2026-VIL-737-CESTAT-CHD-ST
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SERVICE TAX CESTAT Cases

Service Tax – Discharge of Statutory functions - Appellant was formed to perform statutory functions on behalf of the Government of Haryana, such as issuance of driving licenses, vehicle registration certificates, arms & ammunition licenses, income, caste, and domicile certificates, etc. through e-Disha/Common Services Centers where the services are provided at government-prescribed statutory charges - Whether the appellant can be considered as a 'Governmental authority' or 'local authority' under the Finance Act, 1994 and its services are exempt from service tax under Notification No. 25/2012-ST dated 20.06.2012 - HELD - The appellant falls within the definition of 'Governmental authority' as defined under clause 2(s) of Notification No. 25/2012-ST dated 20.06.2012 – Appellant being an instrumentality of the State created to perform local functions electronically, is the implementing agency of the Government and not a commercial service provider. The functions performed by the appellant are Governmental and civic in nature, carried out not for commercial gain but as a part of the State's obligation to provide public services efficiently through e-governance platform. The statutory fee charged for issuing various licenses/certificates cannot be said to be commercial consideration decided between the parties - The exemption under Notification No. 25/2012-ST was consciously drafted to include Governmental authorities that may not be functioning directly as municipalities or panchayats but are executing or assisting in carrying out those functions on behalf of such constitutional bodies – The appellants, being an instrumentality of the State created to perform local functions electronically, are the implementing agency of the government, and are not a commercial service provider. Consequently, denial of exemption under Notification No. 25/2012-ST to the appellants, is not legally sustainable – The impugned order is set aside and the appeal is allowed - Invocation of extended period and imposition of penalties – HELD - The extended period cannot be invoked because the department has failed to prove any of the elements which are required for invoking the extended period provided under proviso to Section 73(1) of the Finance Act, 1994. Moreover, since the appellants are a ‘governmental authority’ fully controlled and funded by the Government of Haryana and its accounts/receipts are also subjected to audit by the Accountant General Haryana and there is no concealment or suppression of facts and every activity is already within the public domain and its operations are under the overall supervision of the Government of Haryana itself, therefore, the element “intent to evade the tax” is wholly absent. Moreover, the issue of taxability and availability of exemption under notification is purely an interpretational issue. Further, the appellants were under a bona fide belief that being a governmental authority performing municipal functions, their services were exempt and hence, no Service Tax registration was necessary - the appellants, being a non-profit government-controlled entity engaged in providing statutory citizen-centric services, leaves no room to infer any intent to evade the tax. Therefore, invocation of extended period and imposition of penalties under Sections 77 & 78 of the Finance Act, are not sustainable in law.
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GSTAT Appeal filed wrongly...
By CA Vivek Jalan

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