KRISHI UPAJ MANDI SAMITI, NEW MANDI YARD, ALWAR versus COMMISSIONER OF CENTRAL EXCISE AND SERVICE TAX, ALWAR on 23 February 2022

SUPREME COURT REPORTS

[2022] 1 S.C.R.

AKRISHI UPAJ MANDI SAMITI, NEW MANDI YARD, ALWAR

v.

COMMISSIONER OF CENTRAL EXCISE AND SERVICE TAX,ALWAR

B (Civil Appeal No.1482 of 2018)

FEBRUARY 23, 2022

[M. R. SHAH AND B. V. NAGARATHNA, JJ.]

Rajasthan Agricultural Produce Markets Act, 1961: s.9(2) –CLiability of Market Committees to pay service tax on market feesreceived for allotting/renting/leasing the shop/shed/platform/land– Held: Exemption circular No.89/7/2006 dated 18.12.2006provides that service tax is not leviable on activities performed bythe public authorities under the provisions of law which areDmandatory and statutory functions and the fee collected forperforming such activities is in the nature of a compulsory levy asper the provisions of the relevant statutes and is deposited into theGovernment Treasury – Under sub-section(2) of s.9, the word usedis “may”, therefore, the activities mentioned in s.9(2)(xvii) cannotbe said to be mandatory statutory duty and/or activity – Under s.9(2),Eit is not a mandatory statutory duty cast upon the Market Committeesto allot/lease/rent the shop/platform/land/space to the traders – Eventhe fees which is collected is not deposited into the GovernmentTreasury – It will go to the Market Committee Fund and will be usedby the Market Committee(s) – Such a fee collected cannot have theFcharacteristics of the statutory levy/statutory fee – Thus, activitiesof allotting/renting/leasing of shop/shed/platform/land by MarketCommittees to the traders is not a mandatory statutory duty castupon the Market Committees under s.9 of the Act and therefore,Market Committees are not exempt from payment of service tax onsuch activities.G

Interpretation of Statutes: Exemption notification –Construction of – Held: Not be liberally construed – Notificationhas to be read as a whole – If any of the conditions laid down in thenotification is not fulfilled, the party is not entitled to the benefit ofthat notification – Circular/Government Order/Notification.H

Interpretation of Statutes: Taxing statutes – Exception orexempting provision – Construction of – Held: An exception and/oran exempting provision in a taxing statute should be construedstrictly – It is not open to the court to ignore the conditions prescribedin the relevant policy and the exemption notifications issued in thatregard – The statutory provisions providing for exemption have tobe interpreted in light of the words employed in them and therecannot be any addition or subtraction from the statutory provisions.

Interpretation of Statutes: Taxing statutes – Interpretation of– Strict interpretation – In a taxing statute, it is the plain languageof the provision that has to be preferred – Strict interpretation ofthe provision is to be accorded to each case on hand – Purposiveinterpretation can be given only when there is an ambiguity in thestatutory provision or it results in absurdity.

Interpretation of Statutes: Fiscal/Taxing statutes vis-a-visExemption notification – Interpretation of – Held: In the event ofambiguity in a provision in a fiscal statute, a construction favourableto the assessee should be adopted – However, said principle shallnot be applicable to construction of an exemption notification, whenit is clear and not ambiguous – Thus, it will be for the assessee toshow that he comes within the purview of the notification – Eligibilityclause in relation to exemption notification must be given effect toas per the language and not to expand its scope deviating from itslanguage – Thus, there is a vast difference and distinction betweena charging provision in a fiscal statute and an exemptionnotification.

Dismissing the appeals, the Court

Conclusion

Dismissing the appeals, the Court

HELD: 1.1 As per the exemption circular “Circular No.89/7/2006 dated 18.12.2006” no service tax is leviable onactivities which are performed by the sovereign/public authoritiesunder the provisions of law being mandatory and statutoryfunctions and the fee collected for performing such activities isin the nature of a compulsory levy as per the provisions of therelevant statute and is deposited into the Government Treasury.In paragraph 3, it is also specifically clarified that if such authorityperforms a service, which is not in the nature of a statutory activity AB

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Aand the same is undertaken for consideration, then in such cases,service tax would be leviable, if the activity undertaken falls withinthe ambit of a taxable service. Thus, the language used in the2006 circular is clear, unambiguous and is capable of determininga defined meaning. [Para 7][711-D-F]

B1.2 The exemption notification should not be liberallyconstrued and beneficiary must fall within the ambit of theexemption and fulfill the conditions thereof. In case such conditionsare not fulfilled, the issue of application of the notification doesnot arise at all by implication. [Para 8][711-F-G]

C1.3 It is settled law that the notification has to be read as awhole. If any of the conditions laid down in the notification is notfulfilled, the party is not entitled to the benefit of that notification.An exception and/or an exempting provision in a taxing statuteshould be construed strictly and it is not open to the court toignore the conditions prescribed in the relevant policy and theDexemption notifications issued in that regard. The Statutoryprovisions providing for exemption have to be interpreted in lightof the words employed in them and there cannot be any additionor subtraction from the statutory provisions. [Paras 8.1, 8.2][711-G-H; 712-A-B]

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2.1 In a taxing statute, it is the plain language of theprovision that has to be preferred, where language is plain and iscapable of determining a defined meaning. Strict interpretationof the provision is to be accorded to each case on hand. Purposiveinterpretation can be given only when there is an ambiguity inFthe statutory provision or it results in absurdity, which is so notfound in the present case. [Para 8.3][712-B-C]

2.2 Now, so far as the submission on behalf of the respondentthat in the event of ambiguity in a provision in a fiscal statute, aconstruction favourable to the assessee should be adopted isGconcerned, the said principle shall not be applicable toconstruction of an exemption notification, when it is clear andnot ambiguous. Thus, it will be for the assessee to show that hecomes within the purview of the notification. Eligibility clause, itis well settled, in relation to exemption notification must be given H

KRISHI UPAJ MANDI SAMITI, NEW MANDI YARD, ALWAR v. COMMISSIONEROF CENTRAL EXCISE AND SERVICE TAX, ALWAR

effect to as per the language and not to expand its scope deviatingfrom its language. Thus, there is a vast difference and distinctionbetween a charging provision in a fiscal statute and an exemptionnotification. [Para 8.4][712-C-E]

2.3 In the present case, it is the case on behalf of theappellants that the activity of rent/lease/allotment of shop/land/platform/space is a statutory activity and the Market Committeesare performing their statutory duties cast upon them underSection 9 of the Act, 1961 and therefore they are exempted frompayment of service tax on such activities. The aforesaidsubmission seems to be attractive but has no substance. Section9(2) is an enabling provision and the words used is “marketcommittee may”. In so far as sub-section (1) of Section 9 isconcerned, the word used is “shall”. Therefore, wherever thelegislature intended that the particular activity is a mandatorystatutory, 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 tobe mandatory statutory duty and/or activity. Under Section 9(2),it is not a mandatory statutory duty cast upon the MarketCommittees to allot/lease/rent the shop/platform/land/space tothe traders. Hence, such an activity cannot be said to be amandatory statutory activity as contended on behalf of theappellants. Even the fees which is collected is not deposited intothe Government Treasury. It will go to the Market CommitteeFund and will be used by the market committee(s). In the facts ofthe case on hand, such a fee collected cannot have thecharacteristics of the statutory levy/statutory fee. Thus, underthe Act, 1961, it cannot be said to be a mandatory statutoryobligation of the Market Committees to provide shop/land/platform on rent/lease. If the statute mandates that the MarketCommittees have to provide the land/shop/platform/space on rent/lease then and then only it can be said to be a mandatory statutoryobligation otherwise it is only a discretionary function under thestatute. If it is discretionary function, then, it cannot be said to bea mandatory statutory obligation/statutory activity. Hence, noexemption to pay service tax can be claimed. [Para 9][712-E-H;713-A-D]

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A2.4 Now, so far as the submission on behalf of the appellantsrelying upon Rule 45 of the Rules, 1963 that the fees, which iscollected shall be deposited with the Government Treasury andtherefore also the Market Committees are exempted frompayment of service tax is concerned, it is to be noted that on fairreading of Rule 45, the amount of fee so collected on such activitiesB– rent/lease shall not go to the Government. Rule 45 provideshow the money received by the Market Committees shall beinvested and/or deposited. It provides that all money receivedby the Market Committee shall be credited to the fund calledthe Market Committee Fund. It further provides that all moneyCpaid into the Market Committee Fund shall be credited once aweek in full into Government Treasury or sub-treasury, or a bankduly approved for this purpose by the Director and all balancefrom the fund shall be kept in such treasury or sub-treasury orbank and it shall not be withdrawn except in accordance with theRules. Therefore, it does not provide that on deposit of the moneyDreceived by the Market Committees into the GovernmentTreasury/sub-treasury or a bank duly approved, it ceases to bethe Market Committee Fund. It will continue to be the MarketCommittee Fund. Even it is the case on behalf of the appellantsthat the fees collected, which will be deposited in the MarketECommittee Fund will be utilized by the Market Committee forexpanding/benefit of the Market Committee etc. [Para 10][713-G-H; 714-A-C]

2.5 Even otherwise, on and after 01.07.2012, such activitiescarried out by the Agricultural Produce Market Committees isFplaced in the Negative List. If the intention of the Revenue wasto exempt such activities of the Market Committees from levyof service tax, in that case, there was no necessity for the Revenuesubsequently to place such activity of the Market Committees inthe Negative List. The fact that, on and after 01.07.2012, suchactivity by the Market Committees is put in the Negative List, itGcan safely be said that under the 2006 circular, the MarketCommittees were not exempted from payment of service tax onsuch activities. [Para 11][714-D-E]

KRISHI UPAJ MANDI SAMITI, NEW MANDI YARD, ALWAR v. COMMISSIONEROF CENTRAL EXCISE AND SERVICE TAX, ALWAR

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 1482of 2018.

From the Judgment and Order dated 25.05.2017 of the Customs,Excise and Service Tax Appellate Tribunal, New Delhi, Principal Benchat New Delhi in Service Tax Appeal No.ST/51774/2016.

With

Civil Appeal Nos. 1861, 1851, 1850, 1863, 1862, 1860, 1859, 1856,1858, 3158, 3160, 3369, 3367, 3368, 3370, 3371, 3372, 3373, 3374, 4384,4382, 4383 and 6012 of 2018 and Civil Appeal Nos. 715 and 3356-3358of 2019.

Prakul Khurana, Ms. Shradha Agarwal, Mayank Goyal, TarunGupta, Abhishek Sharma, Ms. Archana Pathak Dave, Tanuj Agarwala,Abhimanyu Garg, Aman Gupta, Advs. for the Appellant.

Ms. Swarupama Chaturvedi, Ms. Nisha Bagchi, V. ChandraShekara Bharathi, Rajat Nair, M. K. Maroria, B. Krishna Prasad, Advs.for the Respondent.

The Judgment of the Court was delivered by

M. R. SHAH, J.

1. As common questions of law and facts arise in these group ofappeals and as such are arising out of the impugned common judgmentand order passed by the Customs, Excise and Service Tax AppellateTribunal, Principal Bench, New Delhi (hereinafter referred to as“CESTAT”), all these appeals are decided and disposed of together bythis common judgment and order.

2. That the respective appellants herein are the Krishi Upaj MandiSamiti (Agricultural Produce Market Committees) located in differentparts of State of Rajasthan. The respective appellants are establishedunder the provisions of the Rajasthan Agricultural Produce Markets Act,1961 (hereinafter referred to as “Act, 1961”). That the State Governmentconstituted various Market Committees (including the appellants herein)in the notified market areas to carry out the functions as envisaged inthe Act, 1961 and the Rules made thereunder. That the respectiveappellants 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

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Aappellants also rent out the land and shops to traders and collect allotmentfee/lease amount for such land/shop. That the Revenue was of the viewthat the appellants are liable to pay the service tax on the services renderedby them by renting/leasing the lands/shops. Show cause notice was issuedby the concerned jurisdictional authorities. That after adjudication, it washeld that the appellants were not liable to pay the service tax on “marketBfee” or “mandi shulk” collected by them. However, the appellants wereheld liable for service tax under the category of “renting of immovableproperty” in respect of renting of land(s)/shop(s) for a consideration.Accordingly, the Service Tax demands were confirmed. Penalties underSections 76, 77 and 78 of the Finance Act, 1994 were also imposed onCthem. The appellants preferred appeals before the CESTAT.

2.1 By impugned common judgment and order, the CESTAT notedthat with the introduction of Negative List Regime of taxation w.e.f.01.07.2012, the services in question were excluded from the tax liabilityand therefore the appellant(s) being an Agricultural Produce MarketDCommittee 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 MarketCommittees are not liable to service tax on renting of immovable propertyused for storage of agricultural produce in the market area. The CESTATobserved that the respective Market Committees are not liable to serviceEtax on renting shops/sheds/platforms/land in the notified market area fortraders 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 withrespect to the agricultural produce (likebank, general Shop etc.), theFsame shall not be covered by the Negative List and the marketcommittee(s) shall be liable to service tax. Accordingly, the CESTATheld that the appellants – Market Committees are not liable to servicetax for the period after 01.07.2012. The CESTAT also set aside thepenalties imposed on the appellants. The CESTAT ultimately disposedof the appeals in the following terms:-G

“(I)The appellants are liable to pay service tax under thecategory of “renting of immovable property service” forthe period upto 30.06.2012.

(II)For the period from 1.7.2012 (Negative List Regime), theHappellants are not liable to pay service tax under the said KRISHI UPAJ MANDI SAMITI, NEW MANDI YARD, ALWAR v. COMMISSIONEROF CENTRAL EXCISE AND SERVICE TAX, ALWAR [M. R. SHAH, J.]

tax entry in respect of shed/shop/premises leased out tothe traders/others for storage of agricultural produce in themarketing area. The Negative List will not cove the activitiesof renting of immovable property for other than agriculturalproduce.

(III)The demands, wherever raised invoking restricted to thenormal period. Penalties imposed to extended period, shallbe the appellants are set aside.

(IV)The threshold exemption available to the small scale serviceprovider in terms of the applicable notifications during therelevant years, shall be extended to the appellant onverification of their turnover.”

2.2 Feeling aggrieved and dissatisfied with the impugned commonjudgment and order passed by the learned CESTAT holding that theappellants – respective Market Committees are liable to pay service taxunder the category of “renting of immovable property service” for theperiod upto 30.06.2012, the respective Market Committees located inthe State of Rajasthan have preferred the present appeals.

3. Shri Prakul Khurana and Ms. Divyasha Mathur, learned counselappearing on behalf of the respective appellants – respective MarketCommittees have vehemently submitted that as the activity of allotmentof shops/premises/spaces to traders and brokers by the respectiveMarket Committees for the purpose of storage and/or marketing ofagricultural produce is in the nature of a statutory activity as mandatedunder Section 9 of the Act, 1961 and, therefore, the Market Committeesare exempted from payment of service tax on such services as perCircular No.89/7/2006 dated 18.12.2006.

3.1 Learned counsel appearing on behalf of the appellants havesubmitted that under Section 9(2)(xvii) of the Act, 1961, it is the dutycast upon the respective Market Committees for allotment/disposal ofland or any movable or immovable property for the purpose of effectivelycarrying out its duties. It is submitted that as per Section 9(2)(xiii), theMarket Committees are authorised to levy, recovery and receive rates,charges, fees and other sums of money to which the Market Committeeis entitled. Therefore, it is the case on behalf of the respective MarketCommittees that the activities of the said Market Committees of allotment/leasing/renting the shop/land/platform is in the nature of a statutory activity A

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Aand therefore as per Circular No.89/7/2006 dated 18.12.2006, therespective Market Committees are exempted from payment of servicetax on such activities, which are in the nature of statutory activity.

3.2 It is further submitted by Shri Khurana, learned counselappearing on behalf of the appellants – respective Market CommitteesBthat even the fees collected/recovered by the respective MarketCommittees on renting/leasing the land/shop will be deposited in the MarketCommittee Fund and the same shall be ultimately used for the bettermentof the market area. It is submitted therefore that when the respectiveMarket Committees are the public authorities constituted under theStatute – Act, 1961 and when they perform the statutory duty / statutoryCfunction of the allotment/renting/leasing of land/shop, the respectiveMarket Committees are entitled to the exemption provided under the2006 circular.

4. All these appeals are vehemently opposed by Ms. Nisha Bagchi,Dlearned counsel appearing on behalf of the Revenue.

4.1 It is submitted that all the authorities below have rightly heldthat 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 2006Ecircular as claimed by the respective Market Committees.

4.2 It is submitted by learned counsel appearing on behalf of theRevenue that Section 9 of the Act, 1961 is an enabling provision andthere is no mandatory duty cast upon the Market Committees forallotment/renting/leasing of the shop/land/platform. It is submitted thatFeven under Section 9(2), the words used are “market committee may”.It is submitted therefore that it cannot be said that it is a mandatorystatutory duty cast upon the Market Committee to allot/lease/rent theshop/land. It is urged that the activities of renting/leasing by the MarketCommittees to the traders cannot be said to be a statutory activity andtherefore the market committee(s) is/are not entitled to claim anyGexemption under the 2006 circular.

4.3 Learned counsel appearing on behalf of the Revenue hassubmitted that the appellants are claiming an exemption under the 2006circular. That as held in a catena of decisions of this Court that anexemption notification has to be read as a whole. That an exception and/H

or an exemption provision in a taxing statute should be construed strictlyand it is not open to the Court to ignore the conditions prescribed in anexemption notification. It is submitted that the exemption notificationshould be strictly construed and given meaning according to legislativeintendment. It is contended that the Statutory provisions providing forexemption have to be interpreted in light of the words employed in themand there cannot be any addition or subtraction from the statutoryprovisions.

4.4 It is further submitted that as per the law laid down by thisHon’ble Court in a catena of decisions in a taxing statute, it is the plainlanguage of the provision that has to be preferred, where language isplain and is capable of determining a defined meaning. Strict interpretationto the provision is to be accorded to each case on hand.

4.5 Now, in so far as the submission on behalf of the appellantsthat in the event of any doubt or any absurdity in a provision in a fiscalstatute, construction favourable to the assessee should be adopted isconcerned, it is submitted that the said principle shall not be applicable toconstruction of an exemption notification.

4.6 It is urged that there is a vast difference and distinction betweena charging provision in a taxing statute and an exemption notificationand 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 inthe exemption circular 2006 is very clear and unambiguous. That as perthe 2006 circular issued by the Board, only such activities performed bythe public authorities which are in their very nature statutory obligations,the fee collected by them for performing such activities is a compulsorylevy as per the provisions of the relevant statute and is deposited into theGovernment Treasury, shall not be subjected to tax. It is submitted thatin paragraph 3, it is specifically made clear that if such authorities performa service, which is not in the nature of statutory activity and the same isundertaken for consideration and not in the nature of a statutory fee/levy then, in such cases, the service tax would be leviable if the activitiesundertaken falls within the ambit of taxable service.

4.8 It is submitted that in the present case, the activity of renting/leasing performed by the Market Committees cannot be said to be in thenature of a statutory activity and the fee collected cannot be said to be inthe nature of a statutory fee/levy. It is contended that the allotment/rent/

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Alease of shop/land is for a consideration and it is not the mandatorystatutory activity/duty to provide on rent/lease the shop/platform/land tothe traders.

4.9 It is further submitted that even subsequently and on and after01.07.2012 such an activity is put in the Negative List. That from theBaforesaid, the intention of the legislature can be gathered. That if theactivities, which are now put in the Negative List were already exemptedfrom service tax, as per the case on behalf of the respective MarketCommittees in view of 2006 circular, in that case, there was no necessityfor the Revenue to put such services in the Negative List subsequently.

C4.10 Making the above submissions, it is prayed to dismiss thepresent appeals.

5. Heard the learned counsel for the respective parties at length.

6. At the outset, it is required to be noted that the respective MarketCommittees are claiming exemption under the 2006 circular. TheDexemption circular issued by the Board reads as under:- “Circular No. 89/7/2006 dated 18.12.2006:- “A number of sovereign /public authorities (i.e., an agencyconstituted/set up by Government) perform certain functions/duties,which are statutory in nature. These functions are performed inEterms of specific responsibility assigned to them under the law inforce. For examples, the Regional Reference StandardsLaboratories (RRSL) undertake verification, approval andcalibration of weighing and measuring instruments; the RegionalTransport Officer (RTO) issues fitness certificate to the vehicles;Fthe Directorate of Boilers inspects and issues certificate for boilers;or Explosive Department inspects and issues certificate forpetroleum storage tank, LPG/CNG tank in terms of provisions ofthe relevant lows. Fee as prescribed is charged and the same isultimately deposited into the Government Treasury.

A doubt has arisen whether such activities provided by asovereign/public authority required to be provided under a statutecan be considered as ‘provision of service’ for the purpose oflevy of service tax.

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2. The issue has been examined. The Board is of the viewthat the activities performed by the sovereign/public authorities H

under the provision of law are in the nature of statutory obligationswhich are to be fulfilled in accordance with law. The fee collectedby them for performing such activities is in the nature ofcompulsory levy as per the provision of the relevant statute, and itis deposited into the Government treasury. Such activity is purelyin public interest and it is undertaken as mandatory and statutoryfunction. These are not in the nature of service to any particularindividual for any consideration. Therefore, such an activityperformed by a sovereign/ public authority under the provisionsof law does not constitute provision of taxable service to a personand, therefore, no service. tax is leviable on such activities

3. However, if such authority performs a service, which isnot in the nature of statutory activity and the same is undertakenfor consideration not in the nature of statutory fee/levy, then insuch cases, service tax would be leviable, if the activity undertakenfalls within the ambit of a taxable service.”

7. As per the exemption circular only such activities performedby the sovereign / public authorities under the provisions of law beingmandatory and statutory functions and the fee collected for performingsuch activities is in the nature of a compulsory levy as per the provisionsof the relevant statute and it is deposited into the Government Treasury,no service tax is leviable on such activities. In paragraph 3, it is alsospecifically clarified that if such authority performs a service, which isnot in the nature of a statutory activity and the same is undertaken forconsideration, then in such cases, service tax would be leviable, if theactivity undertaken falls within the ambit of a taxable service. Thus, thelanguage used in the 2006 circular is clear, unambiguous and is capableof determining a defined meaning.

8. The exemption notification should not be liberally construedand beneficiary must fall within the ambit of the exemption and fulfill theconditions thereof. In case such conditions are not fulfilled, the issue ofapplication of the notification does not arise at all by implication.

8.1 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, theparty is not entitled to the benefit of that notification. An exception and/or an exempting provision in a taxing statute should be construed strictlyand it is not open to the court to ignore the conditions prescribed in therelevant policy and the exemption notifications issued in that regard.

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8.2 The exemption notification should be strictly construed andgiven a meaning according to legislative intendment. The Statutoryprovisions providing for exemption have to be interpreted in light of thewords employed in them and there cannot be any addition or subtractionfrom the statutory provisions.

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B8.3 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 bepreferred, where language is plain and is capable of determining a definedmeaning. Strict interpretation of the provision is to be accorded to eachcase on hand. Purposive interpretation can be given only when there isan ambiguity in the statutory provision or it results in absurdity, which isCso not found in the present case.

8.4 Now, so far as the submission on behalf of the respondentthat in the event of ambiguity in a provision in a fiscal statute, aconstruction favourable to the assessee should be adopted is concerned,the said principle shall not be applicable to construction of an exemptionDnotification, when it is clear and not ambiguous. Thus, it will be for theassessee to show that he comes within the purview of the notification.Eligibility clause, it is well settled, in relation to exemption notificationmust be given effect to as per the language and not to expand its scopedeviating from its language. Thus, there is a vast difference and distinctionEbetween a charging provision in a fiscal statute and an exemptionnotification.

9. In the present case, it is the case on behalf of the appellantsthat the activity of rent/lease/allotment of shop/land/platform/space is astatutory activity and the Market Committees are performing theirFstatutory duties cast upon them under Section 9 of the Act, 1961 andtherefore they are exempted from payment of service tax on suchactivities.

The aforesaid submission seems to be attractive but has nosubstance. Section 9(2) is an enabling provision and the words used isG“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 mandatorystatutory, the legislature has used the word “shall”. Therefore, whenunder sub-section (2) of Section 9, the word used is “may”, the activitiesmentioned in Section 9(2)(xvii) cannot be said to be mandatory statutoryHduty and/or activity. Under Section 9(2), it is not amandatory statutory duty cast upon the Market Committees to allot/lease/rent the shop/platform/land/space to the traders. Hence, such an activity cannot besaid to be a mandatory statutory activity as contended on behalf of theappellants. Even the fees which is collected is not deposited into theGovernment Treasury. It will go to the Market Committee Fund and willbe used by the market committee(s). In the facts of the case on hand,such a fee collected cannot have the characteristics of the statutorylevy/statutory fee. Thus, under the Act, 1961, it cannot be said to be amandatory statutory obligation of the Market Committees to provideshop/land/platform on rent/lease. If the statute mandates that the MarketCommittees have to provide the land/shop/platform/space on rent/leasethen and then only it can be said to be a mandatory statutory obligationotherwise it is only a discretionary function under the statute. If it isdiscretionary function, then, it cannot be said to be a mandatory statutoryobligation/statutory activity. Hence, no exemption to pay service tax canbe claimed.

10. The next provision relied upon by the appellants – respectiveMarket Committees is Rule 45 of the Rajasthan Agricultural ProduceMarkets Rules, 1963 (hereinafter referred to as “Rules, 1963”), whichreads as under:- “45.The Market Committee fund.- All money received by theMarket Committee shall be credited to the fund called the MarketCommittee fund. Except where Government on application bythe Market Committee or otherwise shall direct, all money paidinto the Market Committee fund shall be credited at least once aweek in full into Government treasury or sub-treasury, or a bankduly approved for this purpose by the Director. All balance fromthe fund shall be kept in such treasury or sub-treasury or bankand it shall not be withdrawn upon except in accordance withthese rules.”

10.1 Now, so far as the submission on behalf of the appellantsrelying upon Rule 45 of the Rules, 1963 that the fees, which is collectedshall be deposited with the Government Treasury and therefore also theMarket Committees are exempted from payment of service tax isconcerned, it is to be noted that on fair reading of Rule 45, the amount offee so collected on such activities – rent/lease shall not go to theGovernment. Rule 45 provides how the money received by the MarketCommittees shall be invested and/or deposited. It provides that all money AB

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Areceived by the Market Committee shall be credited to the fund calledthe Market Committee Fund. It further provides that all money paid intothe Market Committee Fund shall be credited once a week in full intoGovernment Treasury or sub-treasury, or a bank duly approved for thispurpose by the Director and all balance from the fund shall be kept insuch treasury or sub-treasury or bank and it shall not be withdrawnBexcept in accordance with the Rules. Therefore, it does not provide thaton deposit of the money received by the Market Committees into theGovernment Treasury/sub-treasury or a bank duly approved, it ceasesto be the Market Committee Fund. It will continue to be the MarketCommittee Fund. Even it is the case on behalf of the appellants that theCfees collected, which will be deposited in the Market Committee Fundwill be utilized by the Market Committee for expanding/benefit of theMarket 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 MarketDCommittees is placed in the Negative List. If the intention of the Revenuewas to exempt such activities of the Market Committees from levy ofservice tax, in that case, there was no necessity for the Revenuesubsequently to place such activity of the Market Committees in theNegative List. The fact that, on and after 01.07.2012, such activity bythe Market Committees is put in the Negative List, it can safely be saidEthat under the 2006 circular, the Market Committees were not exemptedfrom payment of service tax on such activities. At this stage, it is requiredto be noted that it is not the case on behalf of the Market Committeesthat the activity of rent/lease on shop/land/platform as such cannot besaid to be service. However, their only submission is that the MarketFCommittees are exempted from levy of service tax on such service/activity as provided under the 2006 circular, which as observedhereinabove has no substance.

12. In view of the above and for the reasons stated above, allthese appeals fail and the same deserve to be dismissed and areGaccordingly dismissed. However, in the facts and circumstances of thecase, there shall be no order as to costs.

Pending applications, if any, also stand disposed of.

Devika GujralH