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

Case snapshot

Sections / provisions: Section 9 of the Rajasthan Agricultural Produce Markets Act; 1961 and service tax law.

Questions before the Court / Tribunal

• Krishi Upaj Mandi Samiti, New Mandi Yard, Alwar Vs Commissioner of Central Excise and Service Tax, Alwar Forum-Supreme Court of India Date -23/02/2022 Sub- Whether exemption notification has to be construed strictly and the meaning has to be given to it according to legislative intent. The Supreme Court in this case was called upon to decide whether Market Committee constituted under the Rajasthan Agricultural Produce Markets Act ,1961 were liable to pay service tax on the rent collected by them from the traders under the Renting of immovable property service till 30th June, 2012 as thereafter the same was specifically put in the negative list. The appellants in this case wanted benefit of an exemption notification which was issued vide Circular No.89/7/2006 dated 18.12.2006 as per which any activity which was statutory activity was exempted. They contended that the rent which was…
• Which factual, statutory and procedural conditions controlled the requested relief?
• How did the forum apply the governing provisions to the evidence and procedural history recorded in this case?

Material facts and procedural background

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

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.

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

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

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

Appellant / petitioner / assessee submissions

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.

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

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 t he 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.

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

Revenue / respondent submissions

The judgment does not separately label the respondent’s submissions in an independently extractable passage. No contention is inferred; read the full record.

Court / Tribunal analysis and reasoning

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.

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.

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

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.

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

Operative decision and relief

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]

Ratio and legal principle

The narrow proposition associated with Krishi Upaj Mandi Samiti, New Mandi Yard, Alwar v. Commissioner of Central Excise and Service Tax, Alwar concerns krishi upaj mandi samiti, new mandi yard, alwar vs commissioner of central excise and service tax, alwar forum-supreme court of india date -23/02/2022 sub- whether exemption notification has to be construed strictly and the meaning has to be given to it according to legislative intent. the supreme court in this case was called upon to decide whether market committee constituted under the rajasthan agricultural produce markets act ,1961 were liable to pay service tax on the rent collected by them from the traders under the renting of immovable property service till 30th june, 2012 as thereafter the same was specifically put in the negative list. the appellants in this case wanted benefit of an exemption notification which was issued vide circular no.89/7/2006 dated 18.12.2006 as per which any activity which was statutory activity was exempted. they contended that the rent which was… The proposition cannot be separated from the judgment’s facts, the governing statutory version, the forum’s jurisdiction, and the exact relief recorded in CIVIL APPEAL NO. 1482 OF 2018.

For working-paper purposes, the decision should be cited only after matching the material facts and reading the passages under the judgment-grounded record above. The editorial outcome label “Dismissed” is a navigation aid; it does not replace the operative order or explain every issue in a multi-issue case.

Why this judgment matters

This decision is relevant when a file raises the same central question identified in the source headnote: Krishi Upaj Mandi Samiti, New Mandi Yard, Alwar Vs Commissioner of Central Excise and Service Tax, Alwar Forum-Supreme Court of India Date -23/02/2022 Sub- Whether exemption notification has to be construed strictly and the meaning has to be given to it according to legislative intent. The Supreme Court in this case was called upon to decide whether Market Committee constituted under the Rajasthan Agricultural Produce Markets Act ,1961 were liable to pay service tax on the rent collected by them from the traders under the Renting of immovable property service till 30th June, 2012 as thereafter the same was specifically put in the negative list. The appellants in this case wanted benefit of an exemption notification which was issued vide Circular No.89/7/2006 dated 18.12.2006 as per which any activity which was statutory activity was exempted. They contended that the rent which was… Its practical value lies in the way the Supreme Court of India connected the governing provisions—Section 9 of the Rajasthan Agricultural Produce Markets Act; 1961 and service tax law.—to the procedural posture and evidence before it.

The authority level is Supreme Court. That affects persuasive or binding weight, but authority level alone is never enough. Territorial jurisdiction, statutory period, the identity of the challenged order, and later appellate treatment must all be checked before the case is used in advice, a submission, or litigation strategy.

Practitioner action points

• Begin with the complete judgment and mark the paragraphs supporting the exact proposition relied upon.
• Match the statutory version of Section 9 of the Rajasthan Agricultural Produce Markets Act; 1961 and service tax law. and the decision date 2022-02-23; do not assume the current text is identical.
• Compare the notice, assessment, appeal or other procedural sequence with the chronology recorded in this case.
• Verify the stated later-history status and any review, appeal, SLP, curative or rectification proceedings before citation.
• Record why the client’s evidence is materially similar, and also record any fact capable of distinguishing the result.

Does this case match your facts?

Detailed reliance and distinction analysis

Identity check. Confirm that the cited cause title is Krishi Upaj Mandi Samiti, New Mandi Yard, Alwar v. Commissioner of Central Excise and Service Tax, Alwar, the proceeding is CIVIL APPEAL NO. 1482 OF 2018, and the decision is dated 2022-02-23. These fields are taken from the judgment record and should appear exactly in the citation note.

Bench check. The judgment identifies the coram as M.R. Shah, J. (authoring judge identified in judgment). A later order by another bench, a larger bench, or a higher forum may alter the weight or interpretation of the proposition.

Provision check. The source associates the dispute with Section 9 of the Rajasthan Agricultural Produce Markets Act; 1961 and service tax law.. The practitioner should place the historical statutory text next to the current text and identify every amendment, proviso, explanation, rule or notification that could change the analysis.

Fact check. The source issue is not a free-standing abstract rule. It arises from the concrete record summarized above. A reliable application note should list the common facts, the different facts, and whether each difference affects jurisdiction, admissibility, limitation, burden, computation or relief.

Remedy check. The recorded result is Dismissed. Where a matter is remanded, set aside, partly allowed, or disposed with directions, the exact operative language is more important than a binary winner/loser label.

History check. The current closure state is REVIEW_CURATIVE_DOCKET_CHECK_PENDING. If that state is pending, the page does not assert that no later case exists. It means the check remains open and must be completed at the point of professional reliance.

Section / provision impact

• Section 9 of the Rajasthan Agricultural Produce Markets Act — apply the exact version considered in the judgment.
• 1961 and service tax law. — apply the exact version considered in the judgment.

Case network

• CCE Aurangabad Vs Videocon Industries Limited — Supreme Court of India · Dismissed
• NOIDA v. Anand Sonbhadra — Supreme Court of India · Dismissed
• Augustan Textile Colours Pvt ltd v. Director of Industries & Anr — Supreme Court of India · Dismissed
• Noel Harper & Ors v. Union of India & Anr — Supreme Court of India · Dismissed

Related Finin2min resources

• Case Law Hub
• Search all 592 judgments
• Explore Exemptions, Charities & Trusts

Full judgment and source control

Read / download packaged judgment record

Source class: OFFICIAL_PRIMARY_EXACT_SANITIZED_MIRROR · Repository status: PUBLISH_READY