Service Tax dept asks CIDCO to pay Rs 272 cr

tax was not paid from assessment year 2007 to 2012: DGCEI

The Service Tax department has asked Maharashtra's town planning agency City and Industrial Development Corporation (CIDCO) to pay Rs 136 crore and also imposed on it a penalty of the same amount for not paying tax on leased properties.

In the order issued recently, Service Tax Commissioner R Sekar has held the leasing of industrial plots for construction comes under the purview of the service tax.

The Directorate General of Central Excise Intelligence (DGCEI) had last year issued a show-cause cum demand notice of Rs 136 crores to CIDCO.

The DGCEI said the tax was not paid from assessment year 2007 to 2012.

According to DGCEI's notice, CIDCO had collected lease premium/rent against leasing of industrial plots in Navi Mumbai but had not paid service tax on such services provided.

"Corporate entities of public sector undertakings carrying on commercial activity without performing any sovereign function of the state cannot be treated as Government per se," said Sekar in his order.

Being incorporated as a company under the Companies Act 1956, CIDCO cannot be treated as a government department, the commissioner further said.

With this order, CIDCO will have to pay around Rs 272 crore to the taxing agency.

However, the service tax commissioner's order can be challenged before the Customs Excise and Service Tax appellate tribunal.