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"7.3.1 Are various corporations formed under Central Acts or State Acts or various government companies registered under the Companies Act, 1956 or autonomous institutions set up by special acts covered under the definition of 'governmental authority'?

Answer: No. As stated earlier the appellant company is also not set up by an Act of the State Legislature. They further claim that they are established with 90% or more participation by way of equity or control by Government and they carry out functions entrusted to a municipality under article 243W of the Constitution with respect to Public health. From the Memorandum and Articles of Association of TNMSCL listed above, it is clear that the Corporation is a separate legal entity which is not 'Governmental' in nature and is like any other private company. State activities are multifarious. Considering the wide ramifications, sovereign functions should be restricted to those functions, which are primarily inalienable, and which can be performed by the State alone.

Para 33 of the judgment further amplifies this point;

"33. So, sovereign function in the new sense may have very wide ramification but essentially sovereign functions are primary inalienable functions which only State could exercise. Thus, various functions of the State, may be ramifications of 'sovereignty' but they all cannot be construed as primary inalienable functions. Broadly it is taxation, eminent domain and police power which covers its field. It may cover its legislative functions, administration of law, eminent domain, maintenance of law and order, internal and external security, grant of pardon. So, the dichotomy between sovereign and non-sovereign function could be found by finding which of the functions of the State could be undertaken by any private person or body. The one which could be undertaken cannot be sovereign function. In a given case even in subject on which the State has the monopoly may also be non-sovereign in nature. Mere dealing in subject of monopoly of the State would not make any such enterprise sovereign in nature. Absence of profit making or mere quid pro would also not make such enterprise to be outside the ambit of "industry" ......"

i) Such drugs and medicines shall be clearly marked as "Government supply - Not for Sale"

ii) The Corporation shall not sell the said drugs and medicines in the open market

2. This notification shall be deemed to have come into force on the 12th April 1993.

(emphasis added) The notification states exemption in respect of "tax payable", this shows that had the notification not been issued TNMSCL would have to pay sales tax and the benefit of 'sovereign function' has not been recognized by the State Government itself in the appellant's case. Further as held in 'In re. The Bill to Amend the Sea Customs Act' (supra) the immunity granted to the States in respect of Union taxation, under Art. 289(1) does not extend to indirect taxes. For the reasons discussed above we are of the opinion that in the absence of a specific notification by the Central Government exempting their activities from service tax, like that issued by the State Government in the case of sales tax reproduced above, the appellant will not be eligible to claim exemption from service tax citing the 'sovereign function' principle.

7. The appellant has averred that the extended time limit for issue of SCN is not valid as there is no evidence that TNMSCL had attempted to evade Service Tax liability, nor is there evidence of fraud or suppression. Hence the question of paying interest and penalty does not arise. We have gone through the facts of the case and the impugned order and find that the main issue involved is relating to their claim of 'sovereign function' pertaining to activities, like that of the appellant which they claim takes the colour of governmental activities and is subject to exemption from taxation. We find that the company is registered for service tax purposes with the Service Tax Department under the categories of "Transport of Goods by Road" and "Management Consultancy Services" and they have not disputed the same on grounds of 'sovereign function'. Further the appellant has stated that per G.O.No.431 dt.18.12.1996 exemption has been granted in respect of sales tax payable by TNMSCL for the drugs and medicines procured and distributed to the various medical institutions. This in itself shows that TNMSCL is not a 'sovereign/ governmental authority'' even by the State Governments own understanding as discussed above. This being so, there should not have been any confusion in the interpretation of law especially in the light of the Apex Courts advisory 'In re. The Bill to Amend the Sea Customs Act' in the early 1960's. The declaratory responsibility of an assessee in the self-assessment regime is much bigger and the non-disclosure of taxable activity in the ST/41820/2013 ST-3 Return and non-payment of duty has to be viewed strictly and can only be held to be an act of suppression of facts with an intention to evade payment of duty. Hence the extended period of limitation has been rightly invoked and the appeal in this regard is without merit.