The Customs, Excises, Service Taxes Appellate Tribunal (CESTAT) ruled that the Karnataka Industrial Areas Development Board is not liable to pay the service tax at all as it is a statutory body discharging the statutory function as per the statute Karnataka Industrial Areas Development (KIAD) Act, 1966.
Facts of the case:
The appellant, Karnataka Industrial Areas Development Board (KIADB) is 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. The KIADB is established by an enactment of the Legislature of Karnataka Act, 18 of 1966 i.e. Karnataka Industrial Areas Development Act.
Interpretation of law:
The appellant 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 KIADB provided the 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.
The appellant mainly contended that the appellant is a Government undertaking and being a “State” as defined in Article 12 of the Constitution of India is not liable to pay service tax and not undertaking any activities for-profit motive.
The tribunal consisting of the judicial member S.S. Garg and technical member P. Anjani Kumar in the light of the ratios of the Apex Court in the case of Shri Ramtanu Housing Co-operative Society Ltd. and Bombay High Court in the case of MIDC quashed the impugned order and ruled that the Karnataka Industrial Areas Development Board is not liable to pay the service tax at all as it is a statutory body discharging the statutory function as per the statute Karnataka Industrial Areas Development (KIAD) Act, 1966.