Local authority exemption denied for notified area body; municipal-like functions do not expand statutory status or exemption scope.

Services supplied to a notified area authority were not exempt merely because they related to municipal-like functions such as waste management. The Gujarat HC held that an industrial development or notified area authority created under the Gujarat Industrial Development Act, 1962 is not a local authority or governmental authority within the exemption for pure services under Notification No. 12/2017-Central Tax (Rate) and the corresponding State notification, because the constitutional scheme for municipalities does not extend that status to such bodies. The court also rejected the challenge that the appellate authority exceeded jurisdiction or breached natural justice, finding that the assessees were heard on the remaining exemption conditions and suffered no procedural prejudice.

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Issues: (i) Whether the Notified Area Authority, Vapi is a local authority or governmental authority for the purpose of exemption under Notification No. 12/2017-Central Tax (Rate) and the corresponding State notification; (ii) Whether the Appellate Authority for Advance Ruling exceeded its jurisdiction or violated natural justice by deciding the eligibility issue on grounds not addressed by the original authority.

Issue (i): Whether the Notified Area Authority, Vapi is a local authority or governmental authority for the purpose of exemption under Notification No. 12/2017-Central Tax (Rate) and the corresponding State notification.

Analysis: The exemption applied only to pure services supplied to the Central Government, State Government, Union Territory, local authority, or governmental authority, and only where the services were in relation to functions entrusted to a Panchayat or Municipality. The authority constituted under the Gujarat Industrial Development Act, 1962 was treated as operating in a different statutory sphere from a constitutionally constituted municipality. The constitutional scheme under Articles 243P, 243Q and 243W did not make an industrial township or notified area equivalent to a municipality, and the definition of local authority under Section 2(69) of the Central Goods and Services Tax Act, 2017 was not wide enough to include such an authority. The record also showed that the services were not to be treated as falling within the exemption entry merely because they related to waste management and municipal-like functions.

Conclusion: The issue is answered against the assessee and the Notified Area Authority, Vapi was held not to be a local authority or governmental authority for the exemption.

Issue (ii): Whether the Appellate Authority for Advance Ruling exceeded its jurisdiction or violated natural justice by deciding the eligibility issue on grounds not addressed by the original authority.

Analysis: The appellate authority was permitted to examine the remaining conditions for exemption after differing from the original authority on the question of pure services. The petitioners were heard on those remaining conditions, and the court found no denial of fair opportunity. The challenge based on jurisdiction and natural justice was therefore rejected on the facts of the case.

Conclusion: The issue is answered against the assessee and no jurisdictional or natural justice infirmity was found.

Final Conclusion: The exemption claim failed, and the challenge to the appellate ruling was rejected, leaving the impugned decision undisturbed.

Ratio Decidendi: An industrial development or notified area authority is not treated as a municipality or local authority merely because it performs municipal-like functions, and exemption entries must be construed strictly within the statutory definitions governing the recipient of the services.

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