Gujarat Industrial Development Corporation's infrastructure charges ruled non-taxable under Article 243W statutory functions

Gujarat Industrial Development Corporation Versus Commissioner of Central Excise & ST, Ahmedabad-III

Gujarat Industrial Development Corporation Versus Commissioner of Central Excise & ST, Ahmedabad-III - TMI Issues Involved: Service tax liability on (a) Non-Utilization Penalty, (b) Water Supply Charges, (c) Miscellaneous Receipts, (d) Transfer Charges, and (e) Infrastructure Upgradation Fund.

Issue-wise Detailed Analysis:

1. Non-Utilization (NU) Penalty:
The appellant collected the NU Penalty from leaseholders who did not meet the minimum construction requirements. The Commissioner dropped the demand for service tax on the NU Penalty amounting to Rs. 36,75,995/- for the period from 01.07.2012 onwards, considering it a statutory levy and not a taxable service.

2. Water Supply Charges:
The appellant collected water charges from business entities in the GIDC area. The Commissioner dropped the service tax demand of Rs. 13,08,905/- on water charges, categorizing them as sale proceeds of an essential commodity and covered under the Twelfth Schedule under Article 243W of the Constitution.

3. Miscellaneous Receipts:
The appellant collected various fees such as sub-letting fees, subdivision charges, amalgamation fees, collateral fees, etc. The Commissioner held that these charges, related to the renting of immovable property, were liable for service tax. However, the appellant argued that these receipts were necessary for the orderly regulation of the industrial estate and were part of the infrastructural development activity, thus not subject to service tax. The Tribunal agreed with the appellant, stating that these charges were statutory levies and not subject to service tax.

4. Transfer Charges:
The appellant collected transfer fees from leaseholders during property transfers. The Commissioner held that these fees were additional consideration related to the renting of immovable property and were subject to service tax. The Tribunal, however, found that these fees were statutory levies necessary for maintenance, management, and repairs of the industrial estate and thus not subject to service tax.

5. Infrastructure Upgradation Fund (IUF):
GIDC merged the Infrastructure Maintenance Fund and the Infrastructure Upgradation Fund into a single fund, collecting Rs. 5 per sq. meter from lessees. An audit raised objections about GIDC's failure to pay service tax on the share allocated to industrial associations. The Commissioner dropped the demand for service tax on the amount recovered as Infrastructure Upgradation Fund for the period from 01-07-2012 to March 2016, considering it covered under the Twelfth Schedule under Article 243W of the Constitution. The Tribunal upheld this view, stating that these charges were statutory levies and not subject to service tax.

Extended Period and Penalties:
The Commissioner invoked the extended period, alleging deliberate concealment of material information by the appellant. The Tribunal found no suppression of facts, noting that the appellant, being a governmental authority, should be presumed to act without malafide intent. Consequently, no interest or penalties were deemed applicable.

Conclusion:
The Tribunal concluded that the "infrastructure upgradation fund," "transfer fees," and other miscellaneous charges were statutory levies and not subject to service tax during the impugned period. The share of IUF collected from leaseholders on behalf of industrial associations and reimbursed to them did not qualify as consideration for any service provided by GIDC. The impugned orders were set aside, and the appeals were allowed.