2022 (2) TMI 1113 - SC - Service Tax

Levy of service tax - market fee - mandi shulk - whether the appellant(s) being an Agricultural Produce Market Committee was/were excluded from tax liability on and after 01.07.2012? - HELD THAT - 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 - 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. 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 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. 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 that under the 2006 circular, the Market Committees were not exempted from payment of service tax on such activities - 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. Appeal dismissed.

Summary

Issues Involved:
1. Liability of Agricultural Produce Market Committees (APMCs) to pay service tax under the category of "renting of immovable property service" for the period up to 30.06.2012.
2. Applicability of the Negative List Regime of taxation from 01.07.2012.
3. Interpretation and applicability of Circular No. 89/7/2006 dated 18.12.2006 regarding exemption from service tax for statutory activities.
4. Whether the activities of renting/leasing by APMCs are considered mandatory statutory activities exempt from service tax.

Detailed Analysis:

1. Liability of APMCs to Pay Service Tax up to 30.06.2012:
The Supreme Court addressed whether APMCs are liable to pay service tax under the category of "renting of immovable property service" for the period up to 30.06.2012. The Court noted that the respective appellants, APMCs, were involved in regulating the sale of agricultural produce and charged market fees for issuing licenses and renting out land and shops. The Revenue had issued show cause notices, and after adjudication, it was held that APMCs were not liable to pay service tax on "market fee" or "mandi shulk" but were liable under the category of "renting of immovable property" for renting lands/shops. The CESTAT confirmed this view, holding APMCs liable for service tax for the period up to 30.06.2012.

2. Applicability of the Negative List Regime from 01.07.2012:
The introduction of the Negative List Regime of taxation w.e.f. 01.07.2012 excluded certain services from tax liability. The CESTAT noted that APMCs were excluded from tax liability on renting of immovable property used for storage of agricultural produce in the market area post-01.07.2012. The CESTAT held that APMCs were not liable for service tax on renting shops/sheds/platforms/land for temporary storage of agricultural produce but were liable for renting premises for other commercial purposes.

3. Interpretation and Applicability of Circular No. 89/7/2006:
The appellants argued that their activities of allotment of shops/premises/spaces to traders and brokers were statutory activities under Section 9 of the Rajasthan Agricultural Produce Markets Act, 1961, and thus exempt from service tax as per Circular No. 89/7/2006. The Circular exempts activities performed by public authorities under statutory obligations, where the fee collected is a compulsory levy deposited into the Government Treasury. The Court examined whether the activities of renting/leasing by APMCs fell under this exemption.

4. Mandatory Statutory Activities and Exemption from Service Tax:
The Court analyzed whether the activities of renting/leasing by APMCs were mandatory statutory duties. It was noted that Section 9(2) of the Act, 1961, used the term "may," indicating discretionary power rather than a mandatory obligation. The Court concluded that the activities of renting/leasing shops/land were not mandatory statutory duties and thus did not qualify for exemption under the 2006 Circular. The fees collected were not deposited into the Government Treasury but into the Market Committee Fund, used for market committee purposes, further disqualifying them from exemption.

Conclusion:
The Court dismissed the appeals, holding that APMCs were liable to pay service tax under the category of "renting of immovable property service" for the period up to 30.06.2012. It was also held that post-01.07.2012, APMCs were not liable to service tax for renting immovable property for storage of agricultural produce, but were liable for other commercial purposes. The Court emphasized that exemption notifications should be strictly construed, and the activities of renting/leasing by APMCs did not qualify as mandatory statutory activities exempt from service tax under Circular No. 89/7/2006.