2023 (11) TMI 681 - AT - Service Tax

Agricultural Produce Market Committee liable for service tax on market fees for rent/lease activities from July 2012

The CESTAT New Delhi dismissed the appeal filed by an Agricultural Produce Market Committee challenging service tax liability on market fees (mandi shulk) ... Levy of service tax - market fee - mandi shulk - whether the appellant(s) being an Agricultural Produce Market Committee was/were excluded from tax liability on and after 01.07.2012? - HELD THAT:- Similar issue decided in KRISHI UPAJ MANDI SAMITI, NEW MANDI YARD, ALWAR VERSUS COMMISSIONER OF CENTRAL EXCISE AND SERVICE TAX, ALWAR [2022 (2) TMI 1113 - SUPREME COURT] where it was held that it is required to be 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. Appeal dismissed. Issues:The issues involved in this case are the liability to pay service tax under the category of 'renting of immovable property service,' the exemption from service tax for activities related to agricultural produce, the applicability of penalties, and the extension of threshold exemption to small scale service providers.Liability to Pay Service Tax:The Commissioner (Appeals) decided that the appellants are liable to pay service tax under the category of 'renting of immovable property service' for the period up to 30.06.2012. However, for the period from 1.7.2012 under the Negative List Regime, the appellants are not liable to pay service tax for activities related to shed/shop/premises leased out for storage of agricultural produce in the marketing area. The demands raised invoking the extended period shall be restricted to the normal period, and penalties imposed on the appellants are set aside. The threshold exemption available to small scale service providers during the relevant years shall be extended to the appellant upon verification of their turnover.Supreme Court Dismissal and Interpretation:The orders passed by the Tribunal were challenged before the Supreme Court by Krishi Upaj Mandi Samiti, and all civil appeals were dismissed. The Supreme Court affirmed that the appellants are liable to pay service tax under the category of 'renting of immovable property service' for the specified periods. The court clarified that activities related to shed/shop/premises leased out for storage of agricultural produce are exempt from service tax under the Negative List Regime. The demands raised invoking extended periods were restricted, and penalties imposed on the appellants were set aside. The threshold exemption for small scale service providers was also extended to the appellant upon verification of turnover.Statutory Obligations and Exemption Claim:The appellants argued that the activities of rent/lease/allotment of shop/land/platform/space are statutory duties under Section 9 of the Act, 1961, and therefore exempt from service tax. However, the Tribunal found that Section 9(2) does not impose a mandatory statutory duty on Market Committees to provide such services. The fees collected are not deposited into the Government Treasury but go to the Market Committee Fund for their use. Rule 45 of the Rajasthan Agricultural Produce Markets Rules, 1963, further clarifies that the fees collected by Market Committees are not required to be deposited with the Government Treasury. The activities carried out by Agricultural Produce Market Committees were placed in the Negative List after 1-7-2012, indicating that they were not exempt from service tax.Conclusion:Based on the judgment of the Supreme Court and the interpretation of statutory obligations and exemptions, the appeal was dismissed as the activities of the Market Committees were not exempt from service tax. The orders passed by the Commissioner (Appeals) and the Tribunal were upheld, and the appellants were found liable to pay service tax as per the specified provisions and periods.