Krishi Upaj Mandi Samiti, New Mandi Yard, Alwar Vs
Commissioner of Central Excise and Service Tax, Alwar

Forum-Supreme Court of India
Date -23/02/2022

Sub- Whether exemption notification has to be construed strictly and the meaning has to be given to it according to legislative intent.

The Supreme Court in this case was called upon to decide whether Market Committee constituted under the Rajasthan Agricultural Produce Markets Act ,1961 were liable to pay service tax on the rent collected by them from the traders under the Renting of immovable property service till 30th June, 2012 as thereafter the same was specifically put in the negative list. The appellants in this case wanted benefit of an exemption notification which was issued vide Circular No.89/7/2006 dated 18.12.2006 as per which any activity which was statutory activity was exempted. They contended that the rent which was collected by them was a statutory activity and hence exempt. However, the department argued that an exception and/or an exemption provision in a taxing statute should be construed strictly and it is not open to the Court to ignore the conditions prescribed in an exemption notification. It is submitted that the exemption notification should be strictly construed and given meaning according to legislative intendment. It is contended that 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.

The court accepting the arguments of the department reversed the decision of CESTAT and held that the collection of the rent was not a statutory activity as it was not mandatory as per the language of the statute. The exemption notification should not be liberally construed and beneficiary must fall within the ambit of the exemption and fulfill the conditions thereof. In case such conditions are not fulfilled, the issue of application of the notification does not arise at all by implication.

This judgement will be helpful whenever interpretation of an exemption notification is called upon in any matter be it income-tax, GST or others.

Ramesh Patodia
24-02-2022.