Governmental authority test under service tax exemption failed where statutory conditions for the recipient body were not independently met.

Service tax exemption under Serial No. 12 of Notification No. 25/2012-ST was available only where services were provided to the Government, a local authority, or a governmental authority. Rajasthan Housing Board did not satisfy that definition because it was established by government notification under the Rajasthan Housing Board Act, 1970, and not set up by a State Legislature; the alternative requirement of establishment by Government with 90% or more equity or control for municipal functions was also not shown. The exemption was therefore unavailable, and the service tax demand and related findings were sustained.

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Issues: Whether Rajasthan Housing Board was a "governmental authority" for the purpose of Serial No. 12 of Notification No. 25/2012-ST dated 20.06.2012, so as to entitle the appellant to exemption from service tax on the construction and works contract services rendered to it.

Analysis: The exemption under Serial No. 12 applied only to services provided to the Government, a local authority, or a governmental authority. The definition of "governmental authority" in the notification, as originally issued and as amended by Notification No. 2/2014 dated 30.01.2014, required the body to be set up by an Act of Parliament or a State Legislature, or to be established by Government with 90% or more participation by way of equity or control, and to carry out functions entrusted to a municipality under Article 243W of the Constitution of India. Rajasthan Housing Board was established under Section 4 of the Rajasthan Housing Board Act, 1970 by a government notification, and not set up by a State Legislature. The appellant also failed to show that the Board satisfied the alternative requirement of government establishment with the requisite equity or control for carrying out municipal functions.

Conclusion: Rajasthan Housing Board was not a governmental authority, and the exemption was not available to the appellant.

Final Conclusion: The demand of service tax and the associated findings were sustained, and the appeal failed.

Ratio Decidendi: A body established by government notification under a State Act is not, by that fact alone, a body set up by a State Legislature or a governmental authority for the purposes of the service tax exemption notification; the statutory conditions in the definition must be independently satisfied.

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