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
- 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)
- Urban planning including town planning.
- Planning of land- use and construction of buildings.
- Planning for economic and social development.
- Roads and bridges.
- Water supply for domestic, industrial and commercial purposes.
- Public health, sanitation conservancy and solid waste management.
- Fire services.
- Urban forestry, protection of the environment and promotion of
ecological aspects.
- Safeguarding the interests of weaker sections of society, including
the handicapped and mentally retarded.
- Slum improvement and upgradation.
- Urban poverty alleviation.
- Provision of urban amenities and facilities such as parks, gardens,
playgrounds.
- Promotion of cultural, educational and aesthetic aspects.
- Burials and burial grounds; cremations, cremation grounds and
electric crematoriums.
- Cattle pounds; prevention of cruelty to animals.
- Vital statistics including registration of births and deaths.
- Public amenities includind street lighting, parking lots, bus stops
and public conveniences.
- 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
- British : a board regulating fisheries and navigation in a river or
port
- 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)
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