In a recent case before Customs, Excise and Service Tax Appellate Tribunal ( CESTAT ) it was ruled that no service tax shall be levied on GIDC’s infrastructure upgradation, subletting, and other fees during the impugned period of either before or after 01.07.2012.
The Appellant, Gujarat Industrial Development Corporation ( GIDC ) established under the Gujarat Industrial Development Act, 1962, facilitates industrial development in Gujarat by allocating land and providing infrastructure in industrial areas.
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GIDC collects rents from lessees and pay service tax on the amount retained for infrastructure up-gradation fund. It had decided on merging the infrastructure Maintenance Fund ( IMF ) and the Infrastructure Upgradation Fund ( IUF ) into a single fund.
A circular dated 17.07.2010 outlined quarterly payments of 40% of the collected amount to industrial associations. Central Excise Commissionerate after an audit raised objections about GIDC’s failure to pay service tax on share of 40% allocated to industrial associations.
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The Commissionerate also observed that the appellant had failed to pay service tax on Non-Utilization (NU) Penalty, Water Supply Charges, Miscellaneous Receipts and Transfer Charges.
The appellant challenged the demand in the adjudication proceedings and the Ld. Commissioner dropped the demand of Rs. 1,41,13,393/-. In the impugned order-in-original held that the appellant is liable Service Tax amounting to Rs. 1, 03, 18, 874/- along with interest.
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It was also held that extended period was invokable as they had deliberately concealed material information from the department. The Audit-I Commossionerate , Ahmedabad said that in this case there existed improper assessment on the part of the service provider with a wilful intention to evade payment of Service Tax.
Further interest under Section 75 of the Finance Act, 1994 was demanded and penalties under Section 76, 77 and 78 was also imposed.
The Counsel for the appellant, Advocate Jigar Shah and Advocate Amber Kumarawat, argued that as per section 67 Service tax is leviable only on the ‘gross amount charged’ by the service provider for the ‘services provided.’ And the term ‘ gross amount charged’ should not be interpreted as any amount billed by the service provider.
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The amount collected on behalf of industrial association wont be liable for service tax, since no services was provided by the appellant to the allottees. They also argued that the amount if Rs.2 collected from leaseholders for remittance to infrastructure Associations/Notified Area Authorities does not qualify as consideration for any service provided by GIDC. Therefore service tax wont be applicable on the amount.
The appellant also argued that as the appellant is an undertaking of the State of Gujarat, the income is immune from Union taxation.
Shri Mihir G Rayka, learned Additional Commissioner ( AR ) arguing on behalf of the department reiterated the findings of the impugned order and emphasized that the demand had rightly confirmed against the appellant.
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It was submitted that the income earned by M/s. GIDC before the notification came into effect wont be eligible for exemption and is therefore liable for Service Tax. The charges, categorized as ‘ Transfer Fees ’ and ‘ Infrastructure Upgradation Fund,’ relating to the service of ‘ Renting of Immovable Property,’ attracts Service Tax.
The tribunal comprising Justice Ramesh Nair and C.L. Mahar observed that any authority vested with the obligation and powers to develop an industrial estate need to collect charges as per the State Act, and so long as the charges are as per the Act and not discretionary, the same are considered to be statutory levies.
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They also ruled that infrastructure up – gradation fund, transfer fees ,etc necessary for maintenance, management and repairs of the industrial estate under GIDC, established under the Gujarat Industrial Development Act, 1962 are not subject to service tax during the impugned period. Nor can service tax be levied on the share of “IUF” collected from lease holders and reimbursed from them wont qualify as consideration for any services provided by GIDC.
Therefore the impugned orders were set aside allowing the appeals.
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