2026-VIL-1782-CESTAT-KOL-ST
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SERVICE TAX CESTAT Cases

Service Tax - Taxability of budgetary fund allocation received through NEC by a Government organisation under the Ministry of Water Resources - Appellant, a Government organisation entrusted with conservation and utilisation of water resources, undertook survey and investigation work for a hydro electric project without raising any bill or invoice and received funds from the Ministry of Water Resources through NEC - SCN was issued for the period October 2009 to September 2014 treating the funds received as consideration, and the demand was confirmed with interest and penalty - Appellant contended that the amount is the normal fund granted for carrying on day to day activities and not consideration for any service rendered - Whether the fund allocation received through NEC is consideration for a taxable service - HELD - There is no service provider and service recipient relationship between the Appellant and NEC. The Ministry of Water Resources sends the funds to the Appellant through NEC, hence the amount cannot be taken as consideration received for providing any taxable service - The demand on the fund allocation is set aside - Taxability of services rendered by a Government organisation to NTPC as performance of sovereign function in the light of Circular No. 96/7/2007-ST dated 23.08.2007 - Appellant raised bills on NTPC showing service tax on a part of the services, but the tax charged was not paid on the ground that no service tax was payable - The demand on the amounts received from NTPC was confirmed by the adjudicating authority, and the Respondent contended that similar services rendered by private parties are liable to service tax - Appellant contended that it performs the sovereign function of collecting the amount on behalf of the Government, remits the entire amount to the Government and meets its day to day expenses from funds granted by the Government - Whether the amounts received from NTPC are chargeable to service tax - HELD - The Circular clarifies that activities assigned to and performed by sovereign or public authorities under the provisions of any law are statutory duties, are not services provided for a consideration, and any amount or fee collected in such cases is not consideration for the purpose of service tax. The Appellant is performing the sovereign function of collecting the amount on behalf of the Government and does not retain any amount but remits it to the Government. The Appellant charged service tax initially under the impression that the service was taxable, but the service tax was not paid - The demand on account of transactions with NTPC is legally not sustainable on merits - Invocation of extended period of limitation where a Government organisation entertained a bona fide belief that it performs sovereign function and is not liable to service tax - Appellant, being part of the Ministry of Water Resources, did not pay service tax for the period October 2009 to September 2014 and SCN was issued invoking the extended period - Appellant contended that it carried a bona fide belief that no service tax was payable, that even where tax was charged in some invoices it was not paid on that belief, and that being part of the Government it could have no intention to evade tax - Whether the extended period of limitation is invocable against the Appellant - HELD - The Appellant, being part of the Ministry of Water Resources, could have entertained a bona fide belief that it was performing a sovereign function and was not required to pay service tax. The major portion of the demand is on account of grants given for running day to day activities, and in respect of the NTPC transactions service tax was not collected. The Revenue has not made out any case of suppression on the part of the Appellant - The demand confirmed for the extended period is set aside on account of time bar also and the appeal is allowed with consequential relief, if any.
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