By TIOL News Service

MUMBAI, APRIL 09, 2018: THE appellant is a Municipal Corporation.

Revenue sought to levy service tax on the below mentioned services allegedly provided by the appellant to the general public.

Against the o-in-o passed by the CCE, Kolhapur, the appellant is before the CESTAT.

It is informed that they do not contest the service tax demands pertaining to Building Rent, Mandap keeper and Supply of Tangible Goods. However, they contest the demand on the deposit received against the renting of immovable property.

The appellant submitted that deposit of any kind is advance deposit and not the consideration towards any service, therefore, the same is not liable for service tax. Reliance is placed on the decisions in Samir Rajendra Shah - 2014-TIOL-2202-CESTAT-MUM and Murli Realtors Pvt. Ltd. - 2014-TIOL-1728-CESTAT-MUM.

As regard demand of service tax on Land Rent and Bazaar Land Rent, it is submitted that a statutory fee is recovered for providing vacant land and being in the nature of a sovereign function ofa Government body, therefore, the same is not taxable. The appellant drew the attention of the Bench to an order dt. 20.03.2014 passed by the Commissioner dropping the service tax demand in the case of Satara Nagar Parishad who are identically placed Municipal Corporation, and pleaded that since that order has been accepted by the department, the appellant should also not be taxed.

As regards the slaughter house fees, it is submitted that under Article 243W of Constitution read with Twelfth Schedule, the Regulation of Slaughter houses and tanneries appearing at Sr. no. 18 of the Schedule is a sovereign function, therefore, on any fees connected towards performance of sovereign function, service tax cannot be charged.

As regard the service tax on the alleged advertisements i.e. Sale of Space or Time, the appellant submitted that have not sold the space for advertisement, but have collected the advertisement tax. Being a statutory levy fixed by the Municipal Corporation, the same cannot be taxed.

He further submits that the appellant being a Municipal Corporation, there cannot be a malafide intention or suppression of fact to evade service tax, therefore, neither extended period should be invoked nor penalty. The following case laws are cited in support - Brihanmumbai Municipal Corporation - 2017-TIOL-1846-CESTAT-MUM, Municipal Corpn. Rajahmundry - 2017-TIOL-3349-CESTAT-HYD & Mormugao Municipal Council - 2017-TIOL-3229-CESTAT-MUM.

The AR submitted that no documentary evidence was produced by the appellant regarding the submission of demand made on advance deposits. Further, as regard the service tax on Land Rent and Bazar Land Rent, it is not coming out from the record as to whether it is the same issue that was decided in Satara Nagar Parishad case and, therefore, matter needs verification.

In the matter of the service tax demands accepted by the appellant, the Bench upheld the same and in the matter of the disputed demands, the CESTAT inter alia viewed thus-

Merits:

++ Advance deposit towards the renting of immovable property is considered as security deposit which is not part and parcel of the rent, therefore, the amount being deposit and not rent, cannot be taxed. However, the adjudicating authority has not verified this fact, we, therefore, direct the adjudicating authority to verify the facts.

++ As regard land rent and bazaar land rent, Bench finds that the identical issue has been decided by the Commissioner vide order dt. 20.03.2014, in case of identically placed Satara Nagar Parishad wherein the demand was dropped and the order has attained finality. Bench finds that no evidence is on record to show that on what account the land rent and bazar land rent is collected. However, if this is under the same head which was existing in the case of Satara Nagar Parishad then the same will not be chargeable to service tax, therefore, the Commissioner needs to verify this aspect.

++ As regards the Slaughter house fees, Bench observes that as per the Schedule Twelfth r/w Article 243W, Regulation of Slaughter houses is the sovereign function of the Municipal Corporation. Therefore, the fees collected towards the Regulation of Slaughter houses, the demand of Service Tax is hereby set aside.

++ The service tax demand was also confirmed on the amount collected by the appellant towards advertisement. It is observed from the receipt of the Municipal Corporation i.e. appellant the amount towards so called advertisement was collected as 'Jahirat Kar' (Advertisement Tax). Bench is of the view that the advertisement tax being statutory tax levy by the Municipal Corporation should not be liable to service tax.

Penalty:

Bench finds that appellant is a Government Municipal Corporation and not an individual. It cannot be imagined that the Government itself is involved in suppression of fact with intent to evade service tax. Being non-existence of malafide intention, no penalty can be imposed.

The appeal was partly allowed/disposed of.

(See 2018-TIOL-1109-CESTAT-MUM)