TaxTMI 
TaxTMI 
2024 (5) TMI 265
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....rity in Appeal No. GUJ/GAAR/Appeal/2021/05 only to the extent to the limited findings of the respondent No. 2 - Appellate Authority for Advance Ruling Gujarat, whereby it is held that the Notified Area Authority, Vapi is neither a "local authority" nor "governmental authority" and therefore, the petitioners are not entitled to exemption under the Notification No. 12/2017-Central Tax (Rate) dated 28th June 2017 and the Notification No. 12/2017-State Tax (Rate) dated 30th June 2017. [4] The petitioner No. 1 is engaged in the business of Solid Waste Management and recycling services. The Notified Area Authority, Vapi floated a Tender inviting applications for a Request for Proposal for providing services of collection, sorting and recovery of waste and set up material recovery facility and in accordance with the Rules, Norms and Regulations of Standard of Weights and Measures Rules, 2016, Plastic Waste Management Rules, 2016, the Ministry of Environment, Forest and Climate Change, Central Pollution Control Board, Gujarat Pollution Control Board, etc. at the notified area, GIDC, Vapi. [5] The Notified Area Authority, Vapi is constituted by the State of Gujarat by virtue of Notificati....
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....by the petitioner No. 1 to the Notified Area Authority, Vapi are exempted from payment of GST under Serial No. 3 of the Notification No. 12/2017-Central Tax (Rate) dated 28th June 2017 and the Notification No. 12/2017-State Tax (Rate) dated 30th June 2017 issued for the service taxes as well as State taxes as the services provided by the petitioner No. 1 would squarely fall within the purview of Serial No. 3 of the said Notification. [9] According to the petitioners, the petitioner No. 1 is fulfilling the following conditions prescribed in the said Serial No. 3 of the said Notifications, which are as under: "(i) The petitioners must provide Pure Services (excluding words contract service or other composite supplies involving supply of any goods); (ii) Such pure services must be provided to Central Government, State Government or Union Territory, or local authority or a Governmental Authority; (iii) It must be an activity in relation to any function entrusted to a Municipality under Article 243G of the Constitution or in relation to any function entrusted to a Municipality under Article 243W of the Constitution." [10] On 8th July 2019, the petitioner No. 1 filed an applicati....
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....sion that the petitioners are providing services by way of an activity in relation to functions entrusted to the municipality under Article 243W of the Constitution and therefore, the condition No. 3 for claiming exemption under Serial No. 3 of Notification No. 12/2017 is also fulfilled. However, the respondent No. 2 has held that as the Notified Area Authority is not a 'local authority' and/or 'governmental authority', the petitioners are not entitled to the exemption under Serial No. 3 of Notification No. 12/2017. [14] It was submitted that as the Notified Area Authority, Vapi is established under the GIDA vide Notification dated 6th May 1975, it would be a "deemed to be municipality" under Section 264C of the Gujarat Municipality Act, 1963 and therefore, it is required to be considered as a 'local authority'. [15] It was submitted that Section 16 of the GIDA starts with non-obstante clause and goes on to state that the provisions of the Gujarat Municipality Act, 1963 shall extend to and be brought into force in any area that is deemed to be notified area. It was, therefore, submitted that Chapter - XVIA of the Gujarat Municipality Act, 1963 (for short 'GMA, 1963') dealing with....
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....und' and therefore, would be covered by the definition of "local authority" to which Serial No. 3 of Notification No. 12/2017 would apply and accordingly, the petitioners would be exempted from payment of GST. [17] It was also submitted that Clause (zf) of paragraph No. 2 of Notification No. 12/2017 defining "governmental authority" would also be applicable to the Notified Area Authority, Vapi. It was submitted that as per Clause (zf), "governmental authority" means an authority or a Board or any other body and set up by an Act of Parliament or a State Legislature or established by any Government, with 90% or more participation by way of equity or control, to carry out any function entrusted to a Municipality under Article 243W of the Constitution. It was submitted that even if the Notified Area Authority, Vapi cannot be considered to be as "local authority" under Section 2(69) (c) of the GST Act, then, in that case, the Notified Area Authority, Vapi would be a "governmental authority", as defined in Clause (zf) of paragraph No. 2 of Notification No. 12/2017 because the Notified Area Authority, Vapi is constituted under the Notification dated 6th May 1975 of the Gujarat Industrial....
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....n of the Appellate Authority and therefore, the validity of the order passed by the Appellate Authority has to be examined by applying the principles of judicial review. It was submitted that the Appellate Authority, while rejecting the appeal of the petitioner totally on a new ground, which was not even considered by the Advance Ruling Authority and therefore, the impugned order passed by the Appellate Authority is without jurisdiction. [21] On the other hand, learned A.G.P. Mr. Raj Tanna for the respondents submitted that the challenge to the order of the Appellate Authority of Advance Ruling has a very limited scope, as held by the Hon'ble Bombay High Court in the case of Jotun India Private Limited vs. The Union of India [Writ Petition No. 12691 of 2019 decided on 22nd December 2022], wherein it is held that the view taken by the Advance Ruling Authority and the Appellate Authority is based on the material placed before it and the petitioner cannot seek to convert the limited inquiry in respect of Advance Ruling into an appellate inquiry, which is not permissible to be undertaken in writ jurisdiction as the scrutiny of such orders in writ jurisdiction is minimal to the extent ....
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....e Notification No. 12/2017-State Tax (Rate) dated 30th June 2017 which reads as under: (1) (2) (3) (4) (5) Sl.No. Chapter, Section, Heading, Group or Service Code (Tariff) Description of Services Rate (per cent) Condition 3 Chapter 99 Pure services (excluding works contract service or other composite supplies involving supply of any goods) provided to the/Central Government, State Government or Union Territory or local authority or a Governmental authority by way of any activity in relation to any function entrusted to a Panchayat under Article 243G of the Constitution or in relation to any function entrusted to a Municipality under Article 243W of the Constitution. Nil Nil [26] On bare perusal of above entry at Serial No. 3 granting exemption for providing services, the petitioner has to fulfill the three conditions: (i) the petitioners must provide Pure Services (excluding words contract service or other composite supplies involving supply of any goods), (ii) Such pure services must be provided to Central Government, State Government or Union Territory, or local authority or a Governmental Authority, (iii) it must be an activity in relation to any function e....
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....nicipal or local fund; (d) a Cantonment Board as defined in section 3 of the Cantonments Act, 2006; (e) a Regional Council or a District Council constituted under the Sixth Schedule to the Constitution; (f) a Development Board constituted under article 371 [and article 371J] [Inserted by Act No. 31 of 2018, dated 29.8.2018.] of the Constitution; or (g) a Regional Council constituted under article 371A of the Constitution;" [30] Part - IX of the Constitution refers to "panchayat" and Part IXA refers to "Municipality". Whether the Notified Area Authority, Vapi would fall in any of the clauses of Article 243 or Article 243P, which defines "panchayat" and it gives definition of "panchayat" and "municipality" respectively it would be necessary to refer to Article 243 of the Constitution of India which reads as under: "243. Definitions- In this Part, unless the context otherwise requires,-- (a) 'district' means a district in a State; (b) 'Gram Sabha' means a body consisting of persons registered in the electoral rolls relating to a village comprised within the area of Panchayat at the village level; (c) 'intermediate level' means a level between t....
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....certained at the last preceding census of which the relevant figures have been published." [33] Article 243Q of the Constitution reads as under: "243Q. Constitution of Municipalities-(1) There shall be constituted in every State,-- (a) a Nagar Panchayat (by whatever name called) for a transitional area, that is to say, an area in transition from a rural area to an urban area. (b) a Municipal Council for a smaller urban area; and (c) a Municipal Corporation for a larger urban area, in accordance with the provisions of this Part: Provided that a Municipality under this clause may not be constituted in such urban area or part thereof as the Governor may, having regard to the size of the area and the municipal services being provided or proposed to be provided by an industrial establishment in that area and such other factors as he may deem fit, by public notification, specify to be an industrial township. (2) In this article, 'a transitional area', 'a smaller urban area' or 'a larger urban area' means such area as the Governor may, having regard to the population of the area, the density of the population therein, the revenue generated for local ad....
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....1962 vide Notification dated 6th May 1975 and, that the Appellate Authority has considered the Notification dated 1st April 2008 available in public domain, but the Notification under which the Notified Area Authority, Vapi constituted is issued by the State Government on 6th May 1975, which is not considered by the Appellate Authority to hold that the Notified Area Authority, Vapi is not a "local authority" as per provisions of Section 2(69) of the Act, it would be necessary to revisit the Serial No. 3 of the Notification No. 12/2017 reproduced herein above wherein "any other authority" is not included, hence the petitioners cannot get the benefit of exemption as per the said Notification. [37] Learned advocate for the petitioners has also contended that the Notified Area Authority, Vapi would fall within the ambit of "Governmental Authority" as stated in entry at Serial No. 3 of Notification No. 12/2017, which carries an activity in relation to any function entrusted to the Panchayats under Article 243G of the Constitution or in relation to any function entrusted to the Municipality under Article 243W of the Constitution. It was also pointed out that Clauses (zf) and (zfa), havi....
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....pply of a commodity or service (not being water or electricity) within its own jurisdictional area ow from the supply of water or electricity within or outside its own jurisdictional areas; "10.(20) the income of a local authority which is chargeable under the had, "Income from house property", "Capital gains", or "Income from other sources" or from a trade or business carried on by it which accrues or arises from the supply of a commodity or service (not being water or electricity) within its own jurisdictional area or from the supply of water or electricity within or outside its own jurisdictional area; Explanation.- For the purposes of this clause, the expression "local authority" means- (i) Panchayat as referred to in clause (d) of Article 243 of the Constitution; or (ii) Municipality as referred to in clause (e) of Article 243-P of the Constitution; or (iii) Municipal Committee and District Board, legally entitled to, or entrusted by the government with, the control or management of a Municipal or local fund; or (iv) Cantonment Board as defined in Section 3 of the Cantonments Act, 1924 92 of 1924); (20-A) any income of an authority constituted in India by or under any l....
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....The Legislature of a State may, by law, provide- (a) for the representation in a Municipality of- (i) persons having special knowledge or experience in Municipal administration; (ii) the members of the House of the People and the members of the Legislative Assembly of the State representing constituencies which comprise wholly or partly the Municipal area; (iii) the members of the Council of States and the members of the Legislative Council of the State registered electors within tile Municipal area; (iv) the Chairpersons of the Committees constituted under clause (5) of article 243S: Provided that the persons referred to in paragraph (i) shall not have the right to vote in the meetings of the Municipality; (b) the manner of election of the Chairperson of a Municipality." 19. Article 243S provides for Constitution and composition of Wards Committees, etc. Article 243T provides for reservation of seats of SC and ST for every Municipality and number of seats reserved. Article 243U provides for duration of Municipalities sub-clause (1)states that every Municipality, unless sooner dissolved under any law for the time being in force, shall continue for five years from t....
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....ve members to be nominated by the State Government Member by notification. Member (g) Chief Executive Officer. Member Secretary (4) The headquarters of the Authority shall be at such place as may be notified by the State Government. (5) The procedure for the conduct of the meetings for the Authority shall be such as may be prescribed. (6) No act or proceedings of the Authority shall be invalid by reason of the existence of any vacancy in or defect in the constitution of the Authority." 22. Section 6 provides for the function of the Authority which is to the following effect: "6.(1) The object of the Authority -(1) the object of the Authority shall be to secure the planned development of the industrial development area. (2) Without prejudice to the generality of the objects of the Authority, the Authority shall perform the following functions :- * * * (b) to prepare a plan for the development of the industrial development area; (c) to demarcate and develop sites for industrial, commercial and residential purpose according to the plan; (d) to provide infrastructure for industrial, commercial and residential purposes; (e) to provide amenities; (f) to allocate....
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....t is useful to refer to the Statement of Objects and Reasons of the Constitution Amendment which is to the following effect: "STATEMENT OF OBJECTS AND REASONS 1. In many States local bodies have become weak and ineffective on account of a variety of reasons, including the failure to hold regular elections, prolonged supersessions and inadequate devolution of powers and functions. As a result, Urban Local Bodies are not able to perform effectively as vibrant democratic units of self-government. 2. Having regard to these inadequacies, it is considered necessary that provisions relating to Urban Local Bodies are incorporated in the Constitution particularly for- (i) putting on a firmer footing the relationship between the State Government and the Urban Local Bodies with respect to- (a) the functions and taxation powers; and (b) arrangements for revenue sharing; (ii) Ensuring regular conduct of elections; (iii) ensuring timely elections in the case of supersession; and (iv) providing adequate representation for the weaker sections like Scheduled Castes, Scheduled Tribes and women." 27. The Kishansing Tomar Municipal Corporation of The City Of Ahmedabad, 2006 (8) SCC....
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.... relied on by the High Court for dismissing the writ petition is not sustainable. We thus have to focus on proviso to Article 243Q(1). For the purpose and object of the industrial township referred to therein whether industrial township mentioned therein can be equated with Municipality as defined under Article 243P(e). Article 243P(e) provides that the "Municipality means an institution of self-government constituted under Article 243Q. Whether the appellant is a institution of self-government constituted under Article 243Q is the main question to be answered? Sub-clause (1) of Article 243Q provides that there shall be constituted in every State-a Nagar Panchayat, a Municipal Council and a Municipal Corporation, in accordance with the provisions of this Part. The proviso to sub-clause (1) provides that: "Provided that a municipality under this clause may not be constituted in such urban area or part thereof as the Governor may, having regard to the size of the area and the municipal services being provided or proposed to be provided for an industrial establishment in that area and such other factors as he may deem fit, by public notification, specify to be an industrial township....
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.... some validity in this submission but if, on a fair construction, the principal provision is clean a proviso cannot expand or limit it. Sometimes a proviso is engrafted by an apprehensive draftsman to remove possible doubts, to make matters plain, to light up ambiguous edges. Here, such is the case. * * * 18... If the rule of construction is that prima facie a proviso should be limited in its operation to the subject-matter of the enacting clause, the stand we have taken is sound. To expand the enacting clause, inflated by the proviso, sins against the fundamental rule of construction that a proviso must be considered in relation to the principal matter to which it stands as a proviso. A proviso ordinarily is but a proviso, although the golden rule is to read the whole section, inclusive of the proviso, in such manner that they mutually throw light on each other and result in a harmonious construction." 42. In Hiralal Rattanlal v. State of U.P., 1973 (1) SCC 216, this Court made the following observations: [SCC para 22, p. 224: SCC (Tax) p. 315] "22. ... "Ordinarily a proviso to a section is intended to take out a part of the main section for special treatment. It is not ex....
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....tate a Nagar Panchayat, a Municipal Council or a Municipal Corporation. Further, the words in proviso "a Municipality under this clause may not be constituted" clearly means that the words "may not be constituted" used in proviso are clearly in contradistinction with the word constituted as used in Article 243P(e) and Article 243Q. Thus, notification under proviso to Article 243Q(1) is not akin to constitution of Municipality. We, thus, are clear in our mind that industrial township as specified under notification dated 24.12.2001 is not akin to Municipality as contemplated under Article 243Q. 32. At this juncture, we may also notice the two judgments as relied on by the High Court and three more judgments where Article 243Q came for consideration. The first judgment which needs to be noticed is Adityapur Industrial Area Development Authority (supra). The Adityapur Industrial Development Authority was constituted under the Bihar Industrial Area Development Authority Act, 1974. In paragraph 2 of the judgment the constitution of the authority was noticed which is to the following effect: "2. The appellant Authority has been constituted under the Bihar Industrial Area Development ....
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....ces" or from a trade or business carried on by it was earlier excluded in computing the total income of the Authority of a previous year. However, in view of the amendment, with effect from 1-4-2003 the Explanation "local authority" was defined to include only the authorities enumerated in the Explanation, which does not include an authority such as the appellant. At the same time Section 10(20-A) which related to income of an authority constituted in India by or under any law enacted for the purpose of dealing with and satisfying the need for housing accommodation or for the purpose of planning, development or improvement of cities, towns and villages, which before the amendment was not included in computing the total income, was omitted. Consequently, the benefit conferred by sub-section (20-A) on such an authority was taken away. 7. The High Court by its impugned judgment and order held that in view of the fact that Section 10(20-A) was omitted and an Explanation was added to Section 10(20) enumerating the "local authorities" contemplated by Section 10(20), the appellant Authority could not claim any benefit under those provisions after 1-4-2003. It further held that the exemp....
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.... 37. In the above case this Court noticed in extenso the provisions of Delhi Agricultural Produce Marketing (Regulation) Act, 1998 and provisions of Section 10(20) of the Income Tax Act, 1961. Definition of local authority as contained in Explanation to Section 10(20) and Section 3(31) of the General Clauses Act was also noticed and discussed. This Court held that the definition of local authority in General Clauses Act under Section 3(31) is no longer applicable after the amendment of Section 10(20) by Finance Act, 2002. Following was laid down by this Court in paragraphs 31 and 32 (Agricultural Produce Market Committee vs. CIT (2008) 9 SCC 434): "31. Certain glaring features can be deciphered from the above comparative chart. Under Section 3(31) of the General Clauses Act, 1897, "local authority" was defined to mean "a Municipal Committee, District Board, Body of Port Commissioners or other authority legally entitled to ... the control or management of a municipal or local fund". The words "other authority" in Section 3(31) of the 1897 Act have been omitted by Parliament in the Explanation/definition clause inserted in Section 10(20) of the 1961 Act vide the Finance Act, 200....
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....bodies, such as those connected with providing amenities to the inhabitants of the locality, like health and education services, water and sewerage, town planning and development, roads, markets, transportation, social welfare services, etc. etc. Broadly we may say that they may be entrusted with the performance of civic duties and functions which would otherwise be governmental duties and functions. Finally, they must have the power to raise funds for the furtherance of their activities and the fulfilment of their projects by levying taxes, rates, charges, or fees. This may be in addition to moneys provided by Government or obtained by borrowing or otherwise. What is essential is that control or management of the fund must vest in the authority." 38. The Court further held that Explanation under Section 10(20) provides an exhaustive definition and the tests laid down by this Court in an earlier case i.e. Union of India and others vs. R.C. Jain and others, 1981 (2) SCC 308, are no longer applicable. In paragraph 35 following was stated: "35. One more aspect needs to be mentioned. In R.C. Jain the test of "like nature" was adopted as the words "other authority" came after the wo....
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....erly establishment and organisation of industries in a State." 42. It is, however, true that in the above case this Court was not concerned with the issue which has arisen in the present case and the Court was concerned with a different controversy. 43. We, thus, conclude that authority constituted under Act, 1976 with regard to which notification under proviso to Article 243Q(1) dated 24.12.2001 has also been issued is not akin to the Municipality constituted under Article 243Q(1)." [39] The contention of the petitioner that the Notified Area Authority, Vapi is discharging the function that like of the municipality, is also not acceptable in view of the decision of the Hon'ble Apex Court in the case of New Okhla Industrial Development Authority (supra). [40] In view of the conspectus of law, the Hon'ble Supreme Court held that the Area Development Authority is not akin to the municipality constituted under Article 243Q(1) of the Constitution of India. The Hon'ble Apex Court, in the case of Saij Gram Panchayat vs. State of Gujarat reported in 1992 (2) SCC 366, held that the Gujarat Industrial Development Act operates in a totally different sphere from Parts IX and IXA of the ....
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.... dated 2nd July 2018. However, the moot question which arises in this matter is whether the Appellate Authority, in relying upon the 'new grounds', has violated the principles of natural justice, by not putting the petitioner to any notice that such 'new grounds' were proposed to be considered or by not affording the petitioner opportunity to place on record the documentary evidences or clarifications in order to meet such 'new grounds' ? 27. On the moot issue as aforesaid, in the facts and circumstances as presented from the record, we are satisfied that the ground of failure of natural justice and the consequent vitiation of the decision making process, has been made out. 28. Since the Appellate Authority, in the present case, agreed with the petitioner's contention emphasized in the appeal memo that the expressions 'job work' and 'manufacture' are not mutually exclusive, the Appellate Authority, should have at least put the petitioner to notice that 'new grounds' were proposed to be considered for nevertheless upholding the conclusion of the Advance Ruling Authority. This is particularly so, because the Appellate Authority ....
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....b work following the ratio of the above judgment." 30. The aforesaid means that the Appellate Authority has faulted the petitioner for failure to produce on record the documents/materials referred to in sub-clauses (i),(ii)) and (iii) above. There is no dispute that the Appellate Authority, at no stage, called upon the petitioner to produce such materials and the petitioner failed to produce the same. The petitioner had no opportunity to seek time to produce such documents or complain about failure of natural justice because the Appellate Authority did not even put the petitioner to notice that 'new grounds' were proposed to be considered at appeal stage. This, according to us, amounts to denial of reasonable opportunity to the petitioner to make good its case or to at least respond to the 'new grounds' proposed to be relied upon by the Appellate Authority. 31. Similarly, in paragraph 56 of the impugned order dated 2nd July 2018, the Appellate Authority has observed thus: "56. Thus, the Appellant has not provided documentary evidences, during these appeal proceedings, that- (i) How can the steam coal, which is prime raw material of the job worker, be conside....
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....Appellate Authority was required to adhere to the principles of natural justice in arriving at its decision. This requirement of adhering to the principles of natural justice is in fact required to be read into, in the absence of any specific stipulations in the Statute to the contrary. 34. In the context of the provisions of Section 100 of CPC, the Supreme Court in case of Kshitish C. Purkait vs. Santosh Kumar Purkait and ors. - 1997 (5) SCC 438, has held that though the second Appellate Court has ample powers to formulate substantial questions of law, other than those already formulated at the stage of admission of the appeal, the second Appellate court, before proceeding to decide the second appeal on the basis of such other and further substantial questions of law, must afford a fair opportunity to the opposite party to meet the same. This means that the second Appeal Court must not, in the course of final hearing of the second appeal formulate other and further substantial question of law and thereafter straightway proceed to dispose of the second appeal without putting the parties to notice and affording the parties reasonable opportunity to respond to such other and furthe....