2023 (10) TMI 748 - SC - Service Tax

Exemption from Service tax - governmental authority - educational institutions - Indian Institute of Technology, Patna (IIT Patna) - National Institute of Technology, Rourkela (NIT Rourkela) - covered by Mega Service Tax Exemption Notification No. 25/2012, G.S.R 467(E) dated 20th June, 2012 or not - HELD THAT - When the meaning of the provision in question is clear and unambiguous by the usage of or in clause 2(s), there remains no force in the submission of Ms. Bagchi that or should be interpreted as and . In our opinion, the word or employed in clause 2(s) manifests the legislative intent of prescribing an alternative. Going by the golden rule of interpretation that words should be read in their ordinary, natural, and grammatical meaning, the word or in clause 2(s) clearly appears to us to have been used to reflect the ordinary and normal sense, that is to denote an alternative, giving a choice; and, we cannot assign it a different meaning unless it leads to vagueness or makes clause 2(s) absolutely unworkable. In the present case, the word or between sub-clauses (i) and (ii) indicates the independent and disjunctive nature of sub-clause (i), meaning thereby that or used after sub-clause (i) cannot be interpreted as and so as to tie it with the condition enumerated in the long line of clause 2(s) which is applicable only to sub-clause (ii). In the present case, the use of a semicolon is not a trivial matter but a deliberate inclusion with a clear intention to differentiate it from sub-clause (ii). Further, it can be observed upon a plain and literal reading of clause 2(s) that while there is a semicolon after sub-clause (i), sub-clause (ii) closes with a comma. This essentially supports the only possible construction that the use of a comma after sub-clause (ii) relates it with the long line provided after that and, by no stretch of imagination, the application of the long line can be extended to sub-clause (i), the scope of which ends with the semicolon - the long line of clause 2(s) governs only sub-clause (ii) and not sub-clause (i) because of the simple reason that the introduction of semicolon after sub-clause (i), followed by the word or , has established it as an independent category, thereby making it distinct from sub-clause (ii). If the author wanted both these parts to be read together, there is no plausible reason as to why it did not use the word and and without the punctuation semicolon. An interpretation of the relevant provision resulting in the expanded scope of its operation cannot in itself be sufficient to attribute ambiguity to the provision. To make a statute workable by employing interpretative tools and to venture into a kind of judicial legislation are two different things. Merely because the statute does not yield intended or desired results, that cannot be reason to overstep and cross the Lakshman Rekha by employing tools of interpretation to interpret a provision keeping in mind its outcome. Interpretative tools should be employed to make a statute workable and not to reach to a particular outcome. There are no merit in these appeals - appeal dismissed.

Summary

Issues Involved:

1. Whether IIT Patna and NIT Rourkela qualify as "governmental authority" under the Mega Service Tax Exemption Notification No. 25/2012.
2. Whether the service tax paid by SPCL for construction services at IIT Patna and NIT Rourkela should be refunded.

Issue-Wise Comprehensive Details:

1. Definition of "Governmental Authority":

The core issue revolves around whether IIT Patna and NIT Rourkela fall under the definition of "governmental authority" as per the Exemption Notification. The Exemption Notification under clause 2(s) initially defined a "governmental authority" as a board, authority, or body established with 90% or more government participation and set up by an Act of Parliament or State Legislature to carry out functions under Article 243W of the Constitution. The Clarification Notification amended this definition to include bodies set up by an Act of Parliament or State Legislature or established by the government with 90% or more participation by way of equity or control.

2. Interpretation of the Notification:

The appellants argued that both sub-clauses (i) and (ii) of clause 2(s) should be read conjunctively, meaning that even statutory bodies must have 90% or more government participation. However, the Court disagreed, stating that the word "or" between sub-clauses (i) and (ii) indicates an alternative, making them independent and disjunctive. The Court emphasized that the semicolon after sub-clause (i) and the comma after sub-clause (ii) support this interpretation, meaning the 90% participation requirement applies only to sub-clause (ii).

3. Applicability to IIT Patna and NIT Rourkela:

The Court found that IIT Patna and NIT Rourkela, being established by Acts of Parliament, qualify as "governmental authorities" under sub-clause (i) of the amended clause 2(s) without needing to meet the 90% government participation requirement. Consequently, the construction services provided to these institutions are exempt from service tax.

4. Refund of Service Tax:

Given the classification of IIT Patna and NIT Rourkela as "governmental authorities," the Court upheld the High Court judgments directing the refund of service tax paid by SPCL. The Court rejected the appellants' argument that SPCL's services were provided to NBCC and not directly to IIT Patna, noting that the Exemption Notification also covers services provided by subcontractors.

Conclusion:

The Supreme Court upheld the High Court judgments, affirming that IIT Patna and NIT Rourkela qualify as "governmental authorities" under the Exemption Notification, and thus, the service tax paid by SPCL for construction services is refundable. The appeals were dismissed, and the judgments and orders were upheld without any order for costs.