Municipality is Liable to Pay Service Tax under Renting of Immovable Property Services and other Services: CESTAT remands to Adjudicating Authority

The Chennai bench of the Customs Excise and Service Tax Appellate Tribunal (CESTAT) remanded a case concerning service tax liabilities of the Coimbatore City Municipal Corporation back to the adjudicating authority. \r

The tribunal observed that services provided by municipalities, such as renting of immovable property and other related services, are part of their sovereign functions and hence not liable for service tax. This decision aligns with a High Court ruling in a similar case involving Cuddalore Municipality. \r

The tribunal directed a fresh consideration of whether the municipality is liable to pay service tax, considering the functions performed under the Coimbatore City Municipal Corporation Act, 1981, and constitutional provisions. The bench emphasized that if the activities are sovereign functions, the levy of service tax cannot apply. \r

The impugned orders were set aside, and the appeals were remanded to the Adjudicating Authority.