Custom, Excise & Service Tax Tribunal
District Information Technology ... vs Gurugram on 28 April, 2026
CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
CHANDIGARH
REGIONAL BENCH - COURT NO. I
Service Tax Appeal No. 60529 of 2021
[Arising out of Order-in-Original No. 1-21/ST/COMMR/VMJ/RTK/2021-22 dated
25.06.2021 passed by the Commissioner of Central GST, Rohtak]
District Information Technology Society ......Appellant
Gurugram
Mini Secretariat, Gurugram, Haryana 122001
VERSUS
Commissioner of Central Excise, Goods & ......Respondent
Service Tax, Rohtak Central GST Commissionerate, 2nd Floor, Pacific City Centre Mall, Near Jaat Bhawan, Delhi Road, Rohtak, Haryana 124001 WITH Service Tax Appeal No. 60437 of 2021 (District Information Technology Society, Charkhi Dadri) [Arising out of Order-in-Original No. 1-21/ST/COMMR/VMJ/RTK/2021-22 dated 25.06.2021 passed by the Commissioner of Central GST, Rohtak] Service Tax Appeal No. 60456 of 2021 (District Information Technology Society, Kurukshetra) [Arising out of Order-in-Original No. 1-21/ST/COMMR/VMJ/RTK/2021-22 dated 25.06.2021 passed by the Commissioner of Central GST, Rohtak] Service Tax Appeal No. 60489 of 2021 (District Information Technology Society, Panipat) [Arising out of Order-in-Original No. 1-21/ST/COMMR/VMJ/RTK/2021-22 dated 25.06.2021 passed by the Commissioner of Central GST, Rohtak] Service Tax Appeal No. 60517 of 2021 (District Information Technology Society, Kaithal) [Arising out of Order-in-Original No. 1-21/ST/COMMR/VMJ/RTK/2021-22 dated 25.06.2021 passed by the Commissioner of Central GST, Rohtak] Service Tax Appeal No. 60067 of 2022 (District Information Technology Society, Rohtak) [Arising out of Order-in-Original No. 1-21/ST/COMMR/VMJ/RTK/2021-22 dated 25.06.2021 passed by the Commissioner of Central GST, Rohtak] 2 ST/60529/2021 with 14 more Service Tax Appeal No. 60068 of 2022 (District Information Technology Society, Jhajjar) [Arising out of Order-in-Original No. 1-21/ST/COMMR/VMJ/RTK/2021-22 dated 25.06.2021 passed by the Commissioner of Central GST, Rohtak] Service Tax Appeal No. 60071 of 2022 (District Information Technology Society, Mahendragarh) [Arising out of Order-in-Original No. 1-21/ST/COMMR/VMJ/RTK/2021-22 dated 25.06.2021 passed by the Commissioner of Central GST, Rohtak] Service Tax Appeal No. 60072 of 2022 (District Information Technology Society, Jind) [Arising out of Order-in-Original No. 1-21/ST/COMMR/VMJ/RTK/2021-22 dated 25.06.2021 passed by the Commissioner of Central GST, Rohtak] Service Tax Appeal No. 60089 of 2022 (District Information Technology Society, Ambala) [Arising out of Order-in-Original No. 1-21/ST/COMMR/VMJ/RTK/2021-22 dated 25.06.2021 passed by the Commissioner of Central GST, Rohtak] Service Tax Appeal No. 60090 of 2022 (District Information Technology Society, Palwal) [Arising out of Order-in-Original No. 1-21/ST/COMMR/VMJ/RTK/2021-22 dated 25.06.2021 passed by the Commissioner of Central GST, Rohtak] Service Tax Appeal No. 60091 of 2022 (District Information Technology Society, Panchkula) [Arising out of Order-in-Original No. 1-21/ST/COMMR/VMJ/RTK/2021-22 dated 25.06.2021 passed by the Commissioner of Central GST, Rohtak] Service Tax Appeal No. 60126 of 2022 (District Information Technology Society, Yamunanagar) [Arising out of Order-in-Original No. 1-21/ST/COMMR/VMJ/RTK/2021-22 dated 25.06.2021 passed by the Commissioner of Central GST, Rohtak] Service Tax Appeal No. 60139 of 2023 (District Information Technology Society, Rewari) [Arising out of Order-in-Original No. 1-21/ST/COMMR/VMJ/RTK/2021-22 dated 25.06.2021 passed by the Commissioner of Central GST, Rohtak] Service Tax Appeal No. 60269 of 2023 (District Information Technology Society, Karnal) [Arising out of Order-in-Original No. 1-21/ST/COMMR/VMJ/RTK/2021-22 dated 25.06.2021 passed by the Commissioner of Central GST, Rohtak] APPEARANCE:
Mr. Surjeet Bhadu, Sr. Advocate with Mr. Veer Singh, Advocate and Mr. Rajesh Popli, Advocate, Mr. Chetan Jhalaria, C.A., Mr. Keshav Garg, C.A. for the Appellants Mr. Anurag Kumar with Mr. Narinder Singh, Authorized Representatives for the Respondent 3 ST/60529/2021 with 14 more CORAM: HON'BLE MR. S. S. GARG, MEMBER (JUDICIAL) HON'BLE MR. P. ANJANI KUMAR, MEMBER (TECHNICAL) FINAL ORDER NO. 60318-60332/2026 DATE OF HEARING: 08.01.2026 DATE OF DECISION: 28.04.2026 S. S. GARG :
These 15 appeals are directed against a common impugned Order-in-Original No. 1-21/ST/COMMR/VMJ/RTK/2021-22 dated 25.06.2021 passed by the Commissioner of Central GST, Rohtak who was appointed by the Additional Director General, GST Intelligence, Gurugram vide Order No. 07/2020-21 dated 10.02.2021. Vide the impugned order, the learned Commissioner has confirmed the demand of service tax along with interest and penalties. Details of service tax demanded and penalty imposed in respect of each appellant are given herein below in tabular form:
S. Appeal No. Name of Demand of Penalty (Rs)
No. Appellant Service Tax
(Rs)
1. ST/60529/2021 DITS, Gurugram 2,25,55,027 2,25,55,027 +
10,000
2. ST/60437/2021 DITS, Charkhi Dadri 1,81,839 1,81,839 +
10,000
3. ST/60456/2021 DITS, Kurukshetra 1,22,51,815 1,22,51,815 +
10,000
4. ST/60489/2021 DITS, Panipat 94,70,378 94,70,378 +
10,000
5. ST/60517/2021 DITS, Kaithal 85,56,550 85,56,550 +
10,000
6. ST/60067/2022 DITS, Rohtak 1,21,42,785 1,21,42,785 +
10,000
7. ST/60068/2022 DITS, Jhajjar 1,17,33,221 1,17,33,221 +
10,000
8. ST/60071/2022 DITS, Mahendragarh 43,75,348 43,75,348 +
10,000
9. ST/60072/2022 DITS, Jind 1,12,39,680 1,12,39,680 +
10,000
10. ST/60089/2022 DITS, Ambala 88,34,744 88,34,744 +
10,000
11. ST/60090/2022 DITS, Palwal 50,77,334 50,77,334 +
10,000
4 ST/60529/2021 with 14 more
12. ST/60091/2022 DITS, Panchkula 55,15,999 55,15,999 +
10,000
13. ST/60126/2022 DITS, Yamunanagar 1,06,05,194 1,06,05,194 +
10,000
14. ST/60139/2023 DITS, Rewari 1,00,61,410 1,00,61,410 +
10,000
15. ST/60269/2023 DITS, Karnal 1,45,99,011 1,45,99,011 +
10,000
Since, the issue involved in all these appeals is identical, therefore, all 15 appeals are taken up together for the purpose of discussion and decision vide this common order. However, for the sake of convenience, facts of the appeal bearing number ST/60529/2021 filed by District Information Technology Society, Gurugram, are taken up as a lead case.
2. Briefly stated facts of the case are that the appellant M/s District Information Technology Society ('DITS'), Gurugram is a society created by the Government of Haryana under the Societies Registration Act, 1860. It performs public/sovereign services on the behalf of the state government such as issuance of driving license, vehicle registration certificates, arms & ammunition licenses, income, caste, and domicile certificates etc. These services are provided through e-Disha/Common Services Centers and only statutory government fees are collected for issuance of such documents. The DITS was formed to perform statutory functions efficiently and cost-
effectively, reducing bureaucratic delays and operational costs. Therefore, the DITS functions as an instrumentality/authority of the state under Article 12 of the Constitution and performing activities that only state is authorized to provide.
5 ST/60529/2021 with 14 more 2.1 The officers of the Gurugram Zonal Unit of Directorate General of Goods & Service Tax Intelligence vide their letters dated 04.11.2019, 14.11.2019 and 03.12.2019 sought various information such as copies of Service Tax Registration, Returns, Month-wise Breakups of Receipts and Balance Sheets for 2014-15 to 2017-18. A summons dated 30.12.2019 was also issued to the appellant calling for the required information/documents. In response to the said letters and summons, the appellant vide various letters furnished the required information/documents and explained that the various services are provided to facilitate the citizens/public and the services include services like issuance of certificates/licences on the direction of Government of Haryana; the services are in the nature of services provided by Government or Local Authority as a sovereign function; the services are provided at the behest of the Government to the public/citizens and not to any business entity; the services are exempted from service tax. It was also explained that the appellant is a Government agency/society and the services are provided as a Government agency/society to the public and such services provided by the appellant are exempt from payment of service tax. 2.2 On the basis of information/documents provided by the appellant, the Department issued a show cause notice dated 29.06.2020 to the appellant as to why the service tax amounting to Rs.2,58,12,072/- should not be demanded and recovered under proviso to Section 73(1) of the Finance Act, 1994 read with Section 174 of the CGST Act, 2017 by invoking extended period of five years. The show cause notice also proposed to charge interest at the 6 ST/60529/2021 with 14 more applicable rates under Section 75 of the Finance Act, 1994. The show cause notice also proposed to impose penalties under Sections 76, 77 and 78 of the Finance Act, 1994. In the said show cause notice, it was also alleged that the appellant is not "Government or Local Authority" as per the Finance Act, 1994 and the activities carried out by the appellant meet the characteristics of a "service" taxable unless specified in the negative list or exempted under Notification No. 25/2012-ST dated 20.06.2012 ог any other notification. 2.3 The appellant filed the detailed reply to the said show cause notice and justified that the activities carried out by them are not liable to service tax. The appellant also explained in their reply that the Society was constituted under the directions of Department of Information Technology, Government of Haryana vide Memo No. 3/107/2001/3SIT/571 dated 25.03.2002.
2.4 After following the due process, the learned Adjudicating Authority vide the impugned Order-in-Original dated 25.06.2021 confirmed the demand of Service Tax of Rs.2,25,55,027/- under proviso to Section 73(1) of the Finance Act, 1994 read with Section 174 of the CGST Act, 2017 by invoking the extended period of limitation, along with interest under Section 75 of the Finance Act and also imposed an equal penalty under Section 78 of the Finance Act and a penalty of Rs.10,000/- under Section 77 of the Finance Act. 2.5 Aggrieved by the impugned order dated 25.06.2021, the appellants have preferred the present appeals before us.
3. Heard both sides and perused the material on records.
7 ST/60529/2021 with 14 more
4. The learned Counsel appearing on behalf of the appellant M/s District Information Technology Society ('DITS'), Gurugram submits that the impugned Order-in-Original is not sustainable in law and is liable to be set aside as the same has been passed without properly appreciating the facts & the law and binding judicial precedents. 4.1 The learned Counsel further submits that the appellant is a government-created society formed to facilitate statutory/sovereign functions of Haryana Government such as issuing licenses & certificates. It performs its functions on behalf of Haryana State and is constitutionally required to provide the services to the public, and the fee collected by the appellant is government-prescribed statutory charges and not commercial consideration. He further submits that there is no profit motive, and surpluses cannot be distributed among members, and they can only be used for public purposes as per bye- laws. He also submits that the Finance Act, 1994 does not define "business". He further submits that the DITS merely facilitates statutory functions on behalf on the government and the activities lack profit motive and are sovereign/state functions and they cannot constitute business under Service Tax law. For this, he relies on the judgment of Hon'ble Apex Court in the case of Narain Swadeshi Mills vs. Commissioner of Excess Profits Tax [AIR 1955 SC 176] wherein the Hon'ble Apex Court explained the expression "business" by holding that "Business connotes some real, substantial and systematic or organized course of activity or conduct with a set purpose".
8 ST/60529/2021 with 14 more 4.2 The learned Counsel further submits that the activities carried out by the appellant do not come under the purview of 'service' more particularly in terms of Section 65B(44) of Finance Act, 1994. He also submits that 'service' means any activity carried out by a person for another for consideration, and includes a declared service. He further submits that Section 65B(51) of the Finance Act, 1994 also defines 'taxable service' as any service on which service tax is leviable under Section 66B of the Finance Act, 1994.
4.3 The learned Counsel further submits that there is no 'service' as the appellant is undertaking the functions assigned to them on behalf of the Government of Haryana as an extended arm of the government as a facilitator, and all the activities undertaken by the appellant on behalf of the Government of Haryana are nothing but the sovereign functions of the State and not a commercial activity, therefore, it cannot be termed as a 'service'. 4.4 The learned Counsel further submits that the appellant only functions as an extended arm of the State Government and would be covered by the term 'local authority' or 'other authority' under Article 12 of the Constitution and hence, the activities carried out by the appellant i.e. issuing of registrations, caste certificates, licenses etc cannot be termed as 'service' within the meaning of the provisions contained in Finance Act, 1994. He also submits that the activities carried out by the appellant are stipulated under various statues and the same cannot be termed as 'service' under the Finance Act, 1994.
9 ST/60529/2021 with 14 more 4.5 The learned Counsel further submits that the issue involved in the present case is no more res integra and has been considered by the various benches of this Tribunal in the following cases, wherein on the identical issue, demand of service tax was set aside and appeals of the assessees were allowed:
United Telecoms Ltd vs. CST, Bangalore-I [2020 (43) GSTL 521 (Tri-Bang.)] Sukhmani Society for Citizen Services vs. CCE & ST, Chandigarh [2017 (47) STR 172 (Tri-Chan.)] 4.6 The learned Counsel also places reliance on the following decisions, wherein also on identical facts, demand of service tax was set aside:
MIDC vs. CCE [2014-TIOL-2022 (Tri-Mum.)] UTI Technology Services Ltd vs. CST, Mumbai [2012 (26) STR 147 (Tri-Mum.)] Electrical Inspectorate vs. CST [2008 (9) STR 494 (Tribunal)] CCE, Indore vs. Virgo Softech Ltd [2018 (9) GSTL 274 (Tri-Del.)] CCE, Bhopal vs. Smart Chip Limited [2015 (39) STR 197 (MP)] Chief Conservator of Forests [(1996) 2 SCC 293] 4.7 The learned Counsel further submits that the amount collected by the appellant is a statutory fee and not contractual consideration.
He further submits that mere nomenclature or name of the service alone is not sufficient to determine the taxability of the service. He also submits that in the negative list regime, when all the services except those which have been mentioned in the negative list or otherwise covered by an exemption notification, are taxable, then one cannot go by the mere name or nomenclature of the service; and the nature of the transaction has to be ascertained to see whether a 10 ST/60529/2021 with 14 more particular activity is taxable or not and it is also a settled principle of law that the nomenclature alone would not determine the nature of transaction. In this regard, he places reliance on the following decisions:
Moped India Ltd [1986 (23) ELT 8 (SC)]
Bhopal Sugar Industries Ltd vs. Sales Tax Officer,
Bhopal [(1977) SCC (3) 147]
4.8 The learned Counsel further submits that activities rendered by
the appellant are exempted under various clauses of the Notification No. 25/2012-ST dated 20.06.2012. He further submits that the activities of the appellant would be covered by any of Headings or Sl. Nos. in the said notification, i.e. Sl. No. 38, 39, 47, 48, 55, 57, 58, 60, 61 & 71 of Notification No. 25/2012-ST dated 20.06.2012. 4.9 The learned Counsel further submits that the appellant has to be treated as extended arm of the government and hence 'government' itself. In the impugned order, the learned Commissioner has rejected that the appellant is an agency or instrument of the government and therefore, in a sense, 'government' itself and has relied on the definition of 'government' as defined under Section 65B(26A) of the Finance Act by the amendment in 2015. 4.10 The learned Counsel also submits that the entire demand is barred by limitation and the learned Commissioner has wrongly confirmed the demand of service by invoking the extended period of limitation. He further submits that in the present case, the show cause notice was issued on 29.06.2020 demanding service tax for the period October 2014 to June 2017. He further submits that it is a 11 ST/60529/2021 with 14 more settled principle that extended period can be invoked only when the department conclusively establishes fraud, collusion, willful mis- statement or suppression of facts with intent to evade payment of tax; whereas in the present case, there is no material evidence suggesting any such intent on the part of the appellant. He further submits that the appellant is a governmental authority fully controlled and funded by Government of Haryana and its accounts/receipts are subjected to regular audit by the Accountant General Haryana and scrutiny by various government departments, and there was no concealment or suppression on the part of the appellant, and every activity and receipt was already within the public domain and when operations are under the overall supervision of the government itself, the element of 'intent to evade payment of tax' is wholly absent. 4.11 The learned Counsel further submits that the taxability of services provided by a governmental authority under Notification No. 25/2012-ST dated 20.06.2012 read with Notification No. 02/2014-ST dated 30.01.2014 involves a genuine difference of interpretation of the scope of exemption entries 39 & 60. He further submits that the appellant being a society, was under the bona fide belief that its activities were exempt. He also submits that the Hon'ble Apex Court in the following judgments has consistently held that where the dispute is interpretational, extended period cannot be invoked:
CCE vs. Champher Drugs & Liniments [1989 (40) ELT 276 (SC)] Padmini Products vs. Collector [1989 (43) ELT 195 (SC)] Pushpam Pharmaceuticals vs. CCE [1995 (78) ELT 401 (SC)] 12 ST/60529/2021 with 14 more Anand Nishikawa Co. Ltd vs. CCE, Meerut [2005 (188) ELT 149 (SC)] Continental Foundation Jt. Venture vs. CCE, Chandigarh [2007 (216) ELT 177 (SC)] He submits that in the above-cited judgments, it has also been consistently held by the Apex Court that something positive other than mere inaction or non-payment of duty is required for invoking extended period and that suppression means failure to disclose full information with intent to evade the payment of duty and mere omission to give certain information is not suppression of fact unless it is deliberate with intention to evade the payment of duty.
4.12 The learned Counsel further submits that the appellant was under a bona fide belief and understanding that being a governmental authority, performing municipal functions, its services were exempt and hence no service tax registration was necessary. He refers to the judgment of Hon'ble Apex Court in the case of Padmini Products (supra) wherein it was held that mere failure to obtain license/registration or file returns, when caused by bona fide belief regarding non-taxability, does not constitute suppression or willful mis-statement.
4.13 The learned Counsel further submits that the department has failed to establish any of the ingredients which are necessary to invoke the extended period of limitation. He also submits that the impugned order contains only a bald assertion of "suppression" without citing any evidence of deliberate concealment or intent to evade payment of tax on the part of the appellant, and in the absence of such evidences, the extended period of limitation is 13 ST/60529/2021 with 14 more unsustainable in law as held by the Hon'ble Supreme Court in the case of Pushpam Pharmaceuticals (supra).
5. Other Counsels/Consultants also appeared on behalf of other appellants who also filed their written submissions which have been taken on record; their arguments are also on the same lines as that of the Counsel for the appellant in the lead case.
6. On the other hand, the learned Authorized Representative for the department has filed the written submission which has been taken on record. He reiterates the findings of the impugned order. 6.1 The learned Authorized Representative refers to various provisions of relevant sections of the Finance Act, 1994 such as Section 65B(26A), Section 65B(31), Section 65B(44), Section 65B(51), Section 66D of the Act. He submits that the appellants do not fall within the definition of 'government' as prescribed under Section 65B(26A) of the Act. He further submits that DITS is a society registered under the Societies Registration Act, 1860 and once registered, a society acquires a separate legal personality distinct from the government; its accounts are not maintained under Article 150 of the Constitution; further, the revenue collected by the DITS is not credited to the consolidated fund of the State but is shared with other entities. He also submits that the appellants being a society, do not fall within the definition of 'local authority' as prescribed under Section 65B(31) of the Act. He further submits that the appellants also do not fall within the definition of 'governmental authority' as prescribed in clause 2(s) of Notification No. 25/2012-ST 14 ST/60529/2021 with 14 more dated 20.06.2012 read with Notification No. 02/2014-ST dated 30.01.2014. He also refers to the main objectives of DITS as provided under the memorandum of association of DITS and submits that considering the nature of functions performed by the DITS, they do not fall within the definition of 'governmental authority'. He further submits that DITS is neither 'governmental authority' nor 'local authority' and therefore, the appellants are not entitled to claim benefits under Section 66D of the Finance Act or Notification No. 25/2012-ST.
6.2 To justify the invocation of extended period of limitation, the learned Authorized Representative submits that even after the issue of clarification by the department vide Circular No. 192/02/2016-ST dated 13.04.2016 and the accompanying press note, the appellants chose not to take any corrective action, therefore, extended period of limitation has rightly been invoked by the learned Commissioner to confirm the demand. He also submits that the belief of the appellants that their activities were not taxable, is not supported by any reasonable interpretation of law. In support of his submission, he relies on the following decisions:
Nicholas Piramal India vs. CCE [2010 (260) ELT 338 (SC)] B.P.L. India Ltd. vs. CCE, Cochin [2002 (143) ΕLT 3 (SC)] T.N. State Transport Corpn. Ltd. vs. Collector of C. Ex., Madurai [2004 (166) ELΤ 433 (SC)] McKinsey & Company Inc. vs. CCE [2019 (20) GSTL 198 (Bom.)] Lakhan Singh & Co. vs. CCE, Jaipur [2016 (46) STR 297 (Tri- Del.)] 15 ST/60529/2021 with 14 more Otis Elevator Co. (I) Ltd. vs. CCE, Mumbai-V [2012 (280) ELT 531 (Tri-Mumbai)] Delhi Transport Corporation vs. CST [2015 (38) STR 673 (Del.)] [upheld by the Hon'ble SC as 2016 (45) STR J53 (SC)] 6.3 The learned Authorized Representative further submits that the case-laws relied upon by the appellants are distinguishable on facts and law, and do not apply to the facts of the present case.
7. We have considered the submissions made by both the parties and perused the material placed on record including the case-laws relied upon by both the parties. Before proceeding to give our findings, it is relevant to consider the definitions of 'government', 'governmental authority' and 'local authority' provided under various Sections of the Finance Act and various notifications, which are reproduced herein below:
Section 65B(26A) of the Finance Act, 1994 defines 'Government' as under:
"Government means the Departments of the Central Government, a State Government and its Departments and a Union Territory and its Departments, but shall not include any entity whether created by a statute or otherwise, the account of which are not required to be kept in accordance with article 150 of the Constitution or the rules made there under"
Section 65B (31) of Finance Act defines 'Local Authority' as under:
Local authority means-
a) a Panchayat as referred to in clause (d) of article 243 of the Constitution;
b) a Municipality as referred to in clause (e) of article 243P of the Constitution;
c) a Municipal Committee and a District Board, legally entitled to, or entrusted by the Government with, the control or management of a municipal 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;
16 ST/60529/2021 with 14 more
f) a development board constituted under article 371 of the Constitution; or
g) a regional council constituted under article 371A of the Constitution"
As per 3(31) of General Clauses Act, 1897, the definition of "Local Authority" is as under: -
"Local Authority" shall mean a municipal committee, district board, body of port commissioners or other authority legally entitled to, or entrusted by the Government with, the control or management of a municipal or local fund"
Definition of "Governmental Authority":
(1) As per clause 2(s) of Notin No. 25/2012-ST dated 20.06.2012, "governmental authority" means a board, or an authority or any other body established with 90% or more participation by way of equity or control by Government and set up by an Act of the Parliament or a State Legislature to carry out any function entrusted to a municipality under article 243W of the Constitution;
(2) Vide Notfn No. 02/2014-ST dated 30.01.2014, the definition of "governmental authority" has been amended and the amended definition is as under: -
"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 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;"
8. We find that in the present case, the only issue involved in the present case is whether the DITS/appellants fall within the definition of governmental authority/local authority and the services rendered by them are exempt under Notification No. 25/2012-ST dated 20.06.2012 being a governmental/local authority. Further, we find that the learned Commissioner in the impugned order has held that the DITS is neither a 'government' nor 'governmental/local authority' and it is only a 'society' registered under the Societies Registration 17 ST/60529/2021 with 14 more Act, 1860 and it is separate legal entity which is engaged in providing various services and is recovering the service charge on which it is liable to pay service tax and hence, is not entitled to exemption under Notification No. 25/2012-ST. To counter this finding of the learned Commissioner, the learned Counsel for the appellant has submitted that though the appellants are a registered society but they perform their functions under the complete control of Government of Haryana both administratively and financially. Further, we note that in fact, the appellants are 'governmental authority' and are performing their statutory functions as per the direction of the government and charging a nominal fee as prescribed by the government.
9. We further note that the functions performed by the appellants cannot be performed by any other authority and further, its accounts/receipts are subjected to regular audit by the Accountant General Haryana and scrutiny by various government departments. Further, the statutory fee charged for issuing various licenses/certificates cannot be said to be commercial consideration decided between the parties.
10. We also note that functions namely issuing of driving license, vehicle registration certificate, birth/death certificate etc performed by the appellants are governmental and civic in nature, carried out not for a commercial gain, but as a part of the State obligation to provide public services efficiently through e-governance platform.
11. We further note that the learned Commissioner has grossly erred in appreciating the facts & the law that some of the entries of 18 ST/60529/2021 with 14 more Notification No. 25/2012-ST have been specifically drafted for government authority which exempt the services provided by the governmental authority which may not be directly functioning as municipality or panchayat, but are providing services in relation to any of the functions entrusted to municipalities or panchayats through Article 243W/243G respectively.
12. We also note that Notification No. 25/2012-ST issued under Section 93(1) of the Finance Act, 1994, contains several entries explicitly designed to cover services rendered by the 'governmental authorities' in connection with constitutional functions of local bodies. Relevant particulars are as under:
Entry 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"; and Entry 60: "Services by Government, a 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."
We note that the legislative intent behind these entries was to extend exemption not only to municipalities and panchayats but also to statutory bodies, societies and agencies created by the government to execute those very functions. We find that the learned Commissioner has completely overlooked this express purpose and erroneously held that only direct performance of functions by municipalities or panchayats qualifies for the exemption. We find that such an interpretation defeats the very objective of the said Notification.
19 ST/60529/2021 with 14 more
13. We further note that the DITS clearly falls within the definition of 'governmental authority' as defined under clause 2(s) of the Notification No. 25/2012-ST dated 20.06.2012 as substituted by Notification No. 02/2014-ST dated 30.01.2014, wherein it is clearly described that 'governmental authority' means an authority which established by the 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. In fact, all the DITS are established by the Government of Haryana with 100% control and operate under the direct supervision of the District Deputy Commissioners for each district. If we see the objectives of the appellants as per their memorandum which provide online citizen- centric services such as issuance of driving licenses, vehicle registration certificates, death/birth certificates, registration of properties, digitize and maintain land, municipal and public records and assist government departments and urban local bodies in implementing e-governance projects. The above-said functions are squarely in relation to municipal responsibilities enumerated in Twelfth Schedule (Article 243W) of the Constitution.
14. We further note that exemption notification was consciously drafted to include governmental authorities that may not be functioning directly as municipalities or panchayats, but are executing or assisting in carrying out those functions on behalf of such constitutional bodies. The said intention of the Government is evident from the wording of the Notification No. 25/2012-ST itself and the subsequent clarificatory Notification No. 02/2014-ST which expands 20 ST/60529/2021 with 14 more the definition of 'governmental authority' to include entities "established by the government" with majority control.
15. In view of the facts & circumstances enumerated above, we are of the considered opinion that the appellants, being an instrumentality of the State created to perform local functions electronically, are the implementing agency of the government, and are not a commercial service provider. Consequently, denial of exemption under Notification No. 25/2012-ST to the appellants, is not legally sustainable.
16. Further, we find that identical issue was considered by various benches of the Tribunal. In this regard, we may refer to the decision of Bangalore Bench of the Tribunal in the case of United Telecoms Ltd (supra), wherein the Tribunal after considering the various judgments of the High Courts/Supreme Court and the clarification issued by the CBEC vide Circular No. 89/7/2006-ST dated 18.12.2006, has held as under:
"5. Heard both sides and perused the records of the case. We find that C.B.E.C. by the Circular cited above has clarified as under:
"2. The issue has been examined. The Board is of the view that the activities performed by the sovereign/public authorities under the provision of law are in the nature of statutory obligations which are to be fulfilled in accordance with law. The fee collected by them for performing such activities is in the nature of compulsory levy as per the provisions of the relevant statute, and it is deposited into the Government Treasury. Such activity is purely in public interest and it is undertaken as mandatory and statutory function. These are not in the nature of service to any particular individual for any consideration. Therefore, such an activity performed by a sovereign/public authority under the provisions of law does not constitute provision of taxable service to a person and, therefore, no service tax is leviable on such activities.
21 ST/60529/2021 with 14 more
3. However, if such authority performs a service, which is not in the nature of statutory activity and the same is undertaken for a consideration not in the nature of statutory fee/levy, then in such cases, service tax would be leviable, if the activity undertaken falls within the ambit of a taxable service."
5.1 Tribunal in the case of Smart Chip Limited [2013 (31) STR 727 (Tri. Del.)] has gone into the issue has also observed as under:
"8. Added to above observations made, we are also unable to find how Section 65(19)(iv) of Finance Act, 1994 comes to rescue of Revenue. The object was not procurement of goods or services. Object of the contract as that was spelt out in agreement dated 9- 10-2001 is to build a system. Revenue also fails to get help by piecemeal reading of the law without proving that the services provided by the appellant was auxiliary in nature to serve the purpose of business of client. By no stretch of imagination, building a system can be conceived to be "Business Auxiliary Service".
We have occasion to go through para 52 of the judgment of Hon'ble High Court of Delhi in the case of Home Solutions reported in 2011 (33) STT 95/13 Taxman 188 (Del.) = 2011 (24) S.T.R. 129 (Del.) where the service tax jurisprudence has been laid down by the Hon'ble Court on consideration of rulings of Apex Court on the subject. The same is re-produced for the reading :
52. From the above pronouncements in the field, the following principles regarding service tax can be fruitfully culled out :
(i) The measure of taxation does not affect the nature of taxation and, therefore, the manner of quantification of the levy of service tax has no bearing on the factum of legislative competence.
(ii) Taxable services can include providing of premises on a temporary basis for organizing any official, social or business function but also other facilities supplied in relation thereto.
(iii) Levy of service tax on a particular kind of service cannot be struck down on the ground that it does not conform to a common understanding of the word 'service' as long as it does not transgress any specific restriction embodies in the Constitution.
(iv) Service tax is a levy on the event of service.
22 ST/60529/2021 with 14 more
(v) The concept of service tax is an economic concept.
(vi) 'Consumption of service' as in case of 'consumption of goods' satisfies human needs.
(vii) Service tax is a value added tax which in turn is a general tax applicable to all commercial activities involving provision of service.
(viii) Value added tax is a general tax as well as destination based consumption tax leviable on services provided within the country.
(ix) The principle of equivalence is in-built into the concept of service tax.
(x) The activity undertaken in a transaction can have two components, namely, activity undertaken by a person pertaining to his performance and skill and secondly the person who avails the benefit of the said performance and skill. In the said context, the two concepts namely activity and the service provider and service recipient gain significance.
6. In view of the above, we find that the appellants are only assisting a statutory authority in the discharge of statutory functions and by no stretch of imagination they are rendering any Business Auxiliary Service to the Road Transport Authorities. From the facts of the case, it is apparent that the Road Transport Authority has outsourced part of their work to the appellant and thereby the appellants have in fact assisted the statutory functions of the authorities and have not in any case supported any business activity. In view of the same and in view of the judicial pronouncement as above, appeal is allowed with consequential relief, if any as per law." 16.1 Similarly, Chandigarh Bench of the Tribunal in the case of Sukhmani Society for Citizen Services (supra) has considered the identical issue and held as under:
"8. The activities facilitated by the appellant, such as issue of birth and death certificate, marriage certificate, vehicle registration, etc. are undoubtedly in the nature of the statutory functions of the Govt. The C.B.E. & C. vide Circular No. 96/07/2007-ST, dated 23-8-2007 has clarified that services which are in the nature of statutory duties of the Government are not to be treated as services provided for 23 ST/60529/2021 with 14 more consideration and hence, no service tax will be chargeable on the same.
999.01/ Sovereign/public authorities Activities assigned to any 23-8- perform functions assigned to performed by the 2007 them under the law in force, sovereign/public authorities known as "statutory functions". under the provisions of any law For example, Regional Reference are statutory duties. The fee or Standards Laboratories (RRSL) amount collected as per the undertake verification, approval provisions of the relevant and calibration of weighing and statute for performing such measuring instruments; functions is in the nature of a . Regional Transport Officers compulsory levy and are (RTO) issue fitness certificate to deposited into the Government motor vehicles; account.
. Directorate of Boilers inspects Such activities are purely in and issues certificates for boilers; public interest and are or undertaken as mandatory and . Explosive Department inspects statutory functions. These are and issues certificate for not to be treated as services petroleum storage taken, provided for a consideration.
LPG/CNG tank in terms of Therefore, such activities provisions of the relevant laws. assigned to and performed by a sovereign/public authority Authorities providing such under the provisions of any law, functions, required to be do not constitute taxable performed as per law, may services. Any amount/ fee collect specific amount or fee collected in such cases are not and the amount so collected is to be treated as consideration deposited into Government for the purpose of levy of service account.
tax.
Whether such activities of a However, if a sovereign/public sovereign/public authority, authority provides a service, performed under a statute, can which is not in the nature of be considered as 'provision of statutory activity and the same service' for the purpose of levy of is undertaken for a service tax and the amount or consideration (not a statutory fee collected, if any, for such fee), then in such cases, service purposes can be treated as tax would be leviable as long as consideration for the services the activity undertaken falls provided?
within the scope of a taxable service as defined.
The Commissioner in the impugned order has taken the view that 'provision of service on behalf of the client' appearing in the definition of Business Auxiliary Service, would mean that any service on behalf of any client, would be covered under it. We are of the view that such an interpretation is totally mis-placed. The business auxiliary service would become chargeable to service tax only if the service is rendered in relation to the business of the recipient. In the present case, the service of facilitization has been rendered to the Govt. departments, which are engaged not in business but in rendering public services. Hence we find that the present case fails the basic test prescribed by C.B.E. & C. in the 24 ST/60529/2021 with 14 more Circular dated 23-8-2007 that for charging service tax, the service should not be in the nature of statutory duties of the Government.
9. This Tribunal in several decisions and also the Hon'ble High Court in several decisions has taken similar views. In Ideal Road Builders P. Ltd. case, the Tribunal has taken the view that collecting toll on behalf of the NHAI and retaining a portion of the amount collected as commission cannot be considered as rendering Business Auxiliary Service. Similar view was taken by the Tribunal in the case of Intertoll India Consultants P. Ltd. In United Telecom Ltd. case, service tax demand on e-Sevakendra facilities for payment of electricity bill, telephone bill, birth or death certificate, etc., were set aside. In Smart Chip Ltd. case, the services rendered to the Transport Department to facilitate issue of driving licenses, etc. was held to be not covered under the Business Auxiliary Service."
17. As regards the invocation of extended period to confirm the demand, we find that in the present case, the extended period cannot be invoked because the department has failed to prove any of the elements which are required for invoking the extended period provided under proviso to Section 73(1) of the Finance Act, 1994. Moreover, since the appellants are a 'governmental authority' fully controlled and funded by the Government of Haryana and its accounts/receipts are also subjected to audit by the Accountant General Haryana and there is no concealment or suppression of facts and every activity is already within the public domain and its operations are under the overall supervision of the Government of Haryana itself, therefore, the element "intent to evade the tax" is wholly absent. Moreover, the issue of taxability and availability of exemption under notification is purely an interpretational issue. Further, we also observe that all the appellants were under a bona fide belief that being a governmental authority performing municipal 25 ST/60529/2021 with 14 more functions, their services were exempt and hence, no Service Tax registration was necessary. The decisions cited supra on this issue are squarely applicable to the facts of the present case.
18. As regards the imposition of penalties, we find that imposition of penalties by invoking the extended period is also not sustainable as in the various judgements cited above, the Hon'ble Apex Court has repeatedly held that when the non-payment of tax arises due to a bona fide difference of opinion, it cannot be treated as suppression or willful mis-statement. We find that in the present case, the appellants, being a non-profit government-controlled entity engaged in providing statutory citizen-centric services, leaves no room to infer any intent to evade the tax. Therefore, invocation of extended period and imposition of penalties under Sections 77 & 78 of the Finance Act, are not sustainable in law.
19. Keeping in view our discussion above, we are of the considered opinion that the impugned order is not sustainable in law on merits as well as on limitation, therefore, we set aside the same and allow the appeals of the appellants with consequential relief, if any, as per law.
(Order pronounced in the open court on 28.04.2026) (S. S. GARG) MEMBER (JUDICIAL) (P. ANJANI KUMAR) MEMBER (TECHNICAL) RA_Saifi