign function under the service tax regime. 3. Whether bus-stand maintenance and related activities amount to provision of taxable services by making the premises 'used for commerce or industry' (including the question of whether parking/land use converts an asset into immovable property for service tax purposes). 4. Whether the demands and penalties in respect of the period 01.05.2006 to 30.06.2008 are time-barred such that extended period/penalties cannot be invoked against a statutory undertaking. ISSUE-WISE DETAILED ANALYSIS Issue 1: Characterization of Adda Fees as 'Support Services of Business and Commerce' Legal framework: Service tax classification depends on whether activities fall within defined taxable services (e.g., 'Support Service of Business and Commerce'). Precedent treatment: The Tribunal relied on authorities holding that collection of statutory fees and performance of public utility functions by government or statutory bodies does not convert such activities into commercial support services; relevant authorities cited by the appellant were treated as applicable. Interpretation and reasoning: The Court examined the nature and purpose of the bus stands and the Adda Fees. The bus stands were held to be public utility infrastructure constructed and maintained as part of statutory/public functions, and the fees collected were for maintenance under statutory power (Section 67(1) Motor Vehicles Act invoked factually). The Tribunal found that the activities were not intended to promote or support private business of bus operators but were statutory obligations aimed at providing civic amenities. Hence, the element of a service rendered to promote another party's business - essential to classify it as 'Support Service of Business and Commerce' - was absent. Ratio vs. Obiter: Ratio - Collection of Adda Fees in discharge of statutory duties cannot be equated to 'Support Services of Business and Commerce' where the activity is a public utility/statutory function rather than a commercial support to private operators. Conclusion: The demand framed by classifying Adda Fees as a 'Business Support Service' is not sustainable and must be rejected. Issue 2: Whether collection of statutory fees by a public/statutory authority constitutes a taxable service Legal framework: Levy of service tax excludes activities that are sovereign/statutory obligations performed by public authorities; CBEC circulars and provisions delineate that compulsory statutory levies collected by sovereign/public authorities for mandatory statutory functions do not constitute taxable services. Precedent treatment: The Court relied on circulars and decisions (as cited by the appellant) which hold that fees collected under statutory mandate and deposited into public treasury in discharge of statutory obligations are not consideration for taxable services. The Tribunal applied these authorities to the facts and followed them. Interpretation and reasoning: The Tribunal observed that the undertaking was performing a statutory function of maintaining bus stands and collecting fees to ensure maintenance. These fees were characterized as statutory levies collected in exercise of statutory power, aimed at public interest and not as consideration for services rendered to any particular individual or entity. Consequently, such collection did not constitute a taxable service under the Finance Act regime. Ratio vs. Obiter: Ratio - Fees collected by a statutory/public authority pursuant to statutory duty, for maintenance and public utility provision, do not amount to consideration for taxable service; therefore, service tax is not leviable on such collection. Conclusion: The Adda Fees collected in discharge of statutory duties are non-taxable; the demand on that basis cannot be sustained. Issue 3: Whether the bus-stand premises or activities convert into taxable 'immovable property' or commercial use (including parking exclusion) Legal framework: The leviability of service tax on activities related to buildings/civil structures depends on whether the structure is 'used for commerce or industry'; statutory explanations exclude land use for parking from being treated as immovable property for certain service tax purposes. Precedent treatment: The appellant cited decisions recognizing that government buildings/civil constructions normally used for civic amenities or statutory functions are not taxable; authorities concerning parking exclusion and non-commercial use were relied upon and accepted by the Tribunal as instructive. Interpretation and reasoning: The Tribunal noted that bus stands are government-constructed public utility facilities primarily for providing civic amenities and not for commercial promotion. The Explanation excluding parking spaces from immovable property for levy purposes was noted as supporting the proposition that mere provision of bus stand/parking does not necessarily create a taxable immovable property use. Accordingly, the activities related to bus stand maintenance and use were not treated as converting the premises into taxable commercial immovable property. Ratio vs. Obiter: Ratio - Use of government/civic infrastructure like bus stands for statutory public purposes does not, by itself, make such structures 'used for commerce or industry' so as to attract service tax; exclusion of parking in statutory explanation supports non-taxability where relevant. Conclusion: The bus-stand activities do not render the premises taxable as immovable property used for commerce; the contention that parking or similar use converts the asset into taxable immovable property is unfounded on these facts. Issue 4: Limitation, extended period and imposition of penalties against a statutory undertaking Legal framework: Service tax demands are subject to limitation rules; extended period and penalties require satisfaction of statutory thresholds, including intent to evade or concealment in certain cases. Special considerations apply to statutory undertakings where no intent to evade may be inferred. Precedent treatment: The Tribunal relied on a line of authorities holding that, in the case of government/statutory undertakings performing statutory functions, extended period and penalties cannot be readily invoked absent material showing of intent to evade; several cited precedents were followed. Interpretation and reasoning: The Tribunal found that the show cause notice dated 21.01.2010 concerned demands principally relatable to 01.05.2006-30.06.2008 and was therefore issued beyond the normal limitation period. Given that the undertaking was discharging statutory functions and had no demonstrated intent to evade service tax, the Tribunal accepted the preliminary objection that time bar and absence of culpable intent precluded sustaining the major portion of the demand and any penalties. Ratio vs. Obiter: Ratio - Where a statutory undertaking performs duties in discharge of statutory functions and there is no material to demonstrate deliberate intent to evade service tax, demands falling outside the limitation period are not maintainable and penalties are unsustainable. Conclusion: Major portion of the demand for the specified period is time-barred; penalties imposed cannot be sustained. Ancillary finding The Tribunal recorded that the appellants had already discharged service tax liability in relation to space sold for advertisement and therefore such admitted liability stands unaffected by the above conclusions regarding Adda Fees. Overall Disposition The Tribunal allowed the appeal: demands treating Adda Fees as taxable 'Business Support Service' were set aside; time-bar and absence of intent negated extended period demands and penalties; admitted tax on advertising space remained acknowledged and unaffected.