Municipal Corporation Vs Commissioner of Central Excise and Service Tax (CESTAT Chandigarh)
Summary: The Chandigarh Regional Bench of CESTAT allowed the appeal filed by Municipal Corporation, Mohali against the order of the Commissioner (Appeals), CGST, Chandigarh, which had upheld service tax demand relating to “Selling of Space for Advertisement” for the period April 2012 to June 2012.
The Department had alleged that the Municipal Corporation had been providing “Selling of Space for Advertisement” services to different parties without payment of service tax under Section 65(105)(zzzm) of the Finance Act, 1994. A Show Cause Notice dated 06.05.2014 demanded service tax of ₹5,29,597/- for April 2012 to September 2012 by invoking the extended period of limitation, together with interest and penalties.
The adjudicating authority dropped demand of ₹96,823/- for July 2012 to September 2012 because the impugned service was covered by the negative list under Section 66D of the Finance Act. However, it confirmed demand of ₹3,85,175/- for April 2012 to June 2012 after allowing cum-tax benefit and imposed penalties of ₹38,517/- under Section 76 and ₹30,000/- under Section 77. The Commissioner (Appeals) upheld the order.
Before CESTAT, the Municipal Corporation submitted that the issue had already been decided in its favour for an earlier period by Final Order No. 60400-60401/2026 dated 01.07.2026. It contended that during April 2012 to June 2012, the Finance Act did not define “person” and a local body was also not covered within the definition of “person” under Section 2(42) of the General Clauses Act. Consequently, the activity of the Municipal Corporation could not constitute a taxable service under Section 65(105)(zzzm). Reliance was placed on the Tribunal’s decision in Deputy Commissioner of Police, Jodhpur Vs Commissioner of C. Ex. and S.T., Jaipur-II, where it was held that the State and Police Department were not covered by the expression “person” for the relevant taxable service.
