Delve into the legal intricacies of the court’s analysis on exemption notifications in taxation law. The focus is on differentiating statutory duties from activities carried out for consideration, which could impact the liability of service tax. By closely examining the interpretation of exemption provisions in taxing statutes, the court’s ruling sheds light on the critical aspects that govern the applicability of service tax in such cases.
Facts
- The appellants, Krishi Upaj Mandi Samiti, are not liable to pay service tax on renting of immovable property used for storage of agricultural produce in the market area.
- CESTAT held that the Market Committees are not liable to service tax on renting shops/sheds/platforms/land in the notified market area for temporary storage of agricultural produce.
- However, renting out shops, premises, buildings for commercial purposes other than agricultural produce will make the Market Committees liable to pay service tax.
- The Market Committees were established under the Rajasthan Agricultural Produce Markets Act, 1961, to regulate the sale of agricultural produce in notified markets.
- They charge market fees for issuing licenses and also rent out land and shops to traders.
- Revenue claimed that the Market Committees were liable to pay service tax on the services of renting/leasing lands/shops.
- After adjudication, it was concluded that the appellants were not liable for service tax on market fees collected, but were liable for service tax on renting of immovable property for consideration.
- Appellants liable to pay service tax under the category of ‘renting of immovable property service’ for the period up to 30.06.2012.
- For the period from 1.7.2012, the Market Committees are not liable to service tax as per the Negative List Regime.
- The CESTAT set aside the penalties imposed on the appellants.
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Arguments
- Appellants, Market Committees, claim exemption under 2006 circular for service tax on renting/leasing activities.
- Appellants argue that activities of allotment/renting/leasing of shops by Market Committees are statutory and thus exempt.
- Revenue argues that there is no mandatory duty on Market Committees for renting/leasing activities.
- Revenue contends that renting/leasing activities by Market Committees are not statutory and hence not exempt.
- Appellants argue that fees collected from renting/leasing are used for market area betterment, supporting exemption claim.
- Court is urged to strictly construe exemption notification and not ignore conditions prescribed therein.
- If authorities perform a service for consideration and not in the nature of a statutory fee, service tax is leviable if the activity falls within the taxable service ambit.
- Statutory provisions providing for exemption must be interpreted based on the language used; no additions or subtractions can be made.
- Exemption principles may not apply to activities put in the Negative List post 01.07.2012.
- Difference between a charging provision in a taxing statute and an exemption notification must be considered.
- 2006 circular states that activities considered statutory obligations with fees deposited into the Government Treasury are exempt from tax.
- Renting/leasing by Market Committees is not a statutory activity, and the fees are not a statutory levy.
- Allotment/rent/lease of shop/land is for consideration and not a mandatory statutory duty.
- Plain language of the provision in a taxing statute should be preferred for interpretation when clear and capable of a defined meaning.
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Analysis
- Activities performed by sovereign/public authorities under provisions of law as mandatory and statutory functions are not considered provision of taxable service for levy of service tax.
- Service tax would be leviable if the activity performed by the authority is not in the nature of a statutory activity and is undertaken for consideration.
- Exemption notifications in taxing statutes must be strictly construed, and the beneficiary must fulfill all conditions specified.
- The language of exemption notifications must be read as a whole, and if any conditions are not met, the party is not entitled to the exemption.
- The intent of the legislature must be considered in interpreting statutory provisions providing for exemption.
- Any doubt or absurdity in a fiscal statute should not lead to a favorable construction for the assessee in the context of exemption notifications.
- The 2006 circular clarifies that fees collected for statutory activities are not in the nature of a statutory levy, and service tax is leviable for non-statutory activities undertaken for consideration.
- Market Committees are not exempt from the levy of service tax on rent/lease of shop/land/platform.
- The 2006 circular exempting Market Committees from service tax has no substance.
- The Market Committees have not argued that rent/lease of shop/land/platform cannot be considered a service.
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Decision
- Costs not awarded in this case
- All appeals have failed and are dismissed
- Pending applications are disposed of
Case Title: KRISHI UPAJ MANDI SAMITI NEW MANDI YARD ALWAR Vs. COMMISSIONER OF CENTRAL EXCISE AND SEVICE TAX (2022 INSC 224)
Case Number: C.A. No.-001482 / 2018
