Plain meaning of exemption notification confirmed for educational institutions set up under central enactments, securing service tax exemption.

An exemption notification for construction services was construed according to its plain language: the definition of "governmental authority" in clause 2(s) contained two independent alternatives, and the 90% participation requirement applied only to the second alternative, not to an authority or body set up by an Act of Parliament or a State Legislature. Because the text was clear and unambiguous, it could not be rewritten by treating "or" as "and" or by extending the qualifying phrase beyond its proper clause. Educational institutions established under central enactments were therefore covered by the definition, and construction services rendered to them qualified for exemption from service tax.

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Issues: Whether educational institutions established under central enactments fall within the definition of "governmental authority" in clause 2(s) of Notification No. 25/2012-Service Tax dated 20.06.2012 so as to avail exemption for construction services under clause 12(c).

Analysis: The amended definition in clause 2(s) was read as consisting of two independent alternatives separated by the word "or". The phrase "with 90% or more participation by way of equity or control, to carry out any function entrusted to a municipality under article 243W of the Constitution" was held to qualify only sub-clause (ii), and not sub-clause (i). The punctuation and structure of the clause, especially the semicolon after sub-clause (i), supported the view that an authority or body set up by an Act of Parliament or a State Legislature does not have to satisfy the 90% participation requirement. Since the language was found to be clear and unambiguous, no interpretative exercise could be used to rewrite the provision or read "or" as "and".

Conclusion: IIT Patna and NIT Rourkela were held to be covered by the definition of "governmental authority", and the construction services rendered to them were held to be exempt from service tax.

Final Conclusion: The exemption notifications were construed in favour of the assessees, and the revenue's appeals failed.

Ratio Decidendi: Where the language of an exemption notification is clear, the court must give effect to its plain and grammatical meaning; a qualifying phrase following an alternative introduced by "or" will not be read to govern the preceding independent clause unless the text unmistakably requires it.

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