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2024 (6) TMI 767
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....palities have not discharged appropriate service tax on various services provided by them. Show Cause Notices were issued to the appellants proposing to demand service tax mainly under the category of Renting of Immovable Property Service for different periods from the date of introduction of the service (June 2007). After due process of law, the Original Authority confirmed the demand, interest and imposed penalty. On appeal, the Commissioner (Appeals) upheld the same. Aggrieved by such orders, the appellants are now before the Tribunal. 3.1 The Ld. Counsel Shri M. Karthikeyan appeared and argued for the appellants in the case of Krishnagiri Municipality. It is submitted that the in the said case, the Original Authority had confirmed the demand of service tax along with interest and imposed penalty. The Commissioner (Appeals) had set aside part of the demand and the appeal is filed against such order passed by the Commissioner (Appeals). The Ld. Counsel argued that in this appeal, the appellant is contesting the leviability of service tax on services provided by the municipality as a legal plea can be raised at appeal stage also. It is submitted that a Municipality is a soverei....
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....ations, cremation grounds and electric crematoriums; 15. Cattle pounds; prevention of cruelty to animals; 16. Vital statistics including registration of births and deaths; 17. Public amenities including street lighting, parking lots, bus stops and public conveniences; 18. Regulation of slaughter houses and tanneries; 3.3 The Ld. Counsel submitted that the municipalities have to deal with diverse functions as above and there is lack of man power for discharging these functions which are in the nature of welfare and facilities to the citizens. Certain functions are out sourced by these municipalities in the form of assigning rights to individuals to carry out the specific work. These outsourced functions include the right to collect entry fee on each cattle brought in for slaughter, the right to collect entry fee to the public market, the right to collect fee on each head load of vegetables brought in to the market, parking fee for parking vehicles etc. Such rights to collect fees and levies are assigned to the bidders through open bidding and by floating of tenders. The bidders with highest bidding will get the right to collect the levies and f....
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....tain or not. It was observed by the Hon'ble High Court that the definition of 'person' applied to a 'local authority' only with effect from 01.07.2012. The definition of 'person' as per Section 65 B (37) w.e.f. 01.07.2012 reads as under: "person" includes - (i) An individual, (ii) A Hindu undivided family, (iii) A Company, (iv) The society, (v) A limited liability partnership, (vi) A Firm, (vii) An association of persons or body of individuals, whether incorporated or not, (viii) Government, (ix) A local authority, or (x) Every artificial juridical person not falling within any of the preceding sub clauses 3.7 Again, 'local authority' is defined under Section 65 B (31). It is submitted by the Ld. Counsel that though local authority (Municipality) were brought within the definition of person w.e.f. 01.07.2012, as per the Mega Exemption Notification Municipalities are exempted from payment of service tax in terms of Sl. Nos. 38 & 39 of the Mega Exemption Notification no.25/2012-ST dated 20.06.2012. The Hon'ble Jurisdictional High Court considered the issue as to whether Municipality ....
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....ervice tax under Renting of Immovable Property Service. In the said judgement, the Hon'ble High Court held that the demand is sustainable and that Municipality is liable to pay service tax. The Ld. AR prayed that the appeals may be dismissed. 5. Heard both sides. 6.1 The common issue that arises for consideration in all these appeals is whether the demand of service tax under the category of 'Renting of Immovable Property Service' as well as other services is sustainable against appellants (Municipalities). 6.2 The Hon'ble High Court of Madras in the case of Cuddalaore Municipality (supra) had analysed the matter in detail for the period prior to 01.07.2012 and post 01.07.2012. It was held that prior to 01.07.2012, the word 'person' was not defined in the Finance Act, 1994. The definition of the taxable service used the word 'person' and so did not include Municipality prior to 01.07.2012. The definition of 'Renting of Immovable Property Service' introduced w.e.f. 01.06.2007 under Section 65 (90a) reads as under: ''Renting of Immovable Property' includes renting, letting, leasing, licensing or other similar arrangements of immovable property for use in the course ....
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..... Service Tax on Renting of Immovable Property Service was introduced in 2007 vide 65(105) (2222) of the Finance Act, 1994. The expression of renting of immoveable property was defined in Section 65 (90a) of the Finance Act, 1994 27. The High Court of Delhi in Home Solutions Retail India Ltd. & Others Vs. UOI, 2009 (237) E.L.T 209 (Del) by its order dated 18.04.2009 however struck down this levy by observing that the renting of immovable property for use in the course of furtherance of business or commerce did not involve any value addition and therefore, cannot be regarded as service. 28. The tenants all over the country therefore stopped reimbursing the tax element to the land owner. Since landlords were receiving regular demand notices from the department but such notices were being subjected to stalemate, the Finance Act. 2010 amended the provision with retrospective effect and attempted to cure the defect pointed cut by the Delhi High Court. 29. Thus, definition of taxable service of "renting of immovable property" and "renting of immovable property was amended to read as follows- Definition of Taxable Service taxable service of in "renting of imm....
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....this clause "for use in the course of furtherance of business or commerce includes use of immovable property as factories, office buildings, warehouses theatres, exhibition halls and multiple-use buildings; Explanation 2: For the removal of doubts, it is hereby declared that for the purpose of this clause "renting of immovable property "includes allowing or permitting the use of space in and immovable property, irrespective of the transfer of possession or control of the said immovable property. 30. The Delhi High Court in the 2nd Home Solutions Retails (India) Ltd. v. Union of India 2011 (24) STR 129 (Del) upheld the constitutional validity of the amended definition in Section 65(105)(zzzz) in 2010 with retrospective effect with the following observation- "In view of our aforesaid analysis, we are disposed to think that the imposition of service tax under Section 65(105)(zzzz) read with Section 66 is not a tax on land and building which is under Entry 49 of List | What is being taxed is an activity, and the activity denotes the letting or leasing with a purpose, and the purpose is fundamentally for commercial or business purpose and its fur....
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....fferent class of service providers It is perhaps for this purpose, the expression any other service in relation to such renting has been used in the Section to indicate service tax has to be charged only where there is a value addition 36. May be renting of immoveable property service partly overlapped with the taxable service of a "real estate agent This was because there was no definition for the expression "service" till July, 2012 and therefore there was scope for such overlap in the definition. The definitions are reproduced below- Section 65(88) Section 65(89) "Real Estate Agent" means a person who is engaged in rendering any service in relation to sale, purchase, leasing or renting, of real estate and includes a real estate consultant "Real estate consultant" means a person who renders in any manner, either directly or indirectly, advice, consultancy or technical assistance, in relation to evaluation, conception design, development, construction, implementation, supervision maintenance marketing, acquisition or management, of real estate Definition of taxable service in Section 65(105)(v) any service provided or to be provided to a client, by a rea....
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....parcel post, life insurance and agency services provided to a person other than Government; (ii) services in relation to an aircraft or a vessel, inside or outside the precincts of a port or an airport; (iii) transport of goods or passengers; or (iv) any service, other than services covered under clauses (i) to (iii) above, provided to business entities; (b) services by the Reserve Bank of India; (c) services by a foreign diplomatic mission located in India; (d) services relating to agriculture or agricultural produce by way of- (i) agricultural operations directly related to production of any agricultural produce including cultivation, harvesting, threshing, plant protection or testing; (ii) supply of farm labour; (iii) processes carried out at an agricultural farm including tending, pruning, cutting, harvesting, drying, cleaning, trimming, sun drying, fumigating, curing, sorting, grading, cooling or bulk packaging and such like operations which do not alter the essential characteristics of agricultural produce but make it only marketable for the primary market; (iv) renting or leasing of agro machinery or vacant land ....
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.... Authority, they are exempted under Section 65D(1)(a) of the Finance Act, 1994 as amended and as in force from 01.07.2012. Only ancillary service provided by a third party towards renting of immovable property of a non-governmental or local body will be able to pay service tax like any other service provider. Therefore, service tax is payable by the service provider himself. 59. That apart, it is seen that some of the services provided are also exempted under the Mega Exemption Notification No.25/2012-ST dated 20.06.2012 vide Sl. Nos.38 and 39. They are reproduce below:- 38. Services by way of public conveniences such as provision of facilties of bathroom, washrooms, lavatories, urinal or toilets; 39. Services by a governmental authority by way of any activity in relation to any function entrusted to a municipality under article 243 W of the Constitution. 60. Thus, there is no jurisdiction in the impugned Show Cause Notices/Orders-Original issued by the respondent in the light of the above discussion, demand proposed in the impugned S.C.N.No. 04/2018 (ST) inC.No.V/ST/15/2/2018-ST. Adjn. Dated 07.03.2018 and demand confirmed in Order-in-original N....
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....e notification issued by the second respondent and in such http www.judis.nic in circumstances a challenge to a demand notice issued by the service provider under whom the petitioner is a licensee has to necessarily fail. Nevertheless, since this Court heard the learned counsel for the petitioner in great length, this Court proposes to consider the submissions made by the parties as regards the jurisdiction to levy the service tax. 14 Renting of immovable property was brought under the Act with effect from 01.06.2007, Section 65(105) defines taxable service, which means any service provided to any person by any other person by renting of immovable property or any other service in relation to such renting for use in the course of or for furtherance of, business or commerce and it includes vacant land given on lense or license and the test is as to whether it is used in the course of of furtherance of business of commerce. Admittedly, the petitioner is a licensee of the first respondent Municipality and the property has been used in the course of business or commerce. As noticed above, Section 65(90a)) defines renting of immovable property including renting, letting....
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....(22) STR 257 (Ori), Entertainment World Developers Ltd. Vs. UOI 2012 (25) STR 231 (M.P), Home Solutions Retails (India) Ltd. Vs. UOI 2011 (24) STR (129) Del (FB) Home Solution II]. In these cases, there was no specific discussion upon the issue whether 'local authority' would be liable to pay service tax on Renting of Immovable Property services. There was also no discussion as to the definition of person; in the case of Madurai Corporation, the Ld. Single Judge sustained the demand mainly on the view that the Hon'ble High Court in the batch case observed that Municipality can pass on the burden of service tax to the tenant (recipient of service); The Ld. Single Judge also referred to the case of R Nambi Vs. Tenkashi Municipality [2015 (37) STR 696 (Mad)]. The petitioner therein was a licensee of the Tenkashi Municipality and challenged the demand notice of service tax served by the Municipality upon him. In these cases, the taxability in general was considered. The issue as to whether local authority (Panchayat, Municipality, Corporation) would be liable to discharge service tax as these services are provided in discharge of sovereign function was not considered. The Hon'ble High ....
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....ttedly, the Cuddalore Municipalily case rendered by a Leamed Single Judge of this Court referred to (supra) has not been considered by the respondents in the impugned order and therefore, necessarily the impugned order has to be quashed and the matter will have to be remanded back to the respondent for fresh consideration on merits and in accordance with law within a timeframe to be fixed by this Court. 8. For the foregoing reasons, the impugned order dated 30-9-2022 passed by the respondent is hereby quashed and the matter remanded back to the respondent for fresh consideration on merits and in accordance with law within a time frame to be fixed by this Court. The respondent shall pass final orders, after giving due consideration to the orders of this Court in the cases of (a) Cuddalore Municipality v. Joint Commissioner of GST and Central Excise WP. No 8900 of 2017, dated 22-3-2021 as well as (b) St Thomas Mount Cam Pallavaram Cantonment Board v. The Additional Director's and others in WP Nos 28468 and 28080 of 2021 dated 10-8-2022, within a period of twelve weeks from the date of receipt of a copy of this order. 9. With the aforesaid directions, this writ p....