Service Tax Exemption Notification Should not be Liberally Construed: SC

The Supreme Court of India in the matter of Krishi Upaj Mandi Samiti vs Commissioner of Central Excise and Service Tax has ruled out that Service Tax Exemption Notification Should not be Liberally Construed.

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”). 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. The 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. 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.

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.

The order was made by Honorable Justice M.R. Shah and Honorable Justice B.V. Nagarathna.

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