Page 102 - GSTL_3rd September 2020_Vol 40_Part 1

36 GST LAW TIMES [ Vol. 40
Prakash Adiga, Assistant Accounts Officer of KIADB, was recorded. On further
investigation and verification of the records recovered, KIADB appeared to have
evaded payment of Service Tax amounting to Rs. 1295,14,21,404/- (Rupees One
Thousand Two Hundred and Ninety-Five Crore Fourteen Lakh Twenty- One
Thousand Four Hundred and Four only), for the period from 1-10-2005 to
31-3-2010.
2.2 The appellant, KIADB, is established by an enactment of the Legis-
lature of Karnataka Act, 18 of 1966 i.e. Karnataka Industrial Areas Development
Act, 1966 (KIAD Act, 1966, for short). The Government of Karnataka, for the
purpose of establishing industrial areas and for promoting the rapid and orderly
development of industries in the State of Karnataka, enacted this KIAD Act, 1966.
Appellant was formed and established under the provisions of Section 5 of the
said KIAD Act and performs various statutory/sovereign functions assigned to it
under provisions of KIAD Act. Revenue entertained the view that the appellants
are liable to pay the service tax on various services rendered by them but they
have not paid the service tax and not registered under the Finance Act, 1994. On
these allegations, a show cause notice dated 6-4-2011 was issued to the appellant.
Appellant filed elaborate interim reply to the show cause notice on 24-10-2011
and thereafter filed a further reply dated 24-11-2011 and all the allegations were
rebutted as untenable and the case was contested on merits, limitation, jurisdic-
tion and quantification of demand. In reply to the show cause notice, the appel-
lant mainly contended that the appellant is a Government undertaking and being
a ‘State’ as defined in Article 12 of the Constitution of India are not liable to pay
service tax. Further the appellants are not undertaking any activities for profit
motive. It was also contended that the appellant did not provide any construc-
tion related service. On the contrary, they engaged various contractors who pro-
vided services to the appellant. It was also contended that the figures adopted by
the Department to demand service tax were nothing but cumulative figures of
each year appearing in financial statements. The appellant has also raised the
issue of error in quantification and wrong adoption of figures to arrive at the
amount of service tax payable. After following the due process, the Commission-
er of Service Tax vide the impugned order dated 30-1-2012 confirmed the de-
mand as per the show cause notice. Hence the present appeal.
3. Heard both the sides and perused the records. Both the parties have
filed written submissions, additional submissions and reply to the additional
submissions.
4.1 Learned Counsel for the appellant submitted that the impugned or-
der is not sustainable in law as the same has been passed without properly ap-
preciating the facts, statutory provisions of KIAD ACT and the evidence on rec-
ord furnished by the appellant. He further submitted that no service tax can be
imposed on the sovereign activities as also the statutory obligation of the Gov-
ernment. He referred to various activities being undertaken by the appellant as
per Section 5 of the KIAD Act which can be summarized as follows :-
(a) The main objective of the said statute is to promote the establish-
ment and development of industrial areas within the State of Karna-
taka;
(b) In terms of the industrial policy of the Government, KIADB in con-
sultation with the State Government, prepares a scheme of devel-
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