Custom, Excise & Service Tax Tribunal
Krishi Upaj Mandi Samiti vs Alwar on 26 July, 2024
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
New Delhi
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PRINCIPAL BENCH - COURT NO. 4
Service Tax Appeal No. 50580 Of 2019
[Arising out of Order-in-Appeal No. 491(SM)ST/JPR/2018 dated 30.11.2018 passed
by the Commissioner (Appeals) of Central Goods, Service Tax and Central Excise,
Jaipur]
M/s Krishi Upaj Mandi Samiti : Appellant (s)
Sawai, madhopur, Rajasthan
Versus
Commissioner of Central Goods, Service : Revenue (s)
Tax, Central Excise-Alwar
CGST Block A, Surya Nagar, Alwar
APPEARANCE:
Ms. Diksha Khandal, Chartered Accountant for the Appellant
Shri S. K. Meena, Authorized Representative for the Department
CORAM :
HON'BLE DR. RACHNA GUPTA, MEMBER (JUDICIAL)
HON'BLE MS. HEMAMBIKA R. PRIYA, MEMBER (TECHNICAL)
FINAL ORDER No. 58079/2024
Date of Hearing:26.07.2024
Date of Decision:26.07.2024
HEMAMBIKA R. PRIYA
The present appeal has been filed by M/s Krishi Upaj Mandi
Samiti (hereinafter to as the appellant) against the Order-in-Appeal
No. 491(SM)ST/JPR/2018 dated 30.11.2018 passed by the
Commissioner (Appeals) of Central Goods, Service Tax and Central
Excise, Jaipur wherein the Commissioner (Appeals) upheld the demand
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of Service Tax of Rs. 61,334/- on the taxable value of Rs. 4,96,230/-
for the period 01.04.2012 to 30.06.2012 along with interest.
2. The brief facts of the case are that the appellant is an
Agricultural Produce Market Committee (hereinafter referred to as
'APMC) established by the Rajasthan State Government under the
provisions of the Rajasthan Agricultural Produce Market Act, 1961
(hereinafter referred to as the 'RAPM Act) holding Service Tax
Registration No. AAAJK0853HSD001 under the category of "Renting of
Immoveable Property". The Appellant regulates the sale of agricultural
produce in notified markets. They charge 'market fee' for issuing
license to traders, agents, factory/cold storage owners or other buyers
of agricultural produce. They also let out land and shops to traders and
collect 'allotment fee' or lease amount for such land/shops. It has been
alleged that during the period from 01.04.2012 to 30.06.2012, the
appellant has collected rent amounting to Rs.39,23,493/- from their
traders for storage and warehousing of the agriculture produce which
this activity of the appellant falls under the definition of "Renting of
Immovable Property Service" in view of the provisions of clause (90a)
read with clause (105) (zzzz) of Section 65 of the Finance Act, 1994.
2.1 A Show Cause Notice dated 19.06.2014 was issued to the
Appellants to show cause demanding Service Tax amounting Rs.
5,74,245/- for the period from 1.04.2012 to 31.03.2013 under the
category of 'Renting of Immovable Property under proviso to Section
73(1) of the Finance Act, along with interest at the appropriate rate
under Section 75 of the Finance Act. The notice also proposed penalty
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Service Tax Appeal No. 50580 of 2019
under the provisions of Section 76, 77 and 78 of the Finance Act for
contravention of provisions of Section 66, 67, 68 and 69 of the Finance
Act and Rule 4, 5, 6, and 7 of the Service Tax Rules. The matter was
adjudicated vide Order-in-Original dated 10.01.2018, wherein it was
noted that the appellant had collected an amount of Rs. 39,23,493/-
as allotment fee which is leviable to service tax. Consequently, the
order held that the appellant had evaded service tax amounting to Rs.
4,84,943/- along with interest and penalties for the services provided
for the period 01.04.2012-30.06.2012 was imposable. However, relief
was granted for the period 01.07.2012-31.03.2013 for service tax
amounting to Rs. 89,302/- and applicable interest and penalties were
also set aside. Being aggrieved, the appellant preferred an appeal
before the Commissioner (Appeals) who reduced the service tax
liability of the Appellant to Rs. 61,334/- and held that the appellant is
liable to pay the same along with interest for the services provided for
the period 01.04.2012-30.06.2012. The penalty under Section 77 and
78 of the Finance Act was set-aside. Aggrieved by the said order, the
appellant filed the present appeal.
3. Learned Chartered Accountant for the appellant submitted that
as per the facts and circumstances of the case, the Adjudicating
Authority did not have the requisite jurisdiction to adjudicate the case.
He submitted that as per the provisions of Section 73 of the Act, a
central excise officer is empowered to issue a notice and adjudicate a
case of service tax which has not been paid or short paid or not levied
or short levied or erroneously refunded. The meaning of the
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Service Tax Appeal No. 50580 of 2019
expression 'Central Excise Officer' is not defined under the Act.
However, Section 65B(55) of the Act provides that "words and
expressions used but not defined in this Chapter and defined in the
Central Excise Act, 1944 or the rules made there under, shall apply, so
far as may be, in relation to service tax as they apply in relation to a
duty of excise". The term 'central excise officer' has been defined
under Section 2 of the Central Excise Act, 1944. In the present case,
the adjudicating authority has issued and adjudicated the impugned
SCN as an officer appointed u/s 3 of the CGST Act, 2017 for exercise
of powers and discharge of duties as provided under the CGST Act,
2017. He further stated that the adjudicating authority is not
mentioned under the aforesaid definition of the term 'Central Excise
Officer' defined under the Excise Act for issue of show cause notice
pertaining to the Central Excise Act. Hence, the impugned order-in-
original has been passed illegally without any authority or jurisdiction.
In this regard, Ld. Chartered Accountant relied upon the decision of
the Tribunal in the case of Teracom Ltd. vs. Commissioner of C.
Ex. & S.T., Jaipur-I [2016 (339) E.L.T. 272 wherein the Tribunal
held that if the show cause notice is issued without jurisdiction then
the proceedings initiated thereon are not sustainable.
3.1 Learned Chartered Accountant further contended that the
Adjudicating Authority has failed to consider that the demand raised
by vide the impugned show cause notice for the period 01.04.2012 to
30.06.2012 is barred by limitation. In support of his submission,
Learned Chartered Accountant relied upon the following decisions:-
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Service Tax Appeal No. 50580 of 2019
Punjab Ex Servicemen Corpn. Vs. CCE, Chandigarh 2009 (13)
STR 529 (Tri.-Del.)
Surat Municipal Corporation vs. CST, Surat 2006 5 STR 250
(New Delhi-CESTAT)
3.2 Learned Chartered Accountant further submitted that as per the
facts and circumstances of the case, the adjudicating authority has
failed to consider that the appellant is performing mandatory and
sovereign functions under the RAPM Act and is not liable to any service
tax in terms of clarification issued by the Board vide Circular dated
18.12.2006. He also submitted that Commissioner (Appeals) had
grossly erred in not considering that while carrying out the activity of
allotment of shops/sheds, the appellant was discharging its mandatory
and sovereign function under the RAPM Act and therefore, is not liable
to pay any service tax on the said activity. In support of his
submission, he relied upon the following decisions:-
CIT vs. Agricultural Produce Marketing Committee 2001 (165)
CTR Del. 298
Agricultural Produce Marketing Committee vs. CIT 1996 (57)
ITD 109 (Del)
4. Learned Authorized Representative for the Department
submitted that the present issue is squarely covered by the decision of
Hon'ble Supreme Court in the case of Krishi Upaj mandi Samiti
versus. Commissioner of Central Excise & Service Tax, Alwar
2022(58) G.S.T.L. 129 (S.C.) wherein, it has been held that activity
of renting/leasing/allotment of shop/land/platform/space by
Agricultural Produce Market Committees is taxable service prior to
1.7.2012 as these are not statutory functions. He further submitted
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Service Tax Appeal No. 50580 of 2019
that the appellant while providing taxable service did not comply with
the provisions of Service tax, by taking service tax registration, by not
filing ST-3 Returns during the period 01.04.2012 to 30.06.2012 and by
not payment of service tax as payable by them, deliberately with
intent to evade service tax without revealing the fact to the
Department. In view of the above, it is prayed that present appeal
may be dismissed.
5. Heard both the parties and perused the records.
6. The core issue before us is whether the appellant's activity of
charging market fee for using licenses to traders/agents/factory etc. is
exigible to service tax. We find that this issue is no more res-integra.
The Hon'ble Supreme Court in the case of Krishi Upaj Mandi Samiti
vs. Commissioner of Central Excise & Service Tax (supra) and
held as follows:-
"6. At the outset, it is required to be noted that the respective
Market Committees are claiming exemption under the 2006
circular. ....................................................................................................
7. As per the exemption circular only such activities performed
by the sovereign/public authorities under the provisions of law
being mandatory and statutory functions and the fee collected for
performing such activities is in the nature of a compulsory levy as
per the provisions of the relevant statute and it is deposited into
the Government Treasury, no service tax is leviable on such
activities. In paragraph 3, it is also specifically clarified that if
such authority performs a service, which is not in the nature of a
statutory activity and the same is undertaken for consideration,
then in such cases, service tax would be leviable, if the activity
undertaken falls within the ambit of a taxable service. Thus, the
language used in the 2006 circular is clear, unambiguous and is
capable of determining a defined meaning.
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Service Tax Appeal No. 50580 of 2019
8. The exemption notification should not be liberally construed
and beneficiary must fall within the ambit of the exemption and
fulfil the conditions thereof. In case such conditions are not
fulfilled, the issue of application 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, the party is not entitled to the benefit of that notification.
An exception and/or an exempting provision in a taxing statute
should be construed strictly and it is not open to the Court to
ignore the conditions prescribed in the relevant policy and the
exemption notifications issued in that regard.
8.2 The exemption notification should be strictly construed and
given a meaning according to legislative intendment. 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.
8.3 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 be preferred, where language is plain and is
capable of determining a 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.
8Service Tax Appeal No. 50580 of 2019
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 function under the statute. If it is discretionary function, then, it cannot be said to be a mandatory statutory obligation/statutory activity. Hence, no exemption to pay service tax can be claimed.
10. The next provision relied upon by the appellants - respective Market Committees is Rule 45 of the Rajasthan Agricultural Produce Markets Rules, 1963 (hereinafter referred to as "Rules, 1963"), which reads as under :-
"45. The Market Committee fund. - All money received by the Market Committee shall be credited to the fund called the Market Committee fund. Except where Government on application by the 9 Service Tax Appeal No. 50580 of 2019 Market Committee or otherwise shall direct, all money paid into the Market Committee fund shall be credited at least once a week in full into Government treasury or sub-treasury, or a bank duly approved for this purpose by the Director. All balance from the fund shall be kept in such treasury or sub-treasury 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. It provides that all money received 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 1-7-2012, 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 1-7- 2012, such activity by the Market Committees is put in the Negative List, it can safely be said 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 10 Service Tax Appeal No. 50580 of 2019 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."
7. In view of the same, we hold that there is no infirmity in the impugned order. We now take up the other major argument of the ld counsel that the Commissioner adjudicating the case had no jurisdiction as in the present case the adjudicating authority has issued and adjudicated the impugned SCN as an officer appointed u/s 3 of the CGST Act, 2017 for exercise of powers and discharge of duties as provided under the CGST Act, 2017. In this context, we note that adjudication is a quasi-judicial function of the departmental officers of the Central Board of Indirect Taxes and Customs. It is mandatory that a Show Cause Notice (SCN) is issued if the department contemplates any action prejudicial to the assessee. The SCN would detail the provisions of law allegedly violated and ask the noticee to show cause why action should not be initiated against him under the relevant provisions of the Act/Rules. Thus, an SCN gives the noticee an opportunity to present his case. It is noted that the SCN in the present case was issued by the Central Excise officer on 19.06.2014, which is well before the introduction of GST in India. Thereafter, the impugned order was passed in 2018, which was after the introduction of GST. We note that the Section 174 of the CGST Act 2017, unequivocally saved 11 Service Tax Appeal No. 50580 of 2019 all rights, obligations, privileges and liabilities that were available under the old laws, which would continue in the new regime. As we understand, a Repeal and Savings clause is when an old Act is repealed and the same is followed by new enactment, provisions are generally made under the repealing/subsequent Act in form of 'saving clause', which saves/continues the powers and actions initiated under the erstwhile Act. In this context, we also note that in a similar matter of the powers of DGGI officers, the petitioners had argued that the notification, under which the officials of the DGGSTI have assumed jurisdiction, have not been expressly saved under Section 174(2) of the CGST Act, 2017 (CGST Act), and hence, the impugned orders/notice are without jurisdiction. While dismissing the batch of Writ Petitions (WP No. 12291 of 2019 dated 2 February 2023), the Hon'ble Madras High Court interpreted the effect of repeal and savings clauses, and held that it needs to be ensured that there is smooth continuity rather than one that disrupts the flow of the levy itself. The Hon'ble High Court held that the Director General of GST Intelligence (DGGSTI) is competent to issue a show cause notice (SCN) post-GST.
Therefore, we hold that in view of the Repeal & Savings clause under the CGST Act, 2017, the objections raised by the Ld. Counsel does not sustain.
8. As regards the time bar issue, we note that in the impugned order, the Commissioner (Appeals) has already upheld the demand for the normal period only. Therefore, this argument of the Counsel does not hold.
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9. In view of the discussions above, we uphold the impugned order and dismiss the appeal.
(Order pronounced in the open court) (Dr. Rachna Gupta) MEMBER (JUDICIAL) (HEMAMBIKA R. PRIYA) MEMBER (TECHNICAL) G.Y.