In a recent case, the Chennai bench of the Customs, Excise And Service Tax Appellate Tribunal ( CESTAT ) remanded the challenge on Service Tax liability on income generated out of ‘Renting Out Immovable Properties’ of Muncipality.
M/s. Velur Town Panchayat (the ‘Appellant’) challenged the Order-in-Appeal passed by the Commissioner of Central Excise (Appeals), Salem which upheld the Order-inOriginal No. 21/2014 dated 01.12.2014 confirming the demand of service tax amounting to Rs.4,82,206/- under Section 73(2) of the Finance Act, 1994 (Act) along with appropriate interest besides imposing penalties of Rs.30,000/- under Section 77(2) for non-filing and also under Section 76 of the ACT.
The Appellant was rendering services under the category of “Renting of Immovable Property Service” by renting out immovable properties such as shops, commercial complex, etc. The department alleged that the Appellant had failed to obtain service tax registration and remit Service Tax. A Show Cause Notice dated 17.04.2013 was issued to the Appellant demanding service tax for the period from October 2007 to March 2012 which was adjudicated and appealed against.
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Subsequently, a statement of demand was issued for the period from April 2012-March 2013 proposing to demand service tax of Rs.4,82,206/- along with interest and to impose penalties. The Adjudicating Authority confirmed the demand and imposed penalties under Section 77(2) and Section 76 of the Act. On appeal by the Appellant, the Lower Appellate Authority dismissed their appeal and upheld the Order-in-Original dated 01.12.2014. Aggrieved, the Appellant is on appeal before this forum.
The appeal was statistically closed with the discretion to reopen the matter in case of any change of circumstances. Subsequently the Department filed a Miscellaneous application seeking restoration of appeal citing the Tribunal Final Order No. 42545-42548 of 2018 dated 01.10.2018 passed in the case of Punjai Puliampatty Municipality. Accordingly vide Miscellaneous order No. 40079/2021 dated 23.08.2021, this Tribunal restored the appeal and is being taken up for disposal.
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Consultant Shri R. Balagopal representing the appellant has submitted that M/s. Velur Town Panchayat owns a number of immovable properties, vacant land, markets, etc., which have been leased for specific period by tender-cum-public auction as per the State Government orders, which is a creature of an Act of the Tamil Nadu Legislature and is the statutory body being governed by the Tamil Nadu District Municipalities Act, 1920 and it is an autonomous self-government in terms of the Article 243Q of the Constitution of India. He has submitted that the law is well settled that municipalities are covered under the definition of the ‘State’ as enshrined under the Article 12 of Constitution of India.
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Authorised Representative Shri M. Selvakumar representing the Department has affirmed the findings of the impugned order and submitted that the Appellant is liable to pay service tax on the income generated out of renting out / leasing out immovable properties of the municipality under ‘Renting of Immovable Property service’ as upheld by various High Courts and the Tribunal. It was therefore prayed for dismissal of the appeal filed by the Appellant.
It was held that the Government or local authority is exempted from payment of service tax on Renting of Immovable Property
Services or for other services.
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A Single Judge of this Court by her common order dated 10-8-2022 disposed of the said writ petitions on the ground that at the stage of Show cause notice, writ petitions cannot be entertained. But, however the learned Single Judge has made it clear that the respondent will have to consider the decision rendered by another learned Single Judge of this Court in a batch of writ petitions in W.P. No. 8900 of 2017 in the case of Cuddalore Municipality v. The Joint Commissioner of GST and Central Excise, before passing final orders.
Senior Panel Counsel appearing for the respondent would submit that the order passed in the Cuddalore Municipality case referred to (supra) is the subject matter of challenge in a writ appeal.
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In the case of St. Thomas Mount Cum Pallavaram Cantonment Board after referring to the above conflicting decisions, held it proper to remand the matter back to the file of original authority observed that “8. For the foregoing reasons, the impugned order dated 30-92022 passed by the respondent is hereby quashed and the matter is remanded back to the respondent for fresh consideration on merits and in accordance with law, within a time frame to be fixed by this Court. The respondent shall pass final orders, after giving due consideration to the orders of this Court in the cases of (a) Cuddalore Municipality v. Joint Commissioner of GST and Central Excise in W.P. No. 8900 of 2017, dated 22-3-2021 as well as (b) St. Thomas Mount Cum Pallavaram Cantonment Board v. The Additional Directors and others in W.P. Nos. 28468 and 28080 of 2021, dated 10-8-2022, within a period of twelve weeks from the date of receipt of a copy of this order.”
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A two member bench of Vasa Seshagiri Rao, Member (Technical) and Ajayan T.V., Member (Judicial) viewed that the matter requires to be remanded to the Adjudicating Authority who is directed to consider the issue afresh after giving an opportunity to the Appellant to furnish evidence and for personal hearing. While allowing the appeal, the the tribunal set aside the impugned.
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