Custom, Excise & Service Tax Tribunal
Principal Commissioner Of Gst& Central ... vs Coimbatore City Municipal Corporation on 24 April, 2024
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
CHENNAI
REGIONAL BENCH - COURT NO. III
Service Tax Appeal No. 40464 of 2018
(Arising out of Order-in-Original No. 31-39/2017 dated 15.11.2017 passed by Commissioner of GST and
Central Excise, 6/7, A.T.D Street, Race Course Road, Coimbatore - 641 018)
M/s. The Coimbatore City Municipal Corporation ...Appellant
West Zone,
R.S. Puram,
Coimbatore - 641 002.
Versus
Commissioner of Central Excise ...Respondent
Coimbatore Commissionerate, 6/7, ATD Street, Race Course Road, Coimbatore - 641 018.
With Service Tax Appeal No. 40465 of 2018 (Arising out of Order-in-Original No. 31-39/2017 dated 15.11.2017 passed by Commissioner of GST and Central Excise, 6/7, A.T.D Street, Race Course Road, Coimbatore - 641 018) M/s. The Coimbatore City Municipal Corporation ...Appellant East Zone, Trichy Road, Singanallur, Coimbatore - 641 005.
Versus Commissioner of Central Excise ...Respondent Coimbatore Commissionerate, 6/7, ATD Street, Race Course Road, Coimbatore - 641 018.
With Service Tax Appeal No. 40466 of 2018 (Arising out of Order-in-Original No. 31-39/2017 dated 15.11.2017 passed by Commissioner of GST and Central Excise, 6/7, A.T.D Street, Race Course Road, Coimbatore - 641 018) M/s. The Coimbatore City Municipal Corporation ...Appellant South Zone, Palakkad Main Road, Kuniamuthur, Coimbatore - 641 105.
Versus Commissioner of Central Excise ...Respondent Coimbatore Commissionerate, 6/7, ATD Street, Race Course Road, Coimbatore - 641 018.
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ST/40464-40468/2018 (ST/40720-40728/2018 with ST/CO/40496-40504/2018) With Service Tax Appeal No. 40467 of 2018 (Arising out of Order-in-Original No. 31-39/2017 dated 15.11.2017 passed by Commissioner of GST and Central Excise, 6/7, A.T.D Street, Race Course Road, Coimbatore - 641 018) M/s. The Coimbatore City Municipal Corporation ...Appellant Central Zone, Huzur Road, Coimbatore - 641 018.
Versus Commissioner of Central Excise ...Respondent Coimbatore Commissionerate, 6/7, ATD Street, Race Course Road, Coimbatore - 641 018.
With Service Tax Appeal No. 40468 of 2018 (Arising out of Order-in-Original No. 31-39/2017 dated 15.11.2017 passed by Commissioner of GST and Central Excise, 6/7, A.T.D Street, Race Course Road, Coimbatore - 641 018) M/s. The Coimbatore City Municipal Corporation ...Appellant North Zone, Dr. Balasundaram Road, Coimbatore - 641 037.
Versus Commissioner of Central Excise ...Respondent Coimbatore Commissionerate, 6/7, ATD Street, Race Course Road, Coimbatore - 641 018.
With Service Tax Appeal Nos. 40720 to 40728 of 2018 (with Service Tax Cross Objection Nos. 40496 to 40504 of 2018) (Arising out of Order-in-Original No. 31-39/2017 dated 15.11.2017 passed by Commissioner of GST and Central Excise, 6/7, A.T.D Street, Race Course Road, Coimbatore - 641 018) The Principal Commissioner of GST & Central Excise, ...Appellant Coimbatore Commissionerate, 6/7, ATD Street, Race Course Road, Coimbatore - 641 018.
Versus M/s. Coimbatore City Municipal Corporation ...Respondent Town Hall, Coimbatore - 641 001.
3
ST/40464-40468/2018 (ST/40720-40728/2018 with ST/CO/40496-40504/2018) APPEARANCE:
For the Assessee : Shri S. Durairaj, Advocate For the Revenue : Shri Anoop Singh, Authorised Representative CORAM:p HON'BLE MS. SULEKHA BEEVI C.S., MEMBER (JUDICIAL) HON'BLE MR. VASA SESHAGIRI RAO, MEMBER (TECHNICAL) FINAL ORDER Nos. 40469-40482 / 2024 DATE OF HEARING/ DECISION: 24.04.2024 Order :-[Per Ms. SULEKHA BEEVI C.S.] The issue involved in all these appeals being the same, they were heard together and are disposed of by this common order. The parties are hereafter referred to as assessee and Department for the sake of convenience.
2. Brief facts are that the assessee viz., Coimbatore City Municipal Corporation has five zonal offices. These zones are separately registered with the Department for service tax purposes. The assessee through its zones provide various services which according to the Department are taxable under the provisions of Finance Act, 1994. The assessee did not discharge appropriate service tax and did not file ST-3 Returns. Show Cause Notices were issued separately proposing to demand the Service Tax for the period from 01.04.2007 to 30.06.2014 under the category of Renting of Immovable Property Services, Selling Space for Advertisement Services, Mandap Keeper Services, Demolition Charges for Unauthorised Construction, Garbage Removal Fees, Market Fees, Bus Stand Fee, Slaughter House Fee, 4 ST/40464-40468/2018 (ST/40720-40728/2018 with ST/CO/40496-40504/2018) etc. After due process of law, the Original Authority confirmed the demand, interest and imposed penalties. Against such order, assessee filed appeal before the Tribunal as ST/40187-40206/2017. As per the Final Order No. 40465-40484/2017 dated 13.03.2017, the matter was remanded to the Adjudicating Authority for fresh consideration. After denovo adjudication, the demand, interest and penalties were again confirmed though some amount was dropped. Aggrieved by the confirmation of demand of service tax along with interest and penalties imposed, the Coimbatore City Corporation (assessee) are once again before the Tribunal. The Department has filed appeal against that part of the order by which the adjudicating authority confirmed less amount than that proposed in the Show Cause Notices.
3.1 The Ld. Counsel Shri S. Durairaj appeared and argued for the assessee. The arguments put forth were mainly threefold. Firstly, that the assessee being Municipality had provided services / facilities while discharging sovereign functions and therefore the levy of service tax cannot be sustained. It is submitted that though the assessee had put forward this contention before the Adjudicating Authority, the same has been decided in favour of the Department observing that the Municipalities are not discharging sovereign functions while providing the services. The assessee did not advert to the State legislation, the Municipalities Act by which the Municipality is constituted and is discharging various functions and services in light of Article 243W of the Constitution of India. This aspect had not been considered. This issue is of much importance as the right to collect such fee, fine, rent, etc, emanate out of the State enactment. It is thus 5 ST/40464-40468/2018 (ST/40720-40728/2018 with ST/CO/40496-40504/2018) prayed that the assessee may be given an opportunity to put forward these arguments before the Adjudicating Authority. To support this argument, the Ld. Counsel took assistance of the judgment of the Hon'ble Jurisdictional High Court in the case of Cuddalore Municipality Vs. Joint Commissioner of GST and Central Excise, Tiruchirappalli [2021 (55) GSTL 397 (Mad.)]. The said case, the Hon'ble High Court had considered the issue as to whether the services of renting of immovable property provided by Municipality would be a sovereign function and has held the issue in favour of the assessee.
3.2 The second argument put forward by the Ld. Counsel is that some of the services are in the nature of fees, fine and other charges collected by the Municipality while discharging the functions enlisted in 12 th Schedule of the Constitution. Such fees and charges being welfare measures and also functions carried out as per the Constitution cannot be subject to levy of service tax. The issue of demand of service tax on such amounts cannot sustain and has to be considered on the basis of the above judgment of Hon'ble High Court as well as the applicability of the State Legislature while providing such services.
3.3 The third argument put forward by the Ld. Counsel is that part of the demand is raised on reverse charge basis. The assessee is not liable to pay service tax under Reverse Charge Mechanism because in regard to such services, the service recipient is liable to discharge the service tax. 6
ST/40464-40468/2018 (ST/40720-40728/2018 with ST/CO/40496-40504/2018) 3.4 The Ld. Counsel put forward arguments on the ground of limitation also. It is submitted that though the assessee had raised the plea of limitation, the Adjudicating Authority has not rendered any finding in this regard. The assessee being a 'local authority' which is a wing of the Government cannot be saddled with the guilt of suppression of facts with intent to evade payment of service tax. The assessee has accounted the entire income received which is subject to Audit by the Government. It is submitted that the demand raised invoking the extended period therefore cannot sustain and the same has to be considered with clear finding by the Adjudicating Authority. The Ld. Counsel prayed that the matters may be remanded.
4. The Ld. Authorised Representative Shri M. Ambe appeared for the Department. It is submitted that major part of the demand is under Renting of Immovable Property Services. The assessee though a Municipality has let out shops and other premises to individuals and are receiving rental charges. The said activity would fall under the definition of Renting of Immovable Property Services and the demand has been correctly proposed and confirmed by the Department. Certain fees and other charges collected by the Municipality are for slaughter house, bus stand, public toilet, etc. These activities cannot be said to be sovereign functions. It is submitted by the Ld. Authorised Representative that the Department has filed appeal on the ground that the Adjudicating Authority has dropped part of the demand after accepting the contention of the assessee that the amount quantified in the Show Cause Notice is not correct. The Department had issued Show Cause Notice after obtaining data from the 7 ST/40464-40468/2018 (ST/40720-40728/2018 with ST/CO/40496-40504/2018) website of the Municipality. The fees and other charges collected for various services was provided in the website on the basis of which the Department had quantified the amount of service tax in the Show Cause Notice. During the adjudication, the assessee had produced documents to show that the amount so reflected in the website is not correct and that the amount collected by the assessee varies from that shown in the website. The Adjudicating Authority has thus reduced the demand while confirming the service tax. The Ld. Authorised Representative submitted that the matter has to go back to the Adjudicating Authority in order to verify and quantify the correct demand.
5. Heard both sides.
6. The common issue that arises for consideration in all these appeals is whether the demands of service tax under various services including Renting of Immovable Property Services are sustainable or not? 7.1 It is required to be stated that major part of the demand is on Renting of Immovable Property Services. Some amount has been raised under cleaning services, fees and charges collected for bus stand, public toilet, slaughter house, market place, etc. The Hon'ble High Court in the case of Cuddalore Municipality (supra) had analysed the issue as to whether demand of service tax can be raised in regard to services / facilities provided by Municipality / Corporation. It was held that Municipalities (local 8 ST/40464-40468/2018 (ST/40720-40728/2018 with ST/CO/40496-40504/2018) authority) were rendering such services as sovereign function and therefore the amounts received is outside the purview of levy of service tax. In the said judgment, the Hon'ble High Court considered the liability to pay service tax for the period prior to 01.07.2012 as well as after 01.07.2012. The relevant paragraphs of the judgment in the case of Cuddalore Municipality supra reads as under:-
"58. As far as renting of immovable property is concerned, though under Rule 2(1)(d)(E) of the Service Tax Rules, 1994, service tax is payable by the service provider, it has to be held that if such services are provided by a Government or Local Authority, they are exempted under Section 65D(1)(a) of the Finance Act, 1994 as amended and as in force from 1-7-2012. Only ancillary service provided by a third party towards renting of immovable property of a non-governmental or local body will be liable 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-S.T., dated 20-6-2012 vide Sl. Nos. 38 and 39. They are reproduced below :-
38. Services by way of public conveniences such as provision of facilities 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 243W of the Constitution.
60. Thus, there is no jurisdiction in the impugned show cause notices/Orders-in-Originals issued by the respondent. In the light of the above discussion, demand proposed in the impugned S.C.N. No. 04/2018 (ST) in C. No. V/ST/15/2/2018-ST. Adjn., dated 7-3-2018 and demand confirmed in Order-in-Original No. 3/2017-ST in C. No. IV/09/04/2017-ST. Adjn. (RO OC No. 100/2016), dated 24-3-2017 and Order-in-Original No. 5/2018-ST in C. No. V/ST/15/21/2018-ST.Adj., dated 6-4-2018 are liable to be quashed and are accordingly quashed.
61. In the result,
(i) W.P. No. 3969 of 2018 as mentioned above is dismissed as infructuous.
(ii) W.P. No. 8900 of 2018, W.P. No. 31799 of 2017 and W.P. No. 12489 of 2007 are allowed.
(iii) No cost. Consequently, connected Miscellaneous Petitions are closed."
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ST/40464-40468/2018 (ST/40720-40728/2018 with ST/CO/40496-40504/2018) 7.2 It was held that the Government or local authority is exempted from payment of service tax on Renting of Immovable Property Services or for other services.
7.3 The above decision was rendered by the Hon'ble High Court on 22.03.2021. However, prior to this decision, the Hon'ble Jurisdictional High Court at Madurai Bench in the case of Madurai Corporation Vs. The Commissioner of Central Excise [W.P.(MD) No. 7559 of 2015] had considered the issue of taxability of renting of immovable property and vide judgment dated 09.09.2020 held that Municipality is liable to pay service tax. The relevant paragraphs of the judgment in the case of Madurai Corporation (supra) reads as under:-
"4.This Court heard the learned counsel for the petitioner at considerable length. Though I found the contentions to be worthy of consideration, as rightly pointed out by the learned standing counsel, the issue is no longer res integra. The Division Bench of the Madras High Court had already decided the issue in the decision reported in 2014-TIOL-2545-HC-MAD-ST (G.V.Matheswaran vs. the Union of India and others). After upholding the validity of Section 65(105)(zzzz) of the Act, in Paragraph No.56, the Hon'ble Division Bench observed that it is open to the local body to pass on the burden to the recipient of the service. It is necessary to note that among the petitioners in that batch of writ petitions, there were a few local bodies also. That is why, in R.Nambi vs. Tenkasi Municipality (2015) (37) S.T.R 696 (Mad.), a learned Judge of this Court observed as follows :
"13.At the out set it has to be pointed out that the petitioner it not a service provider. The first respondent Municipality is the service provider, who has been registered with the Department. The onus is on the first respondent Municipality to remit the service tax. In turn, the first respondent Municipality has demanded the same from the petitioner, who is their licensee in respect of four contracts, wherein the petitioner has been given license to collect fees. Furthermore, the petitioner has not challenged the validity of the provisions of the Finance Act nor the notification issued by the second respondent and in such 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 10 ST/40464-40468/2018 (ST/40720-40728/2018 with ST/CO/40496-40504/2018) 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) (zzzz) 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 lease or license and the test is as to whether it is used in the course of or 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, leasing, licensing or other similar arrangements of immovable property for use in the course or furtherance of business or commerce.
15.Admittedly, the properties in question do not fall within the two exemptions provided under Section 65(90a) of the Act. Explanation 2 under Section 65(90a) makes it more clear that renting of immovable property includes allowing or permitting the use of space in an immovable property, irrespective of the transfer of possession or control of the said immovable property. The duty performed by the first respondent Municipality would clearly fall within the ambit of the provisions referred above and therefore they have been remitting service tax to the Department. Further, Section 66D(a)(iv) of the Act deals with negative list of services and Clause (a) provides services by Government or a local authority excluding the following services to the extent they are not covered elsewhere and the relevant clause would be Clause (iv) namely support services, other than services covered under Clauses (i) to (iii), provided to business entities. Therefore, the Municipality is bound to pay service tax on the nature of transaction, which they have entered into with the petitioner."
5.When the Division Bench of the Madras High Court has already held that the local bodies are also liable to pay service tax for rendering "renting of immovable properties" service/mandap keeper services etc., then, it is not for me to go into the issue once again. Judicial discipline demands that I respectfully follow these binding precedents." 7.4 It is to be noted that the Hon'ble High Court in the case of Madurai Corporation has followed the decision of the Hon'ble High Court rendered in batch case of G.V. Matheswaran vs. the Union of India [2014- TIOL-2545-HC-MAD-ST]. In the case of G.V. Matheswaran the constitutional validity of the levy of service tax on Renting of Immovable Property Service was under challenge. The main ground raised by the petitioner therein was that it is a tax on immovable property and that the Centre has no power to 11 ST/40464-40468/2018 (ST/40720-40728/2018 with ST/CO/40496-40504/2018) levy tax for the reason that immovable property (land) falls within the State list. There were various decisions passed by other High Courts upholding validity of the provisions of Section 65(105)(zzzz) and Section 65(90a) of the Finance Act, 1994.
i. Shubh Timb Steels Ltd. Vs. Union of India [2011 (37) GST 46 (P&H)] ii. Utkal Builders Ltd. Vs. UOI [2011 (22) STR 257 (Ori.)] iii. Entertainment World Developers Ltd. Vs. UOI [2012 (25) S.T.R. 231 (M.P.)] iv. Home Solution Retail (India) Ltd. Vs. UOI [2011 (24) S.T.R. 129 (Del.)], Home Solution II In these cases there was no specific discussion upon the issue whether local authority would be liable to pay service tax. In the case of Madurai Corporation, the Ld. Single Bench Judge sustained the demand mainly on the view that it was observed by the Hon'ble High Court in the batch case that the Municipality can pass on the burden of service tax to the tenant (recipient of service tax). The Ld. Single Judge also referred to the case of R. Nambi vs. Tenkasi Municipality [(2015) (37) S.T.R 696 (Mad.)]. The petitioner therein was a licensee of the Tenkasi Municipality and challenged the demand of service tax served by the Municipality. 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 Court in the case of Cuddalore Municipality (supra) has considered this specific issue. In a recent judgment, the Hon'ble High Court in the case of St. Thomas Mount Cum Pallavaram Cantonment Board Vs. Additional Commissioner of GST and Central Excise, Chennai [2023 (71) GSTL 123 (Mad.)] as referred to the decision in the case of Cuddalore Municipality (supra) and remanded the matter to consider the issue as to whether Municipality / Cantonment Board is liable to pay service tax. The relevant paragraphs reads as under:- 12
ST/40464-40468/2018 (ST/40720-40728/2018 with ST/CO/40496-40504/2018) "4. The petitioner claims that as a Cantonment Board and being a Municipality they are exempted from paying Service Tax. The petitioner had earlier challenged the Show cause notice issued by the respondents in W.P. Nos. 28468 and 28080 of 2021.
5. A learned Single Judge of this Court by her common order dated 10-8-2022 disposed of the said writ petitions on the ground that at the stage of Show cause notice, writ petitions cannot be entertained. But, however the learned Single Judge has made it clear that the respondent will have to consider the decision rendered by another learned Single Judge of this Court in a batch of writ petitions in W.P. No. 8900 of 2017 in the case of Cuddalore Municipality v. The Joint Commissioner of GST and Central Excise, before passing final orders.
6. However, the Learned Senior Panel Counsel appearing for the respondent would submit that the order passed in the Cuddalore Municipality case referred to (supra) is the subject matter of challenge in a writ appeal. He would also submit that a contrary view has been taken by another learned single Judge of this Court in another batch of writ petitions in W.P. (MD) Nos. 7599 of 2018 etc. batch, in its decision, dated 9-9-2020. According to him, in the said decision, it has been held that a Municipality is liable to pay Service Tax.
7. The learned Standing Counsel for the respondent would also submit that the decision of the Hon'ble Supreme Court in the case of Krishi Upaj Mandi Samiti v. Commissioner of C.Ex. & S.T., Alwar reported in 2022 (58) G.S.T.L. 129 = [2022] 135 taxmann.com 354 (S.C.) applies to the case of the petitioner and therefore, they are liable to pay Service Tax as demanded under the impugned order.
However, the same is disputed by the Learned Counsel for the petitioner, who would submit that the said decision is not applicable to the case of the petitioner. The matter will have to be examined by the respondent. Admittedly, the Cuddalore Municipality case rendered by a Learned 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 is 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 in W.P. No. 8900 of 2017, dated 22-3-2021 as well as (b) St. Thomas Mount Cum Pallavaram Cantonment Board v. The Additional Directors and others in W.P. 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 petition is disposed of. No costs. Consequently, connected miscellaneous petition is closed." 13
ST/40464-40468/2018 (ST/40720-40728/2018 with ST/CO/40496-40504/2018) 7.5 It is represented before us that the Department has filed appeal against the decision passed by the Ld. Single Judge in the case of Cuddalore Municipality and that assessee has filed appeal against the decision passed in the case of Madurai Corporation. These appeals are pending before the Hon'ble High Court. Since, the Hon'ble High Court in the case of St. Thomas Mount Cum Pallavaram Cantonment Board (supra) has remanded the matter for considering the issue afresh, we are of the considered opinion, that in the interest of justice, these matters also require to be remanded to the Adjudicating Authority to consider afresh the issue as to whether Municipality is liable to pay service tax under Renting of Immovable Property Services and other Services. It is to be noted that some of the amounts falling within the demand pertain to fees and charges collected for carrying out functions specifically listed in 12th Schedule. Further, all these services are carried out as per the provisions of Coimbatore City Municipality Corporation Act, 1981. The State (Tamil Nadu) has bestowed the local authority vide the above enactment to carry out certain functions and services in consequence to Article 243X read with Article 243W of the Constitution. These issues have to be examined in detail. If the activities are in discharge of sovereign right / function, the levy of service tax cannot be attracted.
8. The Ld. Counsel has argued on the ground of the limitation also. The assessee being a local authority, which is a wing of the Government, it cannot be said that assessee has suppressed facts with intent to evade payment of service tax. So also, there is no positive act of suppression alleged in the Show Cause Notice against these Municipalities. As the matter 14 ST/40464-40468/2018 (ST/40720-40728/2018 with ST/CO/40496-40504/2018) is remanded, we direct the Adjudicating Authority to consider the issue on limitation also.
9. The Department has filed appeal aggrieved by dropping or reducing the demands. In case the demand of service tax is sustainable, the Adjudicating Authority is directed to quantify after looking into the actual amounts received in respect of each services. All issues are left open.
10. In the result, the impugned orders are set aside. The appeals are allowed by way of remand to the Adjudicating Authority. Cross objections are disposed, accordingly.
(Order dictated and pronounced in open court)
Sd/- Sd/-
(VASA SESHAGIRI RAO) (SULEKHA BEEVI C.S.)
MEMBER (TECHNICAL) MEMBER (JUDICIAL)
MK