Custom, Excise & Service Tax Tribunal
Nagar Palika Parishad vs Ce & Cgst Ghaziabad on 13 March, 2025
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
ALLAHABAD
REGIONAL BENCH - COURT NO.I
Service Tax Appeal No.70797 of 2016
(Arising out of Order-in-Appeal No.GZB-EXCUS-000-APP-0040-16-17 dated
13-05-2016 passed by Commissioner (Appeals) Customs, Central Excise,
Noida)
M/s Nagar Palika Parishad, .....Appellant
(Loni, Ghaziabad)
VERSUS
Commissioner of Central Excise &
Service Tax, Ghaziabad ....Respondent
(CGO-II, Kamla Nehru Nagar, Ghaziabad)
APPEARANCE:
Shri Rajesh Chhibber, Advocate for the Appellant
Ms Chitra Srivastava, Authorised Representative for the Respondent
CORAM: HON'BLE MR. P.K. CHOUDHARY, MEMBER (JUDICIAL)
HON'BLE MR. SANJIV SRIVASTAVA, MEMBER (TECHNICAL)
FINAL ORDER NO.70126/2025
DATE OF HEARING : 24 September, 2024
DATE OF PRONOUNCEMENT : 13 March, 2025
SANJIV SRIVASTAVA:
This appeal is directed against Order-in-Appeal No.GZB-
EXCUS-000-APP-0040-16-17 dated 13-05-2016 passed by
Commissioner (Appeals) Customs, Central Excise, Noida. By the
impugned order following has been held:-
"5. On consideration of facts, circumstances, relevant
statutory provisions and aforementioned findings, -
(a) service tax liability determined in respect of
renting of shops is upheld;
(b) interest liability on the service tax liability as per
(a) above is upheld;
(c) service tax liability determined in respect of
renting of land for parking space is set aside;
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(d) penalties imposed in terms of sections 70, 77(1)
and 78 of the Act are upheld & the penalty under
section 78 shall be equal to amount of service tax
liability as per (a) above.
As the quantum of service tax liability in respect of renting
of shops is not worked out separately in the impugned
order, the original authority is directed to quantify such
service tax liability and communicate the same to the
appellant within a period of ten days of receipt of this
order. The appeal is disposed of in above terms."
2.1 Appellant is engaged in providing taxable services namely
Renting of Immovable Property. However, they did not get
registration with the Department and did not pay service tax by
contravening the provisions of Rule 4 and Rule 6 of Service Tax
Rules.
2.2 Inquiries were made vide letter dated 02.09.13, 13.09.13,
24.09.13, 18.10.13, 24.10.13 (Ist), 24.10.13(2nd), 13.02.14
and 18.02.14 and on the basis of replies received vide letters
dated 30.09.13, 17.01.14, 12.03.14(Ist), 12.03.14(2) and
20.03.14, it is observed that appellant is engaged in (1) Renting
of Shops which are partially constructed up to the level of
Foundation/DPC(Damp Proof course) by them on the land owned
by NPP and construction of shops above this level is got
completed by the clients to whom the shops are allotted on
auction basis. NPP is collecting lump sum non-refundable
premium amount through auction of the shops in terms of
sample copy of agreement between Nagar Palika, Loni and the
allotee of the shop, Also, the ownership of property is not
transferred to the allotee as no sale deed is involved in the
process. Later on, the allottees get the shops constructed above
DPC level and pay the fixed rent to NPP as per agreement
between them. Undoubtedly, these shops are used for
furtherance of business or commerce. (ii) Renting/leasing of land
for Parking Space to Parking contractors by way of auction of
Parking space on yearly basis in Loni Municipal Area. These
Parking contractors use this land/parking space for providing
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3
public parking on collection of charges from individuals. In this
manner the rented parking land is being utilized in furtherance of
commerce or business.
2.3 After inquiries and examination it was observed that
appellant had short paid service tax as detailed in table bellow:-
Year Gross Amount Received Total Cum S.Tax Less- Tax S.Tax Edu SH Total (Rs.)
Fixed Lump- sum Auction Tax Value Rate value (Rs.) (Rs.) Cess Edu
rent of premiu m for Money/ (Rs.) % 2% Cess
shops) shops (Rs.) rent of (Rs.) 1%
(Rs.) parking (Rs.)
space (Rs.)
2008-09 36216 0 1712500 1748716 12.36 1556351 186762 3735 1868 192365
(Oct,08-
March,0
9)
2009-10 114432 1848000 3775000 5737432 10.30 5201661 520166 10403 5202 535771
2010-11 128918 0 4213000 4341918 10.30 3936462 393646 7873 3936 405456
2011-12 128918 2523000 4645000 7296918 10.30 6615519 661552 13231 6616 681399
2012-13 & 128918 2154242 5 5834140 27505483 12.36 2447978 2 293757 4 58751 29376 3025701
April, 13
Total 537402 2591342 5 20179640 46630467 4178977 6 469970 0 93994 46997 4840691
2.4 Show cause notice dated 21.04.2014 was issued to the
appellant asking them to show cause as to why-
"1. Service Tax amounting to Rs. 48,40,691.00 (Rs. Forty
Eight Lac Forty Thousand Six Hundred Ninety One Only)
(Rs. 46,99,700 S. Tax+ Rs. 93, 994 Edu Cess+ Rs. 46997
SHEdu Cess) should not be demanded and recovered from
them under proviso to section 73(1) of the Finance Act,
1994.
2. Interest on the above said amount should not be
demanded and recovered under Section 75 of the Finance
Act, 1994
3. Penalty under Section 78 of the Finance Act, 1994
should not be imposed upon them.
4. Penalty should not be imposed upon them under section
77 (1) (a) of the Finance Act 1994 for violation of Section
69 ibid read with Rule 4 of the Service Tax rules, 1994.
5. Late fees under Section 70 of the Finance Act, 1994
should not be recovered for non-submission of returns ST-
3 as per para 10 above."
2.5 The said show cause notice was adjudicated as per the
Order-in-Original dated 04.06.2015 by holding as follows:-
"Order
1. I confirm the demand of Service tax amounting to
Rs.48,40,691/- (Rs.forty eight lacs forty thousand six
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4
hundred ninety one only) under proviso to Section 73(1) of
the Finance Act, 1994 against M/s Nagar Palika Parishid,
Loni, District Ghaziabad.
2. I also confirm the demand of interest on said amount in
terms of section 75 of the Finance Act, 1994.
3. I also impose penalty of Rs. 48,40,691/- (Rs.forty eight
lacs forty thousand six hundred ninety one only) on M/s
Nagar PalikaParishid, Loni, District Ghaziabad under the
powers conferred upon me in terms of Section 78 of the
Act ibid.
4. I also impose penalty of Rs.100000/- (Rs. one lacs) on
M/s Nagar Palika Parishid, Loni, District Ghaziabad under
the powers conferred upon me in terms of Section 77(1) of
the Act ibid.
5. I also order for recovery of late fees amounting to
Rs.1,80,000/- (Rs. one lacs eighty thousand only) against
the M/s Nagar Palika Parishid, Loni, District Ghaziabad
under the powers conferred upon me in terms of Section
70 of the Act ibid."
2.7 Aggrieved appellant have filed appeal before Commissioner
(Appeals), who by the impugned order modified the Order-in-
Original to the extent as indicated in para 1 above.
2.8 Aggrieved appellant have filed this appeal.
3.1 We have heard Shri Rajesh Chhibber learned Counsel
appearing for the appellant and Ms Chitra Srivastava, learned
Authorised Representative appearing for the revenue.
3.2 Arguing for the appellant learned Counsel submits that-
The appellant is a body established by the State of UP in
accordance with Article 243P deriving its powers,
authorities and responsibilities under Article 243W and
collecting and expending under Article 243X of the
Constitution of India. Hence, they were of the firm belief
that there was no service tax liability on their part.
As regard renting of shops, the issue being recurring in
nature, the department raised demand for the period
2013-14 and 2014-15 on renting, which has been set aside
Service Tax Appeal No.70797 of 2016
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by the Appellate Authority vide Order In Appeal
No.GZB/EXCUS/000/APPL-MRT/153/2018-19 dated
19.06.2018 had held said activity taxable, but the total
amount on account of renting received in year being much
less than Rs.10 lakhs, the demand has been set aside by
granting benefit of exemption under notification
no.6/2005-ST as amended upto date.
During the period of dispute the threshold limit as per the
Notification No.4/2007 dated 1/3/2007, the said limit was
Rs.8 lakhs. The appellant collected rent much bellow the
said exemption limit.
The appellant has filed a chart as per which the total rent
collected during the said period otherwise is below the
threshold exemption limit. Hence, no service tax is payable
on the said amounts.
As regards one time premium collected at the time of
auction, in no way could be considered as renting activity
and, therefore, in any case, said activity was not liable for
service tax.
Reliance is placed on the following decisions:-
o Greater Noida Industrial Development Authority Vs
CST 2015 (38) STR 1062 (Tri.-Del.).
o CCE Goa Vs Mormugao Municipal Council 2017 (7)
GSTL 228 (Tri.-Mumbai).
3.3 Learned Authorised Representative reiterates the findings
recorded in the orders of the lower authorities. Further, she
placed reliance by the decision of Hon‟ble Allahabad High Court
in the case of M/s Greater Noida Industrial Development
Authority, Noida 2015 (40) STR 95 (All.).
4.1 We have considered the impugned orders along with the
submissions made in appeal and during the course of argument.
4.2 We find that there are two issues involved in the present
case i.e.-
i. service tax on one time premium collected.
ii. On renting of shops.
Service Tax Appeal No.70797 of 2016
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4.3 In respect of first issue i.e. service tax on one time
premium collected, we find the issue is squarely covered by the
decision of Hon‟ble Allahabad High Court in the case of M/s
Greater Noida Industrial Development Authority, Noida 2015
(40) STR 95 (All.) wherein following has been held:-
"28. We may record that under show cause notice dated
22nd March, 2012 demand of Service Tax including the
Education Cess was made for the period between July,
2010 to May, 2011. So far as the second show cause
notice dated 17th October, 2012 is concerned, Service Tax
was demanded along with interest for the period between
May, 2007 to March, 2012 on the following amounts :
(a) one time premium amount;
(b) annual lease rent;
(c) fee charged for examination of the applications;
(d) transfer charges;
(e) rent received from the staff
(f) other misc. income as compliance fees etc.
(g) misc. income as malba charges etc.
29. We may not dilate any further on the said aspect,
inasmuch as the Tribunal under the order impugned has
already remanded the matter to the Commissioner to
examine the challenge to the second show cause notice by
de novo proceeding and to given a specific finding on the
plea of overlapping raised by the assessee.
30. It is left open to the appellant to raise all such legal
as well as factual issues in respect of the second show
cause notice dated 17th October, 2012 during remand de
novo proceedings.
The plea of the appellant that it is performing statutory
duties and is a creation of a statute and therefore cannot
be subjected to Service Tax does not appeal to us. Suffice
is to mention that the Finance Act, 1994 makes no
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distinction between a statutory body i.e. a juristic person
and an individual.
31. As far as the circular dated 23rd August, 2007 issued
by the Government of India, which has been so heavily
relied upon by the appellant is concerned, we may record
that under Clause 032.01, it has been provided that the
Prasar Bharati Corporation (Doordarshan and All India
Radio), which has been constituted under the Prasar
Bharati (Broadcasting Corporation of India) Act, 1990 is
liable to pay Service Tax for broadcasting services.
32. Similarly under Clause 999.01 with regard to the
sovereign/public duties/functions, it has been clarified that
activities assigned to and performed by the
sovereign/public authorities under the provisions of any
law are statutory duties. The fee or amount collected as
per the provisions of the relevant statute for performing
such functions is in the nature of a compulsory levy and
are deposited into the Government account. Such activities
are purely in public interest and are undertaken as
mandatory and statutory functions. These are not to be
treated as services provided for a consideration. Therefore,
such activities assigned to be performed by a
sovereign/public authority under the provisions of any law,
do not constitute taxable services. Any amount/fee
collected in such cases are not to be treated as
consideration for the purposes of levy of Service Tax.
33. However, if a sovereign/public authority provides a
services, which is not in the nature of an statutory activity
and the same is undertaken for a consideration (not a
statutory fee), then in such cases, Service Tax would be
leviable as long as the activity undertaken falls within the
scope of a taxable service as defined.
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34. Letting of immovable property for consideration,
which is determined on the basis of offers received from
public at large by the assessee Greater Noida Industrial
Development Authority is a service provided for
consideration and not on payment of statutory fees,
neither it is a statutory service performed by the assessee.
It may be that the statute permits such activities of letting
out of immovable property for augmenting its finances but
the same cannot be termed as the service in public
interest nor it is a mandatory or statutory functions of the
Development Authority. Accordingly such activity of leasing
do constitute a taxable service, in our opinion."
4.3 In view of the above referred decision of Hon‟ble
Jurisdictional High Court in our view, the order of Commissioner
(Appeals) cannot be upheld to this extent. Similar order has
been passed by Mumbai Bench of this Tribunal in the case of M/s
CIDCO Ltd. 2015 (37) STR 122 (Tribunal-Mumbai). Similar view
has been expressed by Delhi Bench of this Tribunal in the cases
of M/s NEW OKHLA INDUSTRIAL DEVELOPMENT AUTH. 2015
(39) STR 443 (Tri.-Delhi) & M/s Bhilai Steel Plant 2022 (61)
GSTL 56 (Tri.-Delhi).
4.4 The decision of the tribunal in case Greater Noida
Industrial Development Authority [2015 (38) STR 1062 (Tri.-
Del.)] relied upon has not been agreed to by the larger bench of
Tribunal in case of Rajasthan State Industrial Development and
Investment Corporation Ltd. [INTERIM ORDER NO‟s. 1/2025 &
1/2025 dated 27.01.2025 in Service Tax Appeal No 50553 of
2017 and Service Tax Appeal No. 89766 of 2013 (Mumbai
Bench)] and Larger Bench has observed settled the issue stating
as follows:
"31. In Greater Noida Industrial Development Authority, this
issue was examined in paragraph 10.1 of the judgment,
which paragraph has been reproduced above. In paragraph
16 of the judgment, the Division Bench noticed that in
Panbari Tea the Supreme Court drew a distinction between
Service Tax Appeal No.70797 of 2016
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premium and rent, but then proceeded to hold that since
the taxing event under section 65(105)(zzzz) of the Finance
Act is "renting of immovable property", service tax would be
leviable only on the element of rent and not on the value of
"premium" or "salami". The Division Bench failed to notice
that the definition of "renting of immovable property"
includes „leasing‟, which under section 105 of the Transfer
of Property Act includes both premium and periodical rent.
32. The Division Bench of the Tribunal in Kagal Nagar
Parishad merely followed the earlier decision of the Tribunal
in Greater Noida Industrial Development Authority.
33. In view of the fact that „lease‟, as defined under section
105 of the Transfer of Property Act, includes both the one
time premium amount and the periodical rent amount, it
has to be held that the one time premium amount received
by the lessor from the lessee for transfer of interest in the
property would be leviable to service tax under section
65(105)(zzzz) of the Finance Act.
34. It is, therefore, not possible to accept the view
expressed by the two Division Benches of the Tribunal in
Greater Noida Industrial Development Authority and Kagal
Nagar Parishad.
........
49. In view of the aforesaid discussion, the inevitable conclusion that follows is that the value of "premium" during the period prior to 01.07.2012 and during the period w.e.f. 01.07.2012 would be exigible to service tax under "renting of immovable property".
50. The reference would, therefore, have to be answered in the following manner:
"The value of "premium" or "salami" is exigible to service tax under "renting of immovable property" for the period prior to 01.07.2012 under section 65(105)(zzzz) of the Finance Act and from 01.07.2012 under section 66B of the Finance Act."
Service Tax Appeal No.70797 of 2016 10 4.5 In view of the above decision of Larger Bench, we do not find any merits in the submissions made by the appellant in respect of levy of service tax on the "value of premium" or "salami" under the category of „renting of immovable property‟ for the period in dispute.
4.6 The argument of the appellant to the effect that the activity of construction of shops etc would be covered under the category municipal functions as per article 243P, 243W and 243X was rejected by the Mumbai Bench in the case of Mormugao Municipal Council [2017 (7) G.S.T.L. 228 (Tri. - Mumbai)] observing as follows:
9. In the Cross objection respondent have sought to challenge the levy of service tax on shops rented out by MMC under the pretext that the said shops are part of the market developed by MMC as their constitutional responsibility. Ld. Counsel has sought to rely on the Article 243W and 12th Schedule of 243W, more particularly Entries 12 and 17 thereof. The said article and the 12th Schedule reads as under :-
"Article 243W reads as under :-
"243W - Subject to the provisions of this Constitution, the Legislature of a State may, by law, endow -
(a) the Municipalities with such powers and authority as may be necessary to enable them to function as institutions of self-government and such law may contain provisions for the devolution of powers and responsibilities upon Municipalities, subject to such conditions as may be specified therein, with respect to -
(i) the preparation of plans for economic development and social justice;
(ii) the performance of functions and the implementation of schemes as may be entrusted to them including those in relation to the matters listed in the Twelfth Schedule;
Service Tax Appeal No.70797 of 2016 11
(b) the Committees with such powers and authority as may be necessary to enable them to carry out the responsibilities conferred upon them including those in relation to the matters listed in the Twelfth Schedule."
The Twelfth Schedule of Article 243W [sic] reads as under :-
"TWELFTH SCHEDULE (Article 243W)
1. Urban planning including town planning.
2. Regulation of land-use and construction of buildings.
3. Planning for economic and social development.
4. Roads and bridges.
5. Water supply for domestic, industrial and commercial purposes.
6. Public health, sanitation conservancy and solid waste management.
7. Fire services.
8. Urban forestry, protection of the environment and promotion of ecological aspects.
9. Safeguarding the interests of weaker sections of society, including the handicapped and mentally retarded.
10. Slum improvement and upgradation.
11. Urban poverty alleviation.
12. Provision of urban amenities and facilities such as parks, gardens, playgrounds.
13. Promotion of cultural, educational and aesthetic aspects.
14. Burials and burial grounds; cremations, 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.
Service Tax Appeal No.70797 of 2016 12
18. Regulation of slaughter houses and tanneries."
10. On perusal of Entries 12 and 17 clearly shows that or has been mentioned thereunder is provisions of urban amenities and facilities, such as parks, gardens, playgrounds. The market cannot be considered to be similar in nature and therefore provision of markets cannot be considered to be the responsibility under Sr. No. 12 of the 12th Schedule. Similarly Sr. No. 17 relates to street lighting, parking lots, bus stops and public convenience. These amenities do not include market by any stretch of imagination. Thus to state that construction of market is a constitutional responsibility cast upon the MMC is misplaced. We do not find force in the argument made by the respondent.
4.7 As we do not find any merits in the submissions made by the appellant in respect of the levy of service tax on the "one time premium" or "salami" collected by them, the value of taxable services provided during each financial year for the period in the dispute would be more than the threshold exemption limit as provided by the Notification No 4/2007-ST dated 01.03.2007 as amended from time to time. 4.8 Thus, we do not find any merits in the appeal. 5.1 Appeal is dismissed.
(Order pronounced in open court on- 13 March, 2025) Sd/-
(P.K. CHOUDHARY) MEMBER (JUDICIAL) Sd/-
(SANJIV SRIVASTAVA) MEMBER (TECHNICAL) akp