Municipal Corporation Vs Commissioner of Central Excise And Service Tax (CESTAT Chandigarh)
The Chandigarh Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) decided two appeals arising from a common Order-in-Appeal dated 19.01.2015, whereby the Commissioner (Appeals) had upheld service tax demands under the category of “Selling of Space for Advertisement Service” classifiable under Section 65(105)(zzzm) of the Finance Act, 1994. The appeals covered the periods April 2005 to March 2010 and October 2010 to March 2012, involving service tax demands of ₹11,92,449 and ₹19,86,250 respectively.
The appellant, Municipal Corporation, Mohali, submitted that it was a sovereign local body. The Department alleged that it had provided “Selling of Space for Advertisement” services and had failed to discharge service tax on the amounts received. A show cause notice was issued demanding service tax along with interest and penalties by invoking the extended period of limitation.
The Municipal Corporation contended that it had entered into agreements with various parties for the development, repair, upkeep and maintenance of parks, green belts and other public utilities. In consideration, such parties were permitted to allow interested persons to display advertisements. It submitted that the properties belonged to GMADA and had been handed over to it for maintenance. The amounts collected were advertisement tax under Sections 90 and 122 of the Punjab Municipal Corporation Act, 1976, described as licence fee, and were collected under statutory authority. It further relied upon CBEC Circular No. 89/7/2006-ST dated 08.12.2006 and Master Circular No. 96/7/2007-STC dated 23.08.2007, contending that taxes or fees collected by constitutional bodies in exercise of statutory powers were not taxable. It also argued that the activity of selling space for advertisement stood excluded from service tax with effect from 01.07.2012. The appellant further contended that the extended period was not invocable as it entertained a bona fide belief that no service tax was payable and the issue involved interpretation of law.
