TaxTMI 
TaxTMI 
2025 (11) TMI 1924
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....xemption under Entry No.9B of the said notification and has also called in question a communication dated 07.07.2021 issued by the fourth respondent. 2. Heard Sri Girish A. Yadawad, learned counsel for the petitioner, Sri M.B. Kanavi, learned Central Government Standing Counsel for respondent Nos. 1 and 5, Sri Girish S. Hulmani, learned counsel for respondent Nos. 2 to 4 and Smt. Kirtilata R. Patil, learned High Court Government Pleader for respondent Nos. 6 and 7. 3. Facts in brief, germane, are as follows: The petitioner is a Society registered under the Karnataka Societies Registration Act, 1960, which comes into existence in terms of a government order dated 05.09.1990. It is the claim of the petitioner that it is an entity established by the Government of Karnataka. The establishment of the petitioner is said to be under the National Network Programme of Building Centres Scheme, by the Housing and Urban Development Corporation of the Government of India, in furtherance of the Scheme notified. The petitioner is exclusively engaged in civil construction works for the State and Central Governments. The rules and regulations of the petitioner are all said to necessi....
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....f the notification dated 13.10.2017. The petitioner enters into contracts and carries out work only for the State and Central Governments and therefore, requires to be exempted from tax liability under Entry No.9B of the notification No.32/2017. The learned counsel further submits that the definition of the 'Government Society' includes a Society established with 90% or more control, which undoubtedly includes the petitioner. He submits that the fourth respondent has seriously misinterpreted the definition Clause itself and indulged in the impugned communication. 7. Per contra, Sri Girish S. Hulmani, learned counsel for respondent Nos. 2 to 4 would seek to defend the action holding that the petitioner can never be declared a 'Government Entity' and it is liable to pay tax as every Nirmithi Kendras in the State are paying tax. He would seek dismissal of the petition. 8. Smt. Kirtilata R. Patil, learned High Court Government Pleader would submit that they are only formal parties and leave the decision to the hands of this Court. 9. I have given my anxious consideration to the submissions made by the learned counsel for the respective parties and have perused the material on ....
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....ammes, demonstration of housing and publish useful data and literature on housing and allied activities; 11) a Research and Development institution and a consultant in the field of housing; 12) without prejudice to the generally of the above and for effectively carrying out these objectives the Kendra shall have the power to acquire, hold and receive property of any kind including securities and negotiable instruments to conduct and maintain buildings including the right to alter and improve them and to equip them suitably to manage, sell, transfer or otherwise dispose of or deal with property of any kind belonging to the Kendra to enter into contracts for or in connection with any of the purposes of the Kendra to enter into contracts for or in connection with any of the purposes of the Kendra and on its behalf to raise moneys and funds in such a manner as may be deemed fit for on behalf of the Kendra and; 13) to do all such things and to perform all such acts as may be necessary or appropriate for the achievement of any or all of the above objects, 14) to take up construction work of any nature like fabrication, manufacture, installation, etc co....
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....e Chairman is the Deputy Commissioner. Therefore, the petitioner is completely controlled by the government. It is funded from the grants and contributions from the corporate bodies, banks and other financial institutions is a matter of record. The Goods and Services Tax, 2017 (for short 'the GST') in a supersession of Value Added Tax, 2005, which comes about on 01.04.2017. After the new regime comes into existence i.e., GST, a notification is issued bearing No. 12/2017 by the Central Government exempting tax liability to certain entities for supply of services. The said notification is followed by the Government of Karnataka by the Finance Department, in notification bearing No. 32/2017 dated 13.10.2017 wherein, in the definition clauses, Clause (zfa) comes to be added. The additions are as follows: "FINANCE SECRETARIAT NOTIFICATION (32/2017) No. FD 48 CSL 2017 Bengaluru, dated :13.10.2017 In exercise of the powers conferred by sub-section (1) of section 11 of the Karnataka Goods and Services Tax Act, 2017 (Karnataka Act 27 of 2017), the Government of Karnataka, on being satisfied that it is necessary in the public interest so to do, on the recommendations of the Co....
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.... (2) (3) (4) (5) "23A Heading 9967 Service by way of access to a road or a bridge on payment of annuity. Nil Nil": (5) in serial number 41, for the entry in column (3), the following entry shall be substituted namely: - "Upfront amount (called as premium, salami, cost, price, development charges or by any other name) payable in respect of service by way of granting of long term lease of thirty years, or more) of industrial plots or plots for development of infrastructure for financial business, provided by the State Government Industrial Development Corporations or Undertakings or by any other entity having 50 per cent. or more ownership of Central Government, State Government, Union territory to the industrial units or the developers in any industrial or financial business area."; 2. in paragraph 2, for clause (zf),the following shall be substituted, namely: - "(zf) "Governmental Authority" means an authority or a board or any other body, - (i) set up by an Act of Parliament or a State Legislature; or (ii) established by any Government, with 90per cent, or more participation by way of equity or ....
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.... January 30, 2014, an authority or board or any other body set up by an Act of Parliament or State Legislature is a Governmental Authority. Therefore, the notification dated June 20, 2012, exempts the activity of construction undertaken by the petitioner from payment of service tax. 12. However, the arguments of Mrs. Nivedita Nirvikar, learned counsel for respondent No. 1, is that only an authority with 90 per cent. or more participation by way of equity or control to carry out any function entrusted to a municipality under article 243W of the Constitution alone is the Governmental Authority, entitled to exemption from benefit of service tax. Such provision in the notification dated January 30, 2014 is applicable to both parts of clause 2(s) and not to sub-clause (ii) of clause 2(s) alone of the said notification. 13. We have heard learned counsel for the parties and found the arguments raised by Mrs. Nivedita Nirvikar are not sustainable in law. The Governmental Authority as defined in the notification dated January 30, 2014, means an authority or a board or any other body set up by an Act of Parliament or State Legislature. The provisions contained in sub-clause....
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....case of undue enrichment." (Emphasis supplied) The said judgment was tossed by the Department of Central Excise before the Apex Court. The Apex Court in terms of the judgment rendered in the case of COMMISSIONER, CUSTOMS, CENTRAL EXCISE AND SERVICE TAX V. SHAPOORJI PALLONJI & CO. (P) LTD. (2024) 3 SCC 358, dismisses the appeal, upholding the order passed by the division bench of the High Court of Patna. The Apex Court held as follows: ".... .... .... 37. In the present case, the use of a semicolon is not a trivial matter but a deliberate inclusion with a clear intention to differentiate it from sub-clause (ii). Further, it can be observed upon a plain and literal reading of Clause 2(s) that while there is a semicolon after sub-clause (i), sub-clause (ii) closes with a comma. This essentially supports the only possible construction that the use of a comma after sub-clause (ii) relates it with the long line provided after that and, by no stretch of imagination, the application of the long line can be extended to sub-clause (i), the scope of which ends with the semicolon. We are, therefore, of the opinion that the long line of Clause 2(s) governs only sub-claus....
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....rnment". Each word in the definition clause has to be given some meaning and merely because promoting educational aspects is one of the functions of a municipality in terms of Article 243-W of the Constitution read with Schedule XII appended thereto is no valid argument unless equity or control by the Government, to the extent of 90%, is shown to exist qua the relevant authority/board/body. Incidentally, neither is there any indication in the petition nor has Ms Bagchi been able to disclose the identity of any such authority/board/other body which is covered by her argument. No such identified authority/board/body covered by the aforesaid construction of the definition of "governmental authority" in Clause 2(s) of the Clarification Notification, which the appellants appeal to us to accept, having been brought to our notice, we are unable to find any fault in the decisions [Shapoorji Paloonji & Co. (P) Ltd. v. CCE, Customs & Service Tax, 2016 SCC OnLine Pat 1602], [Shapoorji Pallonji v. Union of India, WP (C) No. 17188 of 2015, order dated 5-2-2018 (Ori)] of the Patna High Court and the Orissa High Court extending the benefit of the Exemption Notification to the educational institut....
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....ontrol, which would have to be considered to determine whether it is a public authority or not. 16. Insofar as control is concerned, the above extracts make it clear that, firstly, Nirmiti Kendras were established on the recommendation of the Rural Development and Panchayat Raj Department. A working committee comprising Government Officers was created, comprising Secretaries, Chief Engineers, etc., to supervise the working of the Nirmiti Kendra. 17. The general body of the Nirmiti Kendra consists of all the top officers of each District, and the day-to-day activities of the Nirmiti Kendra are run by officers belonging to the State Government, many of whom belong to the Indian Administrative Service and the Karnataka Administrative Service. Thus, it is clear that Nirmathi Kendra is under the complete control of Government servants. 18. Insofar as the funding is concerned, as observed supra, the funding is by HUDCO, Government organisations, and financial institutions, and these funds are used for the implementation of public works. Thus, not only is the funding provided by the Government, but the works carried out by Nirmathi Kendra are also considered Gov....
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....apital there is no question of equity participation. However, the entire establishment amount has been provided by Government and M/s. Bagalkot Nirmithi Kendra is 100% controlled by Government. No work is carried out without the consent and approval of the government and all the activities are controlled by Chairman-Deputy Commissioner, Executive chairman-Chief Executive Officer of Zilla Panchayat, The Deputy Secretary, Zilla Panchayat, The Executive Engineer, Zilla Panchayat, The District Welfare Officer, The Chief Planning Officer, Z.P, Director, Bagalkot, Director KARNIK, Bangalore, Representatives from Engineering College, Lead Bank Officer, The General Manager, District Industries Centre, representative of NGO Agency, a leading architect and three representatives nominated by the Chairman as per the copy of Memorandum of Association furnished. Further as per para 8(c) of the byelaws the number of members of the society is limited to 20, with Individuals @ 20%, Institutions @ 20% and Ex-officio members at 60%. As such it appears that the participation of 90% or more by way of government control is not being fulfilled as the ex-officio members are only 60% of the members presumi....
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....t, State Government, Union Territory or a local authority." 4. It is noticed from the documents furnished to this office that M/s Bagalkot Nirmithi Kendra is established not by an Act of Parliament or State Legislature but by the Government of Karnataka Order No. G.O 110 RDP ADP 47 NK:59, BANGALORE, DATED 05.03.1990 and based on the order is registered under the Societies Act. Regarding 90% or more participation by way of equity or control, neither government nor private organization have invested in the entity as capital and in the absence of capital there is no question of equity participation. Further as per para 8(c) of the byelaws the number of members of the society is limited to 20 with the following rating, Individuals @ 20%, Institutions @ 20% and Ex-officio members at 60% As per the rules and regulations of the Kendra, the control, administration and management of the affairs of the Kendra shall vest in a governing body, which has the following members: No Governing body Members Represented by 1 Chairman Deputy Commissioner 2 Executive Chairman Chief Executive Officer of Zilla Panchayat, Baga....
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.... which are public in nature. The Hon'ble Court has not commented on the taxability of the Tax pay under GST laws. More so, in the given circumstances of taxability of the activity undertaken by Nirmithi Kendra, ratio of the Hon'ble High Court Order has no relevance. 7. Sir, as per the MOA copies, the Deputy Commissioner of the District is the Chairman of the Governing Body constituted and without the approval of the Deputy Commissioner, the financial transactions are not carried out. It is pertinent to inform to your kind self that the Department of CGST after much deliberations has come to a conclusion that the activities undertaken by the Nirmithi Kendra clearly fit into the definition of supply and are rightly taxable. As ascertained, various other Nirmithi Kendras constituted and undertaking similar activities in different parts of the State of Karnataka have been discharging their GST liability and filing the statutory returns. In spite of written communication and appraisal of the provisions of Act and Rules/Notification provisions to the concerned, if the GST liability is not discharged by M/s. Bagalkot Nirmithi Kendra, unnecessary interest and penalties are....