Karnataka Industrial Areas Development Board Vs Commissioner of Central Tax (CESTAT Bangalore)
Conclusion: Assessee was not liable to pay the service tax at all as it was a statutory body discharging the statutory function as per the statute Karnataka Industrial Areas Development (KIAD) Act, 1966 and hence was not liable to pay service tax.
Held: Assessee M/s.Karnataka Industrial Areas Development Board (KIADB) were engaged in providing various taxable Services such as Renting of Immovable Property Services, Construction of Commercial and Residential Complexes, Business Support Services, Management, Maintenance or Repair Services, Manpower Recruitment and Supply Services, Works Contract Services, etc., to various clients. It appeared that they did not obtain any registration under Service Tax for the said services. On the basis of intelligence gathered and developed by the officers of the Directorate General of Central Excise Intelligence, Bangalore Zonal Unit (BZU), it appeared that M/s. KIADB provided the above-mentioned taxable services, but did not pay the appropriate Service Tax on such taxable services provided by them. After following the due process, the Commissioner of Service Tax vides the impugned order confirmed the demand as per the show-cause notice. Assessee mainly contended that it was a Government undertaking and being a “State” as defined in Article 12 of the Constitution of India was not liable to pay service tax and not undertaking any activities for-profit motive. It was held that assessee was a statutory body discharging the statutory function as per the statute KIAD Act, 1966 and hence were not liable to pay service tax. Since assessee was not liable to pay the service tax at all, it was not appropriate to discuss the demand of service tax on individual services allegedly rendered by assessee on which Commissioner had confirmed the demand.
FULL TEXT OF THE CESTAT JUDGEMENT
The present appeal is directed against the impugned order dt. 31/01/2012 passed by the Commissioner of Service Tax, Bangalore whereby the Commissioner has
(i). confirmed demand of service tax amounting to Rs. 1295,14,21,404/- (Rupees One Thousand Two Hundred and Ninety-Five Crores Fourteen Lakh Twenty-One Thousand Four Hundred and Four only) payable by them, in respect of Seven Taxable Services, provided by them during the period from 1-10-2005 to 31-03-2010, under section 73(2) read with Proviso to Section 73(1) of the Act along with interest under provisions of Section 75 of Finance Act, 1994.
(ii). imposed penalty @ Rs.100/- (Rupees One Hundred Only) per day up to 17.04.2006, Rs.200/- (Rupees Two Hundred Only) per day or @ 2% of the service tax, per month, whichever is higher from 18.04.2006, under section 76; However, this penalty will be applicable for the period till 10.05.2008 in view of the amendment to Section 78 incorporated vide Finance Bill 2008, for their failure to pay service tax in accordance with the provisions of Section 68 of the Act or the rules made there under.
(iii). imposed penalty of Rs. 1000/- (Rupees One Thousand Only) under Section 77 of the Act, for failure to furnish the prescribed return and failure to obtain registration.
(iv). imposed a penalty of Rs.1295,14,21,404/- (Rupees One Thousand Two Hundred and Ninety Five Crores Fourteen Lakh Twenty One Thousand Four Hundred and Four only), under Section 78 of the Finance Act 1994 for suppressing the facts and contravention of the provision of the Act/Rule with intent to evade payment of Service Tax, which shall be reduced to 25% of the service tax confirmed, provided the entire amount of service tax along with interest and reduced penalty are paid within THIRTY days of the receipt of this order.
Further the break-up of service tax demand is as follows:-
