TaxTMI 
TaxTMI 
2010 (3) TMI 435
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....ir liability to Service tax now impugned before us and submitted that the demand was excess by Rs. 3,57,642/- and, Rs. 2,51,806/- under the category 'Cargo handling Services'. They had also resisted the proposals to penalize them on the ground that failure to pay the Service tax had been occasioned by their ignorance and bona fide belief; there was no intention to evade the tax due. Being a State Government undertaking there could be no suppression of facts. The Commissioner rejected the arguments by the appellants as regards excess demand on the ground that the appellants had failed to give break up showing the excess tax demanded; that the appellants had not discharged tax liability for a period of 2, 3 years was fool proof evidence that the assessee had suppressed facts and contravened the provisions of the Finance Act, 1994 (the Act) with intent to evade payment of Service tax. Accordingly, he confirmed demand of Rs. 53,79,256/- under 'Storage and Warehousing Services' and Rs. 25,17,466/- under 'Cargo Handling Services'. Rs. 39,03,044/- and Rs. 5,00,000/- already paid by the appellants towards their liability under 'Storage and Warehousing Services' and 'Cargo Handling Services....
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.... - 1990 (74) E.L.T. 9 (S.C.) 3. Under miscellaneous application allowed by the Tribunal, the appellants have challenged their liability to pay Service tax confirmed in the impugned order relying on the CBEC Circular No. 89/7/2006-S.T., dated 18-12-2006 which clarified that activity of sovereign authorities under the provisions of law were in the nature of statutory obligation and did not constitute taxable service. The appellants had stored fertilizers, which was an essential commodity notified under Essential Commodities Act, 1955; production, sale and distribution of fertilizers was governed by Fertilizer (Control) Order 1985. The impugned activities therefore, did not involve their rendering services to any individual or any person. In the written submissions allowed to be furnished on conclusion of hearing, KSWC has reiterated their claim to the status of a public authority on the basis that it has been permitted to store fertilizer, a controlled commodity and that the warehouse keepers were allowed to charge for the services only the prescribed fee. They relied on the decision of the Tribunal in Nawanshahr Co-op. Sugar Mills v. CCE, Jallandhar - 2008 (12) S.T.R. 176 (Tri.-D....
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....ntified. The sovereign functions (i.e. the services given by the govt. in discharge of the sovereign functions of the state) are maintenance of law & order which includes judiciary, collection of taxes, maintenance of military and maintenance of international relations. These are not commercial services and have no invoices. If a Government maintains hospitals, educational institutions, transportation services, insurance services etc. they are leviable to Service tax just as goods manufactured by Government departments, if sold are liable to excise duty. The dominant test with special reference to identifying sovereign functions of the state are laid down in Bangalore Water Supply and Sewerage Board v. Rajappa according to which; 1. Where a complex of activities, some of which qualify for exemption, involving employees of a total undertaking, some of whom are not 'workmen' as in some departments are not productive if isolated, even then, the predominant nature of the service, as explained in The Corporation of the City of Nagpur, will be the true test. The whole undertaking will be 'industry' and all those who are not 'workmen' by definition may not benefit by the status; ....
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....take verification, approval and calibration of weighing and measuring instruments; the Regional Transport Officer (RTO) issues fitness certificate to the vehicles; the Directorate of Boilers inspects and issues certificate for boilers; or Explosive Department inspects and issues certificate for petroleum storage tank, LPG/CNG tank in terms of provisions of the relevant laws. Fee as prescribed is charged and the same is ultimately deposited into the Government Treasury. A doubt has arisen whether such activities provided by a sovereign/public authority required to be provided under a statute can be considered as 'provision of service' for the purpose of levy of service tax. 2. The issue has been examined. The Board is of the view that the activities performed by the sovereign/public authorities under the provision of law are in the nature of statutory obligations which are to be fulfilled in accordance with law. The fee collected by them for performing such activities is in the nature of compulsory levy as per the provisions of the relevant statute, and it is deposited into the Government Treasury. Such activity is purely in public interest and it is undertaken as mandatory and s....
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....es collect a commercial rate. No evidence is produced to show that KSWC collects a lower rate. As per the State Warehousing Act, appellant's duties include arranging transport of notified goods between warehouses. Appellants collect a mark up of 15% for arranging loading and unloading by H&T contractors from the fertilizer companies. This is not shown to be a fee prescribed under any statute. As per the above Circular of the CBEC, making storage space available for the needy customers by KSWC cannot be held to be a mandatory and statutory function carried out in public interest. In the said Circular, the public authorities mentioned as examples are the Regional Reference Standards Laboratories (RRSL), the Regional Transport Officer (RTO), the Directorate of Boilers, Explosive Department etc. These authorities carry out items of work statutorily mandated; these agencies charge fees statutorily fixed. Services rendered by these agencies are mandatorily availed by the public. It is not as if the target public can avoid availing the services rendered by such authorities and avail the same from some other agency. The fees levied are deposited into the Government's Treasury. The appellan....
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....ircular which clarified with illustrations that statutory functions carried out in public interest by public authorities are not subject to service tax. We find that the CBEC circular relied on by the appellants recognizes statutory bodies such as Regional Reference Standards Laboratory, Regional Transport Officers, Directorate of Boilers, Explosive Department etc which carry out duties assigned to them by law by charging a fee as prescribed which is deposited in the Government Treasury. These activities are in public interest. KSWC does not appear to be a similar organization undertaking an activity in purely in public interest as its mandatory and statutory function. As per CBEC circular, if a public authority performs a service, which is not in the nature of statutory activity and the same is undertaken for a consideration not in the nature of statutory fee/levy, then in such cases, Service tax would be leviable, if the activity undertaken falls within the ambit of a taxable service. Therefore the impugned service rendered by KSWC is not excluded from the purview of levy of Service tax. 9. As regards the question of arranging loading and unloading of fertilizer by H&T contrac....