Discretionary market committee leasing activity was not a statutory exemption and remained liable to service tax before the Negative List.

Agricultural Produce Market Committees' allotment, leasing or renting of shops, sheds, platforms or land was not a mandatory statutory function under the Rajasthan Agricultural Produce Markets Act, 1961, because the provisions were enabling and used the word "may". The amounts collected were credited to the Market Committee Fund, not deposited as a compulsory levy into the Government treasury, so the activity did not fall within the 2006 exemption circular for statutory services. The later inclusion of similar services in the Negative List from 01.07.2012 confirmed that no exemption applied for the earlier period. Service tax was therefore payable up to 30.06.2012.

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Issues: Whether the allotment, leasing or renting of shops, sheds, platforms or land by Agricultural Produce Market Committees was a mandatory statutory function covered by Circular No. 89/7/2006 dated 18.12.2006, and therefore exempt from service tax for the period up to 30.06.2012.

Analysis: The exemption circular applied only to activities performed by sovereign or public authorities under a statutory obligation, where the fee collected was in the nature of a compulsory levy and was deposited into the Government treasury. The relevant provisions of the Rajasthan Agricultural Produce Markets Act, 1961 were held to be enabling in character. The use of the word "may" in Section 9(2) showed that allotment or renting of property was not a compulsory statutory duty. The amounts collected from such activity were credited to the Market Committee Fund under Rule 45 of the Rajasthan Agricultural Produce Markets Rules, 1963 and did not become a statutory levy deposited into the Government treasury. The subsequent placement of similar services in the Negative List from 01.07.2012 reinforced that the earlier regime did not grant the claimed exemption.

Conclusion: The activity of renting or leasing immovable property by the Market Committees was not covered by the 2006 circular for the period up to 30.06.2012, and service tax was payable for that period.

Final Conclusion: The appeals challenging service tax liability for the pre-Negative List period were rejected, and the Revenue's stand was upheld.

Ratio Decidendi: An exemption for statutory activities applies only where the activity is a mandatory obligation imposed by law and the consideration is a compulsory statutory levy deposited into the Government treasury; an enabling or discretionary function does not qualify.

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