CESTAT upholds Penalties for Non-Registration on Ghaziabad Development Authority, denies Limitation Bar Claim [Read Order]

The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Allahabad Bench, has upheld penalties imposed on Ghaziabad Development Authority (GDA) for failing to obtain service tax registration and file returns while providing taxable services. However, the Tribunal partially relieved the Authority by ruling that the extended period of limitation was not applicable, thereby limiting the service tax demand to the normal period.

The case stems from two show cause notices issued in 2013 and 2014, covering the period 2008-09 to 2012-13, demanding over ₹23.7 lakh in service tax on services classified under Renting of Immovable Property and Mandap Keeper. The GDA had not registered under service tax laws or filed service tax returns despite providing taxable services. Authorities imposed interest and penalties under Sections 77 and 78 of the Finance Act, 1994, citing suppression of facts.

The GDA contested the demands and penalties, arguing that they were exempt as a governmental authority under Notification 25/2012-ST, that their services related to sovereign functions, and that the demands were time-barred. They also contended that the show cause notices were vague and based on obsolete legal provisions.

Rejecting most of these arguments, the CESTAT held that the activities of the authority, renting out properties and community centres — were commercial in nature, not sovereign or statutory duties. The Tribunal referred to the Allahabad High Court’s earlier decision in the Greater Noida Development Authority case, which clarified that such activities, though statutorily permitted, are not sovereign functions and are subject to service tax.

On the limitation issue, however, the Tribunal found merit in GDA’s plea. Citing precedents including the Greater Noida Development Authority ruling, the CESTAT observed that the extended period of limitation is invoked only in cases of fraud, wilful misstatement, or suppression of facts with intent to evade tax. Given the statutory nature of GDA’s functioning and absence of such intent, the Tribunal restricted the demand to the normal limitation period.

While upholding the penalties under Section 77 for failure to register and file returns, the Tribunal set aside the heavier penalties under Section 78, which are linked to suppression and intent to evade.

The Tribunal directed the adjudicating authority to recompute the tax liability limited to the normal period within three months. This ruling highlights that while statutory bodies are not immune to service tax on commercial activities, procedural compliance failures will still attract penalties.

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