Krishi Upaj Mandi Samiti, New Mandi Yard, Alwar v. Commissioner of Central Excise and Service Tax, Alwar
This set of appeals has arisen due to dissatisfaction with the common judgment passed by the Customs, Excise and Service Tax Appellate Tribunal. All these appeals are disposed of together by the common judgment.
Facts:
The appellant, Krishi Upaj Mandi Samiti, located in Rajasthan, was established under the Rajasthan Agricultural Produce Markets Act, 1961. Various Market Committees were constituted to carry out the functions as provided in the Act. 1961. The appellant regulates the sale of agricultural produce in the notified markets. They charge “market fee” for issuing licenses to traders, factory storage and agents for agricultural produce. The appellant also rents out the land and shops to traders and collects allotment fees for the same. The Respondent
was of the point that the appellants are liable to pay the service tax on the service rendered by them. The notice was issued by the concerned jurisdictional authorities. The appellants were held liable for service tax under the category of “renting of immovable property”. Penalties under Sections 76, 77 and 78 of the Finance Act, 1994 were also imposed on them. Feeling dissatisfied with the judgment, this appeal is preferred.
Appellant’s Contention:
Shri Prakul Khurana and Ms. Divyasha Mathur appeared on behalf of the appellant. They have submitted that the appellant is exempted from payment of service tax as they undergo the activity of allotment of shops for the purpose of storage and marketing of agricultural produce in the nature of a statutory activity as mandated under Section 9 of the Act, 1961. It is submitted that under Section 9(2)(xvii) of the Act, it is cast upon the Market Committees for disposable of any property for the purpose of carrying out its duties. It is submitted according to Section 9(2)(xiii), they are authorized to levy, recovery and receive rates, charges to which the Market Committee is entitled. The fees collected by the appellant on renting the land will be deposited in the Market Committee fund. Therefore, that when they perform a statutory activity, the appellant is exempted under the 2006 circular.
Respondent’s Contention:
Ms. Nisha Bagchi appeared on behalf of the respondent. It is submitted that it was rightly held that the activities of renting of the shops cannot be said to be a mandatory statutory activity and therefore the appellants are still liable to pay service tax as per the 2006 circular. Section 9 of the 1961 Act is an enabling provision and there is no mandatory duty cast upon the Committee for renting. The words used
under Section 9(2) are “market committee may”. It is clear that it is not a mandatory statutory duty and the appellants cannot claim any exemptions. It is also submitted that the exemption should be given meaning according to the legislative intendment. Therefore, it is prayed to dismiss the present appeal.
Observation:
It is observed by the court that the activities performed by the sovereign/ public authorities under the provisions of law are in the nature of statutory obligations which are to be fulfilled in accordance with law. The activity performed by the committee is of a compulsory nature. They are not in the nature of service to pay any particular individual for any consideration. If only the statute mandates that the renting or leasing, it is a statutory obligation, otherwise it is a discretionary function. If it is a discretionary function, no exemption to pay tax can be claimed. Though the fee is deposited in the Market Committee Fund, it will be utilized for expanding of the Committee.
Judgment:
For the reasons stated above, these appeals failed and the same was dismissed.
Name: Harishri S
College: SASTRA Deemed to be University
Course: BBA LLB (Hons.) II Year