Custom, Excise & Service Tax Tribunal
Sukhmani Society For Citizen Services vs C.C.E. & S.T., Chandigarh on 19 July, 2016
CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL SCO 147-148, SECTOR 17-C, CHANDIGARH 160 017 COURT NO. I APPEAL NO. ST/1547/2011 [DB] [Arising out of Order-in-Original No. 49/ST/CHD-II/2011 dated 27.07.2011 passed by the Commissioner of Central Excise & Service Tax (Appeals), Chandigarh] Date of hearing: 11.07.2016 Date of decision: 19.07.2016 For approval and signature: Honble Mr. Ashok Jindal, Member (Judicial) Honble Mr. V. Padmanabhan, Member (Technical) 1. Whether Press Reporter may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982? No 2. Whether it would be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not? No 3. Whether their Lordships wish to see the fair copy of the order? Seen 4. Whether order is to be circulated to the Department Authorities? Yes Sukhmani Society for Citizen Services : Appellant VS C.C.E. & S.T., Chandigarh : Respondent
Appearance Shri A.K. Batra, C. A. for the Appellant Shri Harvinder Singh, Ld. D.R. for the Respondent CORAM:
Honble Mr. Ashok Jindal, Member (Judicial) Honble Mr. V. Padmanabhan, Member (Technical) FINAL ORDER NO. 60939/2016 Per : V. Padmanabhan The present appeal is directed against the Order dated 06.09.2013 passed by the Commissioner of Central Excise, Chandigarh, in which he upheld the demand of Service Tax to the tune of Rs. 51 lakhs on the appellant for rendering Business Auxiliary Service during the period 01-04-2005 to 31-03-2010 under the taxable clause of Section 65(105)(zzb) of the Finance Act, 1994.
2. The facts of the case are that the appellant, M/s Sukhmani Society for Citizen Services, is a society registered under Society Registration Act XXI of 1860 having district level senior functionaries of the administration and eminent personalities on its Board of Governors as ex-officio members. The appellant is running SUWIDHA (Single User-friendly Window Disposal and Help-line for Applicants) Centers at various towns of the district. The appellant through these SUWIDHA Centers, is engaged in facilitation of issue of different kinds of licenses, permissions and registrations by the Govt. of Punjab such as Registration of Births and Deaths, Marriages, Vehicles, Driving Licenses, Ration Cards, Arms Licenses etc by way of receiving documents/applications on behalf of various related agencies/departments of the Govt alongwith statutory charges for such work and additional amounts towards their service charges. These applications/documents, received from applicants are processed/tracked and referred to concerned departments/agencies and after issuance of required permissions/ approvals thereupon by the concerned Govt departments/agencies, these are handed over back to the applicants. These SUWIDHA centers do provide societys services as front office/help desk of Govt department/agencies, handling the statutory and non-statutory work and receive payments on their behalf which otherwise these department/agencies would have attended themselves. The appellant has been registered as a Society under Society Registration Act XXI of 1860 and acts as per guidelines of the Punjab State e-governance Society with a view to provide various Govt Services under one roof and is charging facilitation charges over and above the Govt statutory fees prescribed under various legislations.
3. The Commissioner took the view that the services provided by the appellant to various Govt departments of State of Punjab is covered under the category of Business Auxiliary Service and is chargeable to service tax. This view has challenged by the appellant in the present proceedings mainly on the following points:
(i) The primary objective of the appellant is to provide integrated citizen services pertaining to all departments to the public. These are in the nature of facilitization services to the general public and does not fall within any category of taxable service.
(ii) The services rendered by them cannot be charge to service tax under Business Auxiliary Service, since the service recipient is the Government. Unless the services are in relation to business, no service tax is chargeable.
(iii) The services which are facilitated by the appellant are falling in the category of sovereign functions of the Government and hence, no service tax is chargeable. They have also placed reliance on several cases, which are listed below:
(a) Smart Chip Ltd. Vs. Commr of C.Ex, Bhopal [2013 (31) STR 727 (Tri.-Del.)], upheld by Honble Madhya Pradesh High Court in Commr of C.Ex, Bhopal Vs. Smart Chip Ltd. [2015 (39) STR 197 (M.P.)]
(b) United Telecom Ltd. Vs. Commr of C.Ex., Hyderabad [2011 (21) STR 234 (Tri.-Bang)]
(c) Ideal Road Builders Pvt Ltd. Vs. Commr of S.T., Mumbai [2015 (40) STR 480 (Tri.-Mum.)]
(d) Intertoll India Consultants (P) Ltd. Vs. Commr of C.Ex., Noida [2011 (24) STR 611 (Tri.-Del.)]
(e) Yardstick Technologies Pvt Ltd. Vs. Commr of S.T., Mumbai-II [2014 (10) TMI 521 CESTAT Mumbai]
4. The definition of Business Auxiliary Service during the period of dispute has under gone several charges but the portion of the definition which is relevant for the present proceedings is given below:
Business Auxiliary Service means any service in relation to-
(i)------------
(ii)-------------
(iii)----------
(iv)-----------
(v)-----------
(vi) provision of service on behalf of the client,
(vii)------------
Taxable Clause Section 65(105)(zzb) of Finance Act, 1994 reads as under:
a) With effect from 01-05-2006 Taxable service means any service provided or to be provided to a client, by any person, in relation to business auxiliary service.
b) 16-06-2005 to 30-04-2006 Taxable service means any service provided or to be provided to a client, by a commercial concern, in relation to business auxiliary service.
c) 01-07-2003 to 15-06-2005 Taxable service means any service provided to a client, by a commercial concern, in relation to business auxiliary service.
5. The appellant is a society registered under Society Registration Act and its function is to provide various Government services under one roof. Illustrative list of such services is as hereunder:
- Marriage Certificate
- Police Clearance Certificate
- Permission to use Loud-Speakers
- Collection of water and sewerage charges
- Building Plans
- Births & Deaths Certificate
- Renewal of Driving License etc.
6. We find that the appellant is authorized to collect the statutory fees and remit the same to the concerned Government departments. In addition, they are also allowed to charge facilitation charges over this statutory fee, which is used to sustain the Seva Kendras. Revenue has taken the view that these facilitation charges which the government has allowed them to collect is the consideration paid by the government to the appellant for provision of services to the public on behalf of the government.
7. For rendering Business Auxiliary Service, there will be three persons e.g. A, B and C. If B provides the service to C on behalf of the A, then B is said to render business auxiliary service. The consideration for the services would be paid by A to B. The view taken by the Revenue is that A is the government, B is the appellant and C is the public. The consideration is taken as the amount collected as facilitation charges. The appellant has taken the argument that to levy service tax under the Business Auxiliary Service the service provided by a service provider has to be in relation to the business of the service recipient. In other words, service provided by any person to a client in relation to Business Auxiliary Service is required to be in relation to business or commerce of the service recipient. We find this argument to be very persuasive. We find that the appellant has provided facilitization services to various departments. Hence, taxability under the category would arisen only if the govt department is engaged in business or commerce and services provided by the appellant are auxiliary to their business.
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 CBCE vide Circular No. 96/07/2007-ST dated 23-08-2007 has clarified that services which are in the nature of statutory duties of the government are not to be treated as services provided for consideration and hence, no service tax will be chargeable on the same.
999.01/ 23.08.07 Sovereign/ public authorities perform functions assigned to them under the law in force, known as statutory functions. For example, Regional Reference Standards laboratories (RRSL) undertake verification, approval and calibration of weighing and measuring instruments;
. Regional Transport Officers (RTO) issue fitness certificate to motor vehicles;
. Directorate of Boilers inspects and issues certificates for boilers; or . Explosive Department inspects and issues certificate for petroleum storage taken, LPG/CNG tank in terms of provisions of the relevant laws.
Authorities providing such functions, required to be performed as per law, may collect specific amount or fee and the amount so collected is deposited into government account.
Whether such activities of a sovereign / public authority, performed under a statute, can be considered as provision of service for the purpose of levy of service tax and the amount or fee collected, if any, for such purposes can be treated as consideration for the services provided?
Activities assigned to any 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 and 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 purpose of levy of service tax.
However, if a sovereign/ public authority provides a service, which is not in the nature of 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.
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 CBEC in the circular dated 23.08.2007 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 Honble 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.
10. In line with the above discussion, the impugned order is set aside and the appeal is allowed.
(Order pronounced in court on ____________) Ashok Jindal Member (Judicial) V. Padmanabhan Member (Technical) RAS 9 1