2024 (12) TMI 1241 - AT - Service Tax

Tribunal Remands Municipality's Service Tax Case for Fresh Review; No Penalties Due to Interpretational Issues.

Commissioner Theni-Allinagaram Municipality Versus Commissioner of GST & Service Tax, Madurai

The Tribunal set aside the impugned order against the appellant, a municipality, regarding the liability to pay service tax on income from renting ... Non-payment of service tax - income from renting out immovable properties - whether the demand of service tax under the category of Renting of Immovable Property service on the appellant is sustainable or not? - HELD THAT:- It is found that in a similar case this Bench in the case of M/S. THE COMMISSIONER VERSUS COMMISSIONER OF GST AND CENTRAL EXCISE, CHENNAI III AND M/S. PALANI MUNICIPALITY VERSUS COMMISSIONER OF GST AND CENTRAL EXCISE, MADURAI [2024 (6) TMI 767 - CESTAT CHENNAI] has considered the decisions of jurisdictional High Court in the case of CUDDALORE MUNICIPALITY VERSUS THE JOINT COMMISSIONER OF GST & CENTRAL EXCISE, THE ASSISTANT COMMISSIONER OF CENTRAL EXCISE & SERVICE TAX AND VIRUDHACHALAM MUNICIPALITY VERSUS THE ASSISTANT COMMISSIONER, OFFICE OF THE ASSISTANT COMMISSIONER OF GST AND CENTRAL EXCISE, CUDDALORE [2021 (4) TMI 500 - MADRAS HIGH COURT], GV. MATHESWARAN VERSUS THE UNION OF INDIA AND OTHERS [2015 (3) TMI 391 - MADRAS HIGH COURT] and the subsequent decision in the case of ST. THOMAS MOUNT CUM PALLAVARAM CANTONMENT BOARD VERSUS ADDITIONAL COMMISSIONER, COMMISSIONER OF GST AND CENTRAL EXCISE, CHENNAI [2023 (4) TMI 1024 - MADRAS HIGH COURT] and the remanded the case to the file of AA. The Hon’ble Court in the case of St. Thomas Mount Cum Pallavaram Cantonment Board after referring to the above conflicting decisions, held it proper to remand the matter back to the file of original authority. It is deemed proper to set aside the impugned order and remand the matter back to the file of original authority who shall adhere to the directions given by the Hon’ble High Court in the case of St. Thomas Mount Cum Pallavaram Cantonment Board and then pass a de novo order in accordance with law. Appeal disposed off by way of remand. Issues:1. Appellant's liability to pay service tax on income from renting out immovable properties.2. Whether demand of service tax under 'Renting of Immovable Property service' on the appellant is sustainable.Detailed Analysis:Issue 1: The Appellant, a municipality, leased out immovable properties for commercial purposes without registering or paying Service Tax. The Commissioner imposed penalties and demanded Service Tax. The Appellant appealed, but no representation was made. The Tribunal noted the municipality's statutory status and its activities promoting local economic development. The Authorized Representative argued for the tax liability based on precedents. The Tribunal considered all submissions and evidence.Issue 2: The sole issue was the sustainability of the service tax demand on the Appellant. The Tribunal referred to a similar case involving a municipality and conflicting decisions. The Tribunal highlighted the remand order in the St. Thomas Mount Cum Pallavaram Cantonment Board case, emphasizing the need for fresh consideration. Pending appeals in High Court related to similar cases were also noted. The Tribunal decided to remand the matter back to the original authority, considering the pending judgments and the nature of services provided by the municipality.The Tribunal set aside the impugned order and directed a fresh consideration in line with the High Court's directions. The Tribunal emphasized the examination of functions carried out by the municipality under specific Acts and the potential sovereign function aspect. The decision to remand was made in the interest of justice and to ensure adherence to the High Court's directives. The Tribunal clarified that no penalty should be levied due to the interpretational nature of the issue. The appeal was disposed of accordingly.