Service tax exemption denied for market committee rentals where allotment was discretionary, not a mandatory statutory function.

Rent, lease or allotment of shop, land, platform or space by market committees was treated as a discretionary activity under Section 9 of the Rajasthan Agricultural Produce Markets Act, 1961, not a compulsory statutory function. On that basis, the claimed service tax exemption was unavailable because the provision was enabling rather than mandatory. The fact that the receipts were credited to the market committee fund under Rule 45 of the Rajasthan Agricultural Produce Markets Rules, 1963 did not alter the character of the activity for exemption purposes. The later introduction of the negative list from 1 July 2012 was also held not to support an earlier exemption under the circular relied upon.

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Issues: Whether the rent, lease or allotment of shop, land, platform or space by market committees was a mandatory statutory function exempt from service tax, and whether the credit of such receipts to the market committee fund under the rules entitled the appellant to exemption.

Analysis: The activity was held not to be a compulsory statutory obligation under Section 9 of the Rajasthan Agricultural Produce Markets Act, 1961, because the relevant provision was enabling in nature and made the allotment or lease of premises discretionary rather than mandatory. The receipts from such activity were also held not to lose their character as market committee fund merely because they were credited to a treasury or bank under Rule 45 of the Rajasthan Agricultural Produce Markets Rules, 1963. The reasoning further noted that the introduction of the negative list from 1 July 2012 did not support the claim that the activity had been exempt earlier under the circular relied upon.

Conclusion: The activity was not exempt from service tax on the asserted ground of being a mandatory statutory function, and the appeal was liable to be dismissed.

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