ST - MIDC is statutory body constituted by Maharashtra Govt and is discharging statutory functions - Providing infrastructural facilities like roads, water, street light and collecting fees for same is not taxable service: CESTAT
By TIOL News Service
MUMBAI, OCT 16, 2014: AFTER the formation of Maharashtra State on May 1, 1960, the Government of Maharashtra constituted a "Board of Industrial Development" (BID) on October 1, 1960, under the Chairmanship of Shri. S. G. Barve, I.C.S. The various committees recommendations received in the industries department were taken up for implementation and as per the Borkar Committees recommendationdevelopment of Ulhas Valley Water Supply was entrusted to the Board of Industrial Development (BID).
The BID framed the legislation and it was introduced before the state legislation and passed in the form of "Maharashtra Industrial Act" which gave birth to MIDC, as a separate corporation on August 1, 1962.
The MIDC has been declared as an agent of the State Government for carrying out the activities within the framework of the MID Act and the MID Rules. These activities can be divided under following 3 broad categories.
| Acquisition and disposal of land. |
|
Provision of infrastructure facilities.
|
| Providing of services. |
In short, MIDC sets up an industrial estate, the plots are given on lease and the MIDC provides amenities including roads, water, drainage, street light etc. and collects a fee fixed by the Government of Maharashtra.
The appellant, in the present case, is MIDC who is the recipient of a Service Tax demand for providing the abovementioned services.
It is the allegation of the Revenue that the applicant was providing 'Maintenance and Repair service' to the lessees and collecting fee for the same which is taxable under the Finance Act, 1994.
In these set of facts, periodical SCNs were issued and the same were adjudicated - demands were confirmed along with interest and penalties u/s 77 &78 of the FA, 1994 were also imposed. The said orders were challenged before the Commissioner (Appeals) who upheld the adjudication orders.
Aggrieved by those orders, appeals were filed before the CESTAT.
In the matter of the earliest appeal ST/650/11 the Stay application was allowed by the Bench [2012-TIOL-1290-CESTAT-MUM] by observing thus -
"5. We find that the Commissioner (Appeals) in the impugned order in para 5.3 held that the applicant is a public authority and the same finding is in para 5.9 of the impugned order. The Board's circular (89/7/2006)dated 18.12.2006 relied upon by the applicant and reproduced in the impugned order provides that the activities performed by the public authority are not taxable. In view of the above Board's Circular, the applicant has prima facie strong case in their favour. Therefore, pre-deposit of service tax, interest and penalties is waived and recovery of the same is stayed during the pendency of the appeal."
The aforesaid appeal along with five other filed in the latter years were decided recently. The total period involved is 01.04.2005 to 30.09.2012.
The Bench extracted Section 17 of the MID Act and Rule 29 of MID Rules, 1962 and observed that it is not in dispute that the appellant is a statutory body constituted by the Government of Maharashtra under MID Act and is discharging the statutory function cast on them by MID Act and Rules framed there-under.
The CESTAT further observed -
++ CBEC Circular No. 89/7/2006 dated 18.12.2006 clarifies that the activities performed by sovereign/public authority under the provisions of law are in nature of statutory obligations which are to be fulfilled in accordance with law. The fee collected by them for performing such activity is in nature of compulsory/statutory levy as per the provisions of relevant statute and it is deposited into the Govt. treasury. Such activity is undertaken as mandatory and statutory functions. These are not in nature of service to any particular individual or for any considerations. Performing of such activity by a statutory/public authority under the provisions of law does not come under the taxable service and therefore no service tax is leviable on such activity.
++ We further find that Section 97 of the Finance Act, 1994 and the Notification No. 24/2009-ST dated 27.7.2009 exempts the services of maintenance and repairs of roads. Therefore, the appellant are not required to pay service tax on their activity as discussed above. The appellant are executing their work which is statutory in nature.
++ In Appeal No. ST/85267/14- demand is for twoperiods, one from 1.10.2011 to 30.06.2012 and the second is from 01.7.2012 to 30.09.2012 when the negative list came into effect but the SCN has been issued on the basis of definition of Management, Maintenance and Repair service as stood prior to 01.07.2012. Therefore, as post 01.07.2012 the provisions are not existing the demands for the period post 01.07.2012 are not maintainable.
Holding that the appellant is not required to pay service tax under the category of Management, Maintenance and Repair service as prescribed under Section 65 (64) of the Finance Act, 1994, the orders of the Commissioner(A) were set aside and the appeals were allowed with consequential relief.
In passing : Also see 2014-TIOL-1809-CESTAT-MUM.
(See 2014-TIOL-2022-CESTAT-MUM)
