Page 119 - GSTL_3rd September 2020_Vol 40_Part 1

2020 ] KARNATAKA INDUSTRIAL AREAS DEV. BOARD v. COMMR. OF CENTRAL TAX 53
13. Having examined the scope of ‘public authority’ and applying the
general principles to the functions and responsibilities of the appellant we
have no hesitation to hold that the appellant is a public authority perform-
ing statutory functions as mandated by an Act of Parliament.
15. The Hon’ble Kerala High Court examined a similar dispute regarding
service tax liability, in Union of India v. Kerala State Insurance Department re-
ported in 2016 (43) S.T.R. 173 (Ker.). The Hon’ble High Court held as
below :
“4. Rule 22A of Part-I KSR provides that any person who en-
ters Government service on or after 19th August, 1976 and has not
crossed the age of 50 years shall, within a period of one year from the
date of such entry in service, subscribe to a policy in the official branch
of the State Life Insurance at such rate as may be determined by the
Government from time-to-time and shall continue to subscribe till he
ceases to be in Government service. The period of one year has now
been reduced to one month by G.O(P). 229/12/Fin, dated 19-4-2012.
Rule 22B also provides that such employee shall enroll as a member of
General Insurance Scheme. Though, at the relevant point of time, taxable
service included insurance service as well, the Central Board of Customs
and Excise issued Circular No. 89/7/2006-Service Tax, dated 18-12-2006
and the relevant part of this circular reads thus :
“A number of sovereign/public authorities (i.e., an agency consti-
tuted/set up by government) perform certain functions/duties,
which are statutory in nature. These functions are performed in
terms of specific responsibility assigned to them under the law in
force. For examples, the Regional Reference Standards Laborato-
ries (RRSL) undertake verification, approval and calibration of
weighing and measuring instruments; the Regional Transport Of-
ficer (RTO) issues fitness certificate to the vehicles; the Directorate
of Boilers inspects and issues certificate for boilers; or Explosive
Department inspects and issues certificate for petroleum storage
tank, LPG/CNG tank in terms of provisions of the relevant laws.
Fee as prescribed is charged and the same is ultimately deposited
into the Government treasury. A doubt has arisen whether such
activities provided by a sovereign/public authority required to be
provided under a statute can be considered as ‘provision of ser-
vice’ for the purpose of levy of Service Tax.
2. The issue has been examined. The Board is of the view that the
activities performed by the sovereign/public authorities under the
provision of law are in the nature of statutory obligations which
are to be fulfilled in accordance with law. The fee collected by
them for performing such activities is in the nature of compulsory
levy as per the provisions of the relevant statute, and it is deposit-
ed into the Government treasury. Such activity is purely in public
interest and it is undertaken as mandatory and statutory function.
These are not in the nature of service to any particular individual
for any consideration. Therefore, such an activity performed by a
sovereign/public authority under the provisions of law does not
constitute provision of taxable service to a person and, therefore,
no service tax is leviable on such activities.
3. However, if such authority performs a service, which is not in
the nature of statutory activity and the same is undertaken for a
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