Krishi Upaj Mandi Samiti, New Mandi Yard, Alwar vs Commissioner of Central Excise and Service Tax, Alwar

Krishi Upaj Mandi Samiti, New Mandi Yard, Alwar vs Commissioner of Central Excise and Service Tax, Alwar

REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 1482 OF 2018

Krishi Upaj Mandi Samiti,

New Mandi Yard, Alwar …Appellant(s)

Versus

Commissioner of Central Excise

and Service Tax, Alwar …Respondent(s)

With

CIVIL APPEAL NO. 1861 OF 2018

CIVIL APPEAL NO. 1851 OF 2018

CIVIL APPEAL NO. 1850 OF 2018

CIVIL APPEAL NO. 1863 OF 2018

CIVIL APPEAL NO. 1862 OF 2018

CIVIL APPEAL NO. 1860 OF 2018

CIVIL APPEAL NO. 1859 OF 2018

CIVIL APPEAL NO. 1856 OF 2018

CIVIL APPEAL NO. 1858 OF 2018

CIVIL APPEAL NO. 3158 OF 2018

CIVIL APPEAL NO. 3160 OF 2018

CIVIL APPEAL NO. 3369 OF 2018

CIVIL APPEAL NO. 3367 OF 2018

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CIVIL APPEAL NO. 3368 OF 2018

CIVIL APPEAL NO. 3370 OF 2018

CIVIL APPEAL NO. 3371 OF 2018

CIVIL APPEAL NO. 3372 OF 2018

CIVIL APPEAL NO. 3373 OF 2018

CIVIL APPEAL NO. 3374 OF 2018

CIVIL APPEAL NO. 4384 OF 2018

CIVIL APPEAL NO. 4382 OF 2018

CIVIL APPEAL NO. 4383 OF 2018

CIVIL APPEAL NO. 6012 OF 2018

CIVIL APPEAL NO. 715 OF 2019

CIVIL APPEAL NOS. 3356-3358 OF 2019

J U D G M E N T

M.R. SHAH, J.

1. As common questions of law and facts arise in these group of

appeals and as such are arising out of the impugned common judgment

and order passed by the Customs, Excise and Service Tax Appellate

Tribunal, Principal Bench, New Delhi (hereinafter referred to as

“CESTAT”), all these appeals are decided and disposed of together by

this common judgment and order.

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2. That the respective appellants herein are the Krishi Upaj Mandi

Samiti (Agricultural Produce Market Committees) located in different

parts of State of Rajasthan. The respective appellants are established

under the provisions of the Rajasthan Agricultural Produce Markets Act,

1961 (hereinafter referred to as “Act, 1961”). That the State Government

constituted various Market Committees (including the appellants herein)

in the notified market areas to carry out the functions as envisaged in the

Act, 1961 and the Rules made thereunder. That the respective

appellants regulate sale of agricultural produce in the notified markets.

They charge “market fee” for issuing license to traders, agents, factory

/storage, company or other buyers of other agricultural produce. The

appellants also rent out the land and shops to traders and collect

allotment fee/lease amount for such land/shop. That the Revenue was

of the view that the appellants are liable to pay the service tax on the

services rendered by them by renting/leasing the lands/shops. Show

cause notice was issued by the concerned jurisdictional authorities.

That after adjudication, it was held that the appellants were not liable to

pay the service tax on “market fee” or “mandi shulk” collected by them.

However, the appellants were held liable for service tax under the

category of “renting of immovable property” in respect of renting of

land(s)/shop(s) for a consideration. Accordingly, the Service Tax

demands were confirmed. Penalties under Sections 76, 77 and 78 of

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the Finance Act, 1994 were also imposed on them. The appellants

preferred appeals before the CESTAT.

2.1 By impugned common judgment and order, the CESTAT noted that

with the introduction of Negative List Regime of taxation w.e.f.

01.07.2012, the services in question were excluded from the tax liability

and therefore the appellant(s) being an Agricultural Produce Market

Committee was/were excluded from tax liability on and after 01.07.2012.

The CESTAT also took note of the circular issued by the Board.

Accordingly, the CESTAT held that the appellants – respective Market

Committees are not liable to service tax on renting of immovable

property used for storage of agricultural produce in the market area. The

CESTAT observed that the respective Market Committees are not liable

to service tax on renting shops/sheds/platforms/land in the notified

market area for traders for temporary storage of agricultural produce

traded in the market. The CESTAT also observed that in respect of

shops, premises, buildings, etc. rented/leased out for any other

commercial purpose other than with respect to the agricultural produce

(like bank, general Shop etc.), the same shall not be covered by the

Negative List and the market committee(s) shall be liable to service tax.

Accordingly, the CESTAT held that the appellants – Market Committees

are not liable to service tax for the period after 01.07.2012. The CESTAT

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also set aside the penalties imposed on the appellants. The CESTAT

ultimately disposed of the appeals in the following terms:-

“(I) The appellants are liable to pay service tax under

the category of "renting of immovable property

service" for the period upto 30.06.2012.

(II) For the period from 1.7.2012 (Negative List

Regime), the appellants are not liable to pay service

tax under the said tax entry in respect of

shed/shop/premises leased out to the traders/others

for storage of agricultural produce in the marketing

area. The Negative List will not cove the activities of

renting of immovable property for other than

agricultural produce.

(III) The demands, wherever raised invoking restricted

to the normal period. Penalties imposed to extended

period, shall be the appellants are set aside.

(IV) The threshold exemption available to the small

scale service provider in terms of the applicable

notifications during the relevant years, shall be

extended to the appellant on verification of their

turnover.”

2.2 Feeling aggrieved and dissatisfied with the impugned common

judgment and order passed by the learned CESTAT holding that the

appellants – respective Market Committees are liable to pay service tax

under the category of “renting of immovable property service” for the

period upto 30.06.2012, the respective Market Committees located in the

State of Rajasthan have preferred the present appeals.

3. Shri Prakul Khurana and Ms. Divyasha Mathur, learned counsel

appearing on behalf of the respective appellants – respective Market

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Committees have vehemently submitted that as the activity of allotment

of shops/premises/spaces to traders and brokers by the respective

Market Committees for the purpose of storage and/or marketing of

agricultural produce is in the nature of a statutory activity as mandated

under Section 9 of the Act, 1961 and, therefore, the Market Committees

are exempted from payment of service tax on such services as per

Circular No.89/7/2006 dated 18.12.2006.

3.1 Learned counsel appearing on behalf of the appellants have

submitted that under Section 9(2)(xvii) of the Act, 1961, it is the duty cast

upon the respective Market Committees for allotment/disposal of land or

any movable or immovable property for the purpose of effectively

carrying out its duties. It is submitted that as per Section 9(2)(xiii), the

Market Committees are authorised to levy, recovery and receive rates,

charges, fees and other sums of money to which the Market Committee

is entitled. Therefore, it is the case on behalf of the respective Market

Committees that the activities of the said Market Committees of

allotment/leasing/renting the shop/land/platform is in the nature of a

statutory activity and therefore as per Circular No.89/7/2006 dated

18.12.2006, the respective Market Committees are exempted from

payment of service tax on such activities, which are in the nature of

statutory activity.

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3.2 It is further submitted by Shri Khurana, learned counsel appearing

on behalf of the appellants – respective Market Committees that even

the fees collected/recovered by the respective Market Committees on

renting/leasing the land/shop will be deposited in the Market Committee

Fund and the same shall be ultimately used for the betterment of the

market area. It is submitted therefore that when the respective Market

Committees are the public authorities constituted under the Statute –

Act, 1961 and when they perform the statutory duty / statutory function

of the allotment/renting/leasing of land/shop, the respective Market

Committees are entitled to the exemption provided under the 2006

circular.

4. All these appeals are vehemently opposed by Ms. Nisha Bagchi,

learned counsel appearing on behalf of the Revenue.

4.1 It is submitted that all the authorities below have rightly held that

the activities of allotment/renting/leasing of the shop/shed/platform/land

cannot be said to be a mandatory statutory activity and therefore, the

Market Committees are not exempted from service tax as per 2006

circular as claimed by the respective Market Committees.

4.2 It is submitted by learned counsel appearing on behalf of the

Revenue that Section 9 of the Act, 1961 is an enabling provision and

there is no mandatory duty cast upon the Market Committees for

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allotment/renting/leasing of the shop/land/platform. It is submitted that

even under Section 9(2), the words used are “market committee may”. It

is submitted therefore that it cannot be said that it is a mandatory

statutory duty cast upon the Market Committee to allot/lease/rent the

shop/land. It is urged that the activities of renting/leasing by the Market

Committees to the traders cannot be said to be a statutory activity and

therefore the market committee(s) is/are not entitled to claim any

exemption under the 2006 circular.

4.3 Learned counsel appearing on behalf of the Revenue has

submitted that the appellants are claiming an exemption under the 2006

circular. That as held in a catena of decisions of this Court that an

exemption notification has to be read as a whole. That an exception

and/or an exemption provision in a taxing statute should be construed

strictly and it is not open to the Court to ignore the conditions prescribed

in an exemption notification. It is submitted that the exemption

notification should be strictly construed and given meaning according to

legislative intendment. It is contended that the Statutory provisions

providing for exemption have to be interpreted in light of the words

employed in them and there cannot be any addition or subtraction from

the statutory provisions.

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4.4 It is further submitted that as per the law laid down by this Hon’ble

Court in a catena of decisions in a taxing statute, it is the plain language

of the provision that has to be preferred, where language is plain and is

capable of determining a defined meaning. Strict interpretation to the

provision is to be accorded to each case on hand.

4.5 Now, in so far as the submission on behalf of the appellants that in

the event of any doubt or any absurdity in a provision in a fiscal statute,

construction favourable to the assessee should be adopted is

concerned, it is submitted that the said principle shall not be applicable

to construction of an exemption notification.

4.6 It is urged that there is a vast difference and distinction between a

charging provision in a taxing statute and an exemption notification and

the same have to be borne in mind in the instant cases.

4.7 It is submitted that in the present case, the language used in the

exemption circular 2006 is very clear and unambiguous. That as per the

2006 circular issued by the Board, only such activities performed by the

public authorities which are in their very nature statutory obligations, the

fee collected by them for performing such activities is a compulsory levy

as per the provisions of the relevant statute and is deposited into the

Government Treasury, shall not be subjected to tax. It is submitted that

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in paragraph 3, it is specifically made clear that if such authorities

perform a service, which is not in the nature of statutory activity and the

same is undertaken for consideration and not in the nature of a statutory

fee/levy then, in such cases, the service tax would be leviable if the

activities undertaken falls within the ambit of taxable service.

4.8 It is submitted that in the present case, the activity of

renting/leasing performed by the Market Committees cannot be said to

be in the nature of a statutory activity and the fee collected cannot be

said to be in the nature of a statutory fee/levy. It is contended that the

allotment/rent/lease of shop/land is for a consideration and it is not the

mandatory statutory activity/duty to provide on rent/lease the

shop/platform/land to the traders.

4.9 It is further submitted that even subsequently and on and after

01.07.2012 such an activity is put in the Negative List. That from the

aforesaid, the intention of the legislature can be gathered. That if the

activities, which are now put in the Negative List were already exempted

from service tax, as per the case on behalf of the respective Market

Committees in view of 2006 circular, in that case, there was no necessity

for the Revenue to put such services in the Negative List subsequently.

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4.10 Making the above submissions, it is prayed to dismiss the present

appeals.

5. Heard the learned counsel for the respective parties at length.

6. At the outset, it is required to be noted that the respective Market

Committees are claiming exemption under the 2006 circular. The

exemption circular issued by the Board reads as under:-

“Circular No.89/7 /2006 dated 18.12.2006:-

"A number of sovereign /public authorities (i.e., an agency

constituted/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 Laboratories (RRSL)

undertake verification, approval and calibration of

weighing and measuring instruments; the Regional

Transport Officer (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 lows.

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 service'

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

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fulfilled in accordance with law. The fee collected by them

for performing such activities is in the nature of

compulsory levy as per the provision of the relevant

statute, and it is deposited 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 consideration not in the nature of

statutory fee/levy, then in such cases, service tax would

be leviable, if the activity undertaken falls within the ambit

of a taxable service."

7. As per the exemption circular only such activities performed by the

sovereign / public authorities under the provisions of law being

mandatory and statutory functions and the fee collected for performing

such activities is in the nature of a compulsory levy as per the provisions

of the relevant statute and it is deposited into the Government Treasury,

no service tax is leviable on such activities. In paragraph 3, it is also

specifically clarified that if such authority performs a service, which is not

in the nature of a statutory activity and the same is undertaken for

consideration, then in such cases, service tax would be leviable, if the

activity undertaken falls within the ambit of a taxable service. Thus, the

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language used in the 2006 circular is clear, unambiguous and is capable

of determining a defined meaning.

8. The exemption notification should not be liberally construed and

beneficiary must fall within the ambit of the exemption and fulfill the

conditions thereof. In case such conditions are not fulfilled, the issue of

application of the notification does not arise at all by implication.

8.1 It is settled law that the notification has to be read as a whole. If

any of the conditions laid down in the notification is not fulfilled, the party

is not entitled to the benefit of that notification. An exception and/or an

exempting provision in a taxing statute should be construed strictly and it

is not open to the court to ignore the conditions prescribed in the

relevant policy and the exemption notifications issued in that regard.

8.2 The exemption notification should be strictly construed and given a

meaning according to legislative intendment. The Statutory provisions

providing for exemption have to be interpreted in light of the words

employed in them and there cannot be any addition or subtraction from

the statutory provisions.

8.3 As per the law laid down by this Court in a catena of decisions, in a

taxing statute, it is the plain language of the provision that has to be

preferred, where language is plain and is capable of determining a

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defined meaning. Strict interpretation of the provision is to be accorded

to each case on hand. Purposive interpretation can be given only when

there is an ambiguity in the statutory provision or it results in absurdity,

which is so not found in the present case.

8.4 Now, so far as the submission on behalf of the respondent that in

the event of ambiguity in a provision in a fiscal statute, a construction

favourable to the assessee should be adopted is concerned, the said

principle shall not be applicable to construction of an exemption

notification, when it is clear and not ambiguous. Thus, it will be for the

assessee to show that he comes within the purview of the notification.

Eligibility clause, it is well settled, in relation to exemption notification

must be given effect to as per the language and not to expand its scope

deviating from its language. Thus, there is a vast difference and

distinction between a charging provision in a fiscal statute and an

exemption notification.

9. In the present case, it is the case on behalf of the appellants that

the activity of rent/lease/allotment of shop/land/platform/space is a

statutory activity and the Market Committees are performing their

statutory duties cast upon them under Section 9 of the Act, 1961 and

therefore they are exempted from payment of service tax on such

activities.

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The aforesaid submission seems to be attractive but has no

substance. Section 9(2) is an enabling provision and the words used is

“market committee may”. It is to be noted that in so far as sub-section

(1) of Section 9 is concerned, the word used is “shall”. Therefore,

wherever the legislature intended that the particular activity is a

mandatory statutory, the legislature has used the word “shall”.

Therefore, when under sub-section (2) of Section 9, the word used is

“may”, the activities mentioned in Section 9(2)(xvii) cannot be said to be

mandatory statutory duty and/or activity. Under Section 9(2), it is not a

mandatory statutory duty cast upon the Market Committees to

allot/lease/rent the shop/platform/land/space to the traders. Hence, such

an activity cannot be said to be a mandatory statutory activity as

contended on behalf of the appellants. Even the fees which is collected

is not deposited into the Government Treasury. It will go to the Market

Committee Fund and will be used by the market committee(s). In the

facts of the case on hand, such a fee collected cannot have the

characteristics of the statutory levy/statutory fee. Thus, under the Act,

1961, it cannot be said to be a mandatory statutory obligation of the

Market Committees to provide shop/land/platform on rent/lease. If the

statute mandates that the Market Committees have to provide the

land/shop/platform/space on rent/lease then and then only it can be said

to be a mandatory statutory obligation otherwise it is only a discretionary

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function under the statute. If it is discretionary function, then, it cannot be

said to be a mandatory statutory obligation/statutory activity. Hence, no

exemption to pay service tax can be claimed.

10. The next provision relied upon by the appellants – respective

Market Committees is Rule 45 of the Rajasthan Agricultural Produce

Markets Rules, 1963 (hereinafter referred to as “Rules, 1963”), which

reads as under:-

“45. The Market Committee fund.- All money received

by the Market Committee shall be credited to the fund

called the Market Committee fund. Except where

Government on application by the Market Committee or

otherwise shall direct, all money paid into the Market

Committee fund shall be credited at least once a week in

full into Government treasury or sub-treasury, or a bank

duly approved for this purpose by the Director. All balance

from the fund shall be kept in such treasury or subtreasury or bank and it shall not be withdrawn upon

except in accordance with these rules.”

10.1 Now, so far as the submission on behalf of the appellants relying

upon Rule 45 of the Rules, 1963 that the fees, which is collected shall be

deposited with the Government Treasury and therefore also the Market

Committees are exempted from payment of service tax is concerned, it

is to be noted that on fair reading of Rule 45, the amount of fee so

collected on such activities – rent/lease shall not go to the Government.

Rule 45 provides how the money received by the Market Committees

shall be invested and/or deposited. It provides that all money received

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by the Market Committee shall be credited to the fund called the Market

Committee Fund. It further provides that all money paid into the Market

Committee Fund shall be credited once a week in full into Government

Treasury or sub-treasury, or a bank duly approved for this purpose by

the Director and all balance from the fund shall be kept in such treasury

or sub-treasury or bank and it shall not be withdrawn except in

accordance with the Rules. Therefore, it does not provide that on

deposit of the money received by the Market Committees into the

Government Treasury/sub-treasury or a bank duly approved, it ceases to

be the Market Committee Fund. It will continue to be the Market

Committee Fund. Even it is the case on behalf of the appellants that the

fees collected, which will be deposited in the Market Committee Fund

will be utilized by the Market Committee for expanding/benefit of the

Market Committee etc.

11 Even otherwise, it is to be noted that on and after 01.07.2012,

such activities carried out by the Agricultural Produce Market

Committees is placed in the Negative List. If the intention of the

Revenue was to exempt such activities of the Market Committees from

levy of service tax, in that case, there was no necessity for the Revenue

subsequently to place such activity of the Market Committees in the

Negative List. The fact that, on and after 01.07.2012, such activity by

the Market Committees is put in the Negative List, it can safely be said

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that under the 2006 circular, the Market Committees were not exempted

from payment of service tax on such activities. At this stage, it is

required to be noted that it is not the case on behalf of the Market

Committees that the activity of rent/lease on shop/land/platform as such

cannot be said to be service. However, their only submission is that the

Market Committees are exempted from levy of service tax on such

service/activity as provided under the 2006 circular, which as observed

hereinabove has no substance.

12 In view of the above and for the reasons stated above, all these

appeals fail and the same deserve to be dismissed and are accordingly

dismissed. However, in the facts and circumstances of the case, there

shall be no order as to costs.

Pending applications, if any, also stand disposed of.

………………………………….J.

 [M.R. SHAH]

NEW DELHI; ………………………………….J.

FEBRUARY 23, 2022. [B.V. NAGARATHNA]

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