Gujarat State Land Development Corporation Ltd VERSUS C.CGST & CEx-Gandhinagar

Service Tax Appeal No. 10983 of 2019

ST/ORS/10554/2021

(Arising out of OIA-AHM-EXCUS-003-COM-015-18-19 dated- 28/02/2019 passed by

Commissioner (Appeals) Commissioner of Central Excise, Customs and Service Tax

AHMEDABAD

 

Gujarat State Land Development Corporation Ltd

VERSUS

C.CGST & CEx-Gandhinagar

 

APPEARANCE:

Shri Prakash Shah & Shri S.J Vyas, Advocates for the Appellant

Shri Prabhat K Pameshwaram, Additional Commissioner (AR) for the Respondent

CORAM:

HON’BLE MR. RAMESH NAIR, MEMBER (JUDICIAL)

HON’BLE MR. RAJU, MEMBER (TECHNICAL)

FINAL ORDER No. A/ 10151 /2023

DATE OF HEARING: 21.09.2022

DATE OF DECISION: 20.01.2023

RAJU

This appeal has been filed by M/s Gujarat State Land Development

Corporation against demand of service tax under the category of business

Auxiliary Service. The Revenue is sought to change the cause title from

“Service Tax Ahmedabad” to “ Commissioner, Central GST & Central Excise ,

Gandhinagar Commissionerate, Custom House , Navrangpura, Ahmedabad”.

The change in cause title is allowed and cause title is accordingly amended.

Learned Counsel for the appellant pointed out that the appellant’s

are public sector undertaking of the state of Gujarat engaged in assisting

government of Gujarat in its efforts for soil conservation and land

reclamation. The appellants were not registered with service tax

department. Based on Intelligence the Directorate General of Goods and

Service Tax Intelligence officers visited the appellants premises and

conducted certain investigation. After the investigation SCN was issued to

the appellant seeking to demand of service tax under the category of

Business Auxiliary Service, supply of tangible goods service and rent a cab

service.

2.1 Learned Counsel argued that the main purpose of creation of the said

public sector undertaking was to assist government in its effort for soil

conservation and land reclamation. The activity was funded by government

and certain funds were given to the appellant for conducting such activities .

2.2 Learned counsel pointed out that the state government releases the

grants every year to carry out such activities for which the appellant do not

charge any amount from farmers who are the beneficiaries of the scheme.

The appellants have many offices situated at various district and taluka

level. The appellants have no independent source of funds. A part of the

fund is used for the administration of the appellant from the grants released

by the government. The government allocates and releases the grants for

establishment charges in the beginning of each financial year from which

they incur its establishment expenditure.

2.3 Learned counsel pointed out that the Revenue is seeking to charge

service tax under the category of Business auxiliary service, in the category

of provision of service on behalf of the client. Learned counsel pointed out

that the government of Gujarat is supposed to be the client of the

appellant learned counsel pointed out that government of Gujarat is not

engaged in any kind of business to qualify for any service under the category

of business auxiliary service and therefore there cannot be any service in

the nature of business auxiliary service that can be provided to the

government .

2.4 Learned counsel further pointed out that they are merely being

reimbursed for the salary paid to the employees and the administrative

expenditure and the said reimbursement does not amounts to any

consideration for purpose of levy of service tax. He further pointed out that

100 % shares of the appellant are owned by the Government. In these facts

of the case learned counsel argued that the activity of managing the

schemes for soil conservation and land reclamation do not amount to

provision of business auxiliary service .

2.5 Learned Counsel further pointed out that demand is also been made

under the category of supply of tangible goods service. It has been

noticed that the appellant supplied bulldozers on rent to service recipient

(other entities) and the said activity liable to be tax under the category of

supply of tangible goods service . Learned counsel pointed out that the SCN

does not specify as to how the charging of rent for bulldozers amounts to

supply of tangible goods service. He further pointed out that there is no

discussion whatsoever on the possession and effective control of the 

bulldozer which is a key element on determining the liability of service tax.

He pointed out that even impugned order does not disclose how mere

renting of bulldozers amount to supply of tangible goods service.

The next issue raised in the proceeding relates to provision of rent a cab

service. Learned counsel pointed out that employees of the organization are

provided with official vehicles . However if and when the said official

vehicles are used for private purpose then certain amount is charged to the

appellant. It was argued that simply charging the employees for private

use of official vehicle does not amount to provision of rent a cab service. He

further pointed out that the impugned order also does not give any reason

as to how this amount collected from the employees for private use of

vehicle amounts to the provision of rent a cab service .

2.6 Learned counsel further pointed out that the appellants are

Government entity and therefore cannot be any suppression,

misdeclaration etc on the part of the appellant with the intention of evasion

of duty. He pointed out that extended period of limitation has been invoked

wrongly in the instant case.

Serial No. 12 and 25 of the Notification 25/2012 dated 20.06.2012 grants

exemption to specified services provided to government, a local authority or

a government authority by the way of

1. a)

Carrying out any activity in relation to any function ordinarily

entrusted to a municipality in relation to water supply, public health,

sanitation conservancy, solid waste management

or slum

improvement and up gradation

The said notification however extended benefit to the following with

effect from 11.07.2014 :



Water supply, public health, sanitation conservancy , sol;id

waste management or slum improvement and up gradation



Repair or maintenance of a vessel

Notification 25/2012 dated 20.06.2012 defines government authority as

follows :-

(i)A board or any other body set up by an Act of Parliament or

State Legislature; or

(ii)Established by Government;

With ninety percent, or more participation by way of equity or

control to carry out any function entrusted to a municipality under

Article 243 W of the Constitution.

Learned counsel argued that they are also entitled to the exemption

as they are engaged in providing service to government which

covered by article 243W. He relied on the 12th Schedule under article

243 W reads as under:-

Article 243. Powers, authority and responsibilities of Municipalities

etc.

Subject to the provisions of this Constitution, the Legislature of a State

may, by law, endow-

(a) the Municipalities with such powers and authority as may be

necessary to enable them to function as institutions of self

government and such law may contain provisions for the devolution of

powers and responsibilities upon Municipalities, subject to such

conditions as may be specified therein, with respect to-

(i) the preparation of plans for economic development and social

justice;

(ii) the performance of functions and the implementation of schemes

as may be entrusted to them including those in relation to the matters

listed in the Twelfth Schedule;

(b) the Committees with such powers and authority as may be

necessary to enable them to carry out the responsibilities conferred

upon them including those in relation to the matters listed in the

Twelfth Schedule.

Matters listed in twelfth schedule are:

Twelfth Schedule

( Article 243 W)

1. Urban planning including town planning.
2. Planning of land- use and construction of buildings.
3. Planning for economic and social development.
4. Roads and bridges.
5. Water supply for domestic, industrial and commercial purposes.
6. Public health, sanitation conservancy and solid waste management.
7. Fire services.
8. Urban forestry, protection of the environment and promotion of

ecological aspects.

9. Safeguarding the interests of weaker sections of society, including

the handicapped and mentally retarded.

10. Slum improvement and upgradation.
11. Urban poverty alleviation. 
12. Provision of urban amenities and facilities such as parks, gardens,

playgrounds.

13. Promotion of cultural, educational and aesthetic aspects.
14. Burials and burial grounds; cremations, cremation grounds and

electric crematoriums.

15. Cattle pounds; prevention of cruelty to animals.
16. Vital statistics including registration of births and deaths.
17. Public amenities includind street lighting, parking lots, bus stops

and public conveniences.

18. Regulation of slaughter houses and tanneries.”

Learned AR relies on the impugned order. He took us through the

provisions of MOA of the appellant to assert that the appellant if an entity

created specifically to assist for implementing the schemes i.e. soil

conservation and land reclamation.

We have gone through rival submissions. We find that it is not in

dispute that the appellant are public sector undertaking created especially

for assisting government for soil conservation and land reclamation. Since

the appellants are required to maintain offices and pay for its man power

certain grants are given by the government to cover such expenses. The

appellants are 100 % owned by the government.

 Business auxiliary service is defined as follows :

“(19) “Business auxiliary service” means any service in relation to –

(i) Promotion or marketing or sale of goods produced

or provided by or belonging to the client; or

(ii) promotion or marketing of service provided by the

client, or

(*******)

(iii) any customer care service provided on behalf of

the client, or

(iv) procurement of goods or services, which are

inputs for the client, or

[Explanation:- For the removal of doubts, it is

hereby declared that for the purposes of this sub

clause, “inputs” means all goods or services intended

for use by the client;]

[(v) production or processing of goods for, or on

behalf of, the client;]

(vi) provision of service on behalf of the client,

or

(vii) a service incidental or auxiliary to any activity

specified in sub-clauses (i) to (vi), such as billing,

issue or collection or recovery of cheques, payments,

maintenance of accounts and remittance, inventory

management, evaluation or development of

prospective customer or vendor, public relation

services, management or supervision,

and includes services as a commission agent, [but does not include

any activity that amounts to manufacture of excisable goods].”

4.1 The revenue is seeking to demand the service tax on the services

provided by the public sector undertaking formed by the Government

especially for the purpose of soil conservation and land reclamation.

Notification No 25/2012 provides exemption to specified service including

conservancy. The term “conservancy” is defined by the Merriam Webster

dictionary as follows:-

“Plural Conservancies

1. British : a board regulating fisheries and navigation in a river or

port

2. a: CONSERVATION

b: an organization or area designated to conserve and protect natural

resources”

The Britannica Dictionary defines conservancy as follows:-

“1 [count] : an organization that works to protect animals, plants, and

natural resources especially by purchasing and caring for areas of land

— usually used in the names of organizations

2 [count] British : a group of officials who control and protect a river

or port

3 [non count] : conservation

 raising money for the conservancy of natural resources

 water conservancy”

In terms of above definition the activity of soil conservation and land

reclamation would be fall under the terms “conservancy”.

4.2 In view of above the activity undertaken by the appellant would be

specifically covered by the Notification No. 25/2012 –ST dated 20.06.2012

under Sr No.25 thereof. In view of above services provided by the

appellant would be exempt with effect from 20.06.2012 onwards under

aforesaid notification.

4.3 It is also noticed that the entire amount received by the appellant

from the government in the shape of grant is in the nature of

reimbursement i.e. to say the actual expenditure incurred for the provision

of the service is reimbursed by the Government of Gujarat. For that

reason also the amount paid by the Government to the appellant cannot be

taxed as does not fall within the definition of consideration for service. In 

these circumstances we do not find any merit in the demand of service tax

under the head of business auxiliary service against the appellant. The

demand on this count is set aside and the appeal on this count is allowed.

The next issue raised in the impugned order is relates to demand

under the head of supply of tangible service. It has been argued by learned

counsel in the written submission that the bull dozers/ dumpers are given on

lease and the same was operated lessee. It has been argued that the bull

dozers/ dumpers given by them on lease are under the possession and

control of the lesseses It has been argued that there is a contract of

bailment which implies that the possession and control of the equipment is

transferred to the lessee. It has been argued by the learned counsel that

no person of the appellant organization operates the said bull dozers/

dumpers leased out . It has been argued that the terms of contract

specifically prohibits lessee not to transfer, assign and charge mortgage ,

sublet sale or dispose of in any way part with the possession of machinery.

He argued that this position clearly indicate the possession of goods is

transferred to the lessee.

5.1 We find that neither show cause notice nor the impugned order gives

any grounds to substantiate the claim that the physical possession and

effective control of the equipment is not transferred to the clients but is

retain to the appellant. In these circumstances we do not find any evidence

to support the charges levied on the appellant in regard to supply of tangible

goods service. Demand on this count is also set aside and appeal is allowed.

The next issue is relates to the demand under the category of rent-a

cab service. It has been argued by the learned counsel that the amount on

which service tax sought to be recovered is the amount recovered from the

employees when the official vehicles are put to personal use by the

employees. It has been argued that the appellants are not rent-a-cab

operator and are not in the business of giving vehicles on hire. It has been

argued that as per the policy of government employees on given certain

benefits and one such benefit is permitting an employees to use the vehicle

of appellant for private use upon certain payments. It has been argued the

vehicle are not given to the public at large but only to employees in

terms of the employment agreement. We find that substantial force in

the argument of the appellant that this is not a service provider/ service

recipient relationship. The appellants are not in the business of rent – a

cab providing rent a cab service and any recovery is made for private use

of vehicle are in terms of the employment agreement. Thus, we do not 

find any merit in the argument of the Revenue. Demand on this count is

also set aside and appeal is allowed.

Accordingly, the impugned order is set aside and appeal is allowed.

MA is also allowed.

(Pronounced in the open court on 20.01.2023 )

RAMESH NAIR

MEMBER (JUDICIAL)

RAJU

MEMBER (TECHNICAL)