Nagar Panchayat Khamano Vs Commissioner of Central Excise & Service Tax (CESTAT Chandigarh)
Summary: The Chandigarh Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) allowed three appeals filed by Nagar Panchayat, Khamano, Fatehgarh Sahib, Punjab, challenging orders passed by the Commissioner (Appeals), CGST, Chandigarh. The appeals arose from Order-in-Appeal Nos. LUD-EXCUS-001-APP-1059-18 dated 26.04.2018, LUD-EXCUS-001-APP-885-18 dated 28.03.2018 and LUD-EXCUS-001-APP-886-18 dated 28.03.2018.
The appellant, Nagar Panchayat, had provided shelters/empty spaces with toilet facilities enabling bus operators to stop their buses so that passengers could alight and board. The Nagar Panchayat collected “Adda Fees” from the bus operators. The Revenue considered these receipts to be consideration towards “Business Support Services” provided by the Nagar Panchayat to the bus operators and issued three show cause notices proposing recovery of service tax along with interest and penalty. The original authority and the appellate authority confirmed the proposals, resulting in the three appeals before CESTAT.
Before the Tribunal, the appellant submitted that the facilities had been created for the public in discharge of its functions under Article 243W of the Constitution of India read with Sl. No. 17 of the Twelfth Schedule to the Constitution. It was further submitted that the District Magistrate fixes the Adda Fee from time to time under Rule 200(3) of the Punjab Motor Vehicles Rules, 1989.
The appellant relied upon CBEC Circular No. 96/7/2007-ST dated 23.08.2007, which, according to the appellant, clarified that activities assigned to and performed by sovereign/public authorities are statutory duties and that fees charged, if any, for such activities are not liable to service tax. The appellant also contended that, prior to 01.07.2012, service tax was leviable on services rendered by a person to another person and that Nagar Panchayat was not included in the definition of “a person” under the General Clauses Act.
For the period commencing from 01.07.2012 under the Negative List regime, the appellant relied upon Notification No. 30/2012 dated 20.06.2012 and submitted that services provided or agreed to be provided by the Government or a local authority by way of support services were covered by the relevant reverse-charge mechanism. The appellant also relied upon State of Punjab Vs UOI – 2016 (43) STR 177 (P&H) and Final Order No. 60184/2023 dated 07.07.2023 passed by the same Bench in respect of Chandigarh Transport Corporation.
The Department’s Authorized Representative reiterated the findings contained in the impugned orders.
CESTAT observed that the issue was no longer res integra. It noted that the appellant was a statutory body performing the impugned functions under Article 243W of the Constitution. The Tribunal further found that the Revenue had not established that the appellant had created any other facilities or infrastructure for the bus operators apart from providing a place, with or without a shed, for buses to stop and toilets.
The Tribunal held that these were facilities created by the Nagar Panchayat in public interest and that they could not be regarded as facilities created to support the business of the bus operators. Following its earlier decision concerning Chandigarh Transport Corporation, the Tribunal held that no service tax was leviable for the period before 01.07.2012.
For the period after 01.07.2012, under the Negative List regime, CESTAT referred to Sl. No. 06 of Notification No. 30/2012-ST dated 20.06.2012 and held that the service tax, if any, was required to be paid by the recipient of the service and not by the appellants.
Accordingly, the Tribunal held that the appellants were not liable to pay service tax on the facilities created by them for common public use, even though they had collected parking or Adda Fees from bus operators for maintenance of the facility.
CESTAT therefore allowed all three appeals.
Cases Discussed
- State of Punjab Vs UOI, 2016 (43) STR 177 (P&H) — relied upon by the appellant in support of its submissions concerning the statutory/public functions of the local authority and service tax.
- Chandigarh Transport Corporation, Final Order No. 60184/2023 dated 07.07.2023 — followed by the Tribunal in holding that no service tax was leviable for the period before 01.07.2012 on the facilities in question.
FULL TEXT OF THE ORDER OF CESTAT CHANDIGARH
Nagar Panchayat, Khamano, filed these three appeals ST/60928/2018, ST/60929/2018 & ST/60930/2018, contesting the respective impugned orders passed by the Commissioner (Appeals); the appellants have provided shelters/ empty spaces with toilets facilities so that the bus operators can stopped their buses for the passengers to alight and board the buses. Revenue was of the opinion that the Adda Fees collected by Nagar Panchayat amounted to consideration towards “Business Support Services” rendered by the appellants to the bus operators; accordingly, three show cause notices were issued to the appellants proposing to recover service tax along with interest and penalty. The original authority as well as the appellate authority have confirmed the proposals in the show cause notice. Hence, these appeals.
2. Shri Sudeep Singh Bhangoo, learned counsel for the appellants submits that the Nagar Panchayat has created the facilities for the public in discharge of the application under Article 243W of the Constitution of India along with Sl. No.17 of the Twelfth Schedule of the Constitution of India; District Magistrate fixes the Adda Fee from time to time in terms of the Rule 200(3) of the Punjab Motor Vehicles Rules, 1989. He submits that CBEC Circular No.96/7/2007-ST dated 23.08.2007 clarified that activities assigned to and performed by sovereign/ pubic authorities are statutory duties and the fee charged, if any, for the same is not liable to service tax; prior to 01.07.2012, no service tax is leviable as per the clarification as above and that prior to 01.07.2012, service tax was leviable on the services rendered by a person to another person; Nagar Panchayat is not included in the definition of ‘a person’ under General Clauses Act. He also submits that even in the Negative List Regime i.e. from 01.07.2012, Notification No.30/2012 dated 20.06.2012 exempts services provided or agree to be provided by the government or local authority by way of support services. He relies on State of Punjab Vs UOI – 2016 (43) STR 177 (P&H) and the Final Order No.60184/2023 dated 07.07.2023 passed by this Bench in respect of Chandigarh Transport Corporation.
3. Learned Authorized Representative for the Department reiterates the findings of the impugned order.
4. Heard both sides and perused the records of the case. We find that the issue is no longer res integra. It is not denied that the appellant is a statutory body and performed the impugned functions in terms of Article 243W of the Constitution of India. It is not proved by the Revenue that the appellant has created any other facilities/ infrastructure to the bus operators other than providing a place with or without a shed for the buses to stop and toilets. Understandably, these are the facilities created by the Nagar Panchayat in public interest. It cannot be said that they are created to support the business of the bus operators. In view of our decision in the Final Order cited above in the case of Chandigarh Transport Corporation, no service tax is leviable before 01.07.2012.
5. For the period after 01.07.2012, in the Negative List Regime, we find that in terms of Sl. No.06 of the Notifications No.30/2012- ST dated 20.06.2012, the service tax, if any, is required to be paid by the recipient of service and not the appellants. In view of the same, we find that the appellants are not liable to pay service tax on the facilities created by them for common public use even if they have collected some parking or Adda Fee from the bus operators for the purpose of the maintenance of the facility.
6. In view of the above, all the appeals are allowed.
(Order pronounced in the open court on 23/07/2026)
