Governmental authority exemption applies to local governance training linked to municipal functions under Article 243W.

A body established by the Government of Kerala for local governance training, with over 90% governmental control and financial support, was treated as a governmental authority for service tax exemption purposes. Under Notification No. 25/2012-ST, as expanded by Notification No. 2/2014-ST, an entity set up by Government and carrying out functions entrusted to a municipality under Article 243W qualifies for exemption. The appellant's training activities were held to fall within that description, so the service tax demand was unsustainable.

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Issues: Whether the appellant was entitled to exemption from service tax as a governmental authority carrying out activities in relation to functions entrusted to a municipality under Article 243W of the Constitution, and whether the demand was therefore unsustainable.

Analysis: The appellant was established by the Government of Kerala for training in the field of local governance, with more than 90% governmental control and financial support. Under Notification No. 25/2012-ST dated 20.06.2012, as expanded by Notification No. 2/2014-ST dated 30.01.2014, a body established by Government with requisite control, carrying out functions entrusted to a municipality under Article 243W, qualifies as a governmental authority eligible for exemption. The appellant's training activities fell within that description, and the demand could not be sustained.

Conclusion: The appellant was entitled to the exemption and the service tax demand was unsustainable.

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