M.VEERAIYAN,J - (1.)HEARD both sides extensively on the stay petition.
(2.)The applicant has been engaged by the Transport Department of Madhya Pradesh Government for computerization on "Boot basis", their various activities like issuance of learner license, permanent driving licence, registration certificate for various vehicles etc. The applicant has entered into agreement and in terms of the agreement is required to maintain necessary infrastructure including server, terminals in connection with the said computerization work. In particular they are required to import blank smart cards from suppliers located abroad personalize the card, print required information on the card and supply the information loaded printed card to the Transport Department for issue of authenticated license, permit, certificate etc. The original authority has held that the entire activities relating to issuance of such licences/certificates in the form of smart cards amounts to rendering of 'business auxiliary service' by the applicant to the Transport Department of the Madhya Pradesh Government and accordingly she confirmed demand of about Rs. 2.24 crores as service tax and imposed penalties under various sections.
(3.)LEARNED Advocate for the applicant submits that the functions of the Transport Department of the State Government cannot be considered as 'Business activity' for the purpose of levying service tax under the head 'Business Auxiliary Services'. The Government Department is undertaking statutory and regulatory functions as envisaged under the Motor Vehicles Act and other allied Acts. When the Government Department cannot be considered as doing "Business", the question of the applicant rendering any auxiliary service in connection with the business undertaken by the said Department may not arise. He also submits that the blank smart card procured by them cannot be considered as an input for the said Department. The processes involved in transferring the required information into those blank cards cannot be treated as "processing of goods". Therefore, he submits that the service, if any, rendered by them cannot come under the 'Business Auxiliary Service'.