Comissioner, Central Gstand Cx, GST Bhawan vs. M/S Ganpati Mega Builders(INDIA) PVT. LTD.

Held

The Court held that the Krishi Utpadan Mandi Samiti is a body corporate established under the U.P. Krishi Utpadan Mandi Adhiniyam, 1964, and falls within the definition of 'Government Authority' under Clause 2(s) of the Mega Exemption Notification. Clause 12 of the notification exempts services provided to a government authority by way of construction, provided the civil structure is meant predominantly for use other than for commerce, industry, or business. The Court found the revenue's contention that renting out shops makes the Mandi Samiti's activities commercial to be misconceived. It reasoned that the Mandi Samiti's primary function is to regulate the sale and purchase of agricultural produce, and constructing markets and renting out facilities are part of this regulatory framework, not commercial business activities. The Court referred to the Apex Court's decision in Krishi Upaj Samiti (supra) and the Patna High Court's decision in Shapoorji Paloonji and Company Pvt Ltd (supra) to support its reasoning. Therefore, the "Work Contract Services" provided by the respondent to the Mandi Samiti are exempt from service tax. The Court found no infirmity in the CESTAT's order and dismissed the appeal.

Facts

The Commissioner, Central GST, GST Bhawan (appellant/revenue) filed an appeal against an order dated August 19, 2021, passed by the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Allahabad. The respondent, M/s Ganpati Mega Builders (India) Pvt. Ltd., a registered contractor, was levied service tax, interest, and penalty amounting to Rs. 1,15,61,921/- by the Commissioner, Customs, Central Excise and Service Tax, Agra, for providing "work contract services" to the Rajya Krishi Utpadan Mandi Parishad. The services included construction of various facilities. The CESTAT had allowed the respondent's appeal, holding that the Mandi Samiti was exempted under Clause 14 of Mega Exemption Notification No. 12/2012-ST dated June 20, 2012. The revenue contended that the Mandi Samiti's activities, including renting out shops, were commercial and thus not covered by the exemption.

Key Issues

1. Whether the "work contract services" provided by the respondent to the Krishi Utpadan Mandi Samiti are exempt from service tax under Clause 12 of Mega Exemption Notification No. 12/2012-ST, dated June 20, 2012, considering the nature of the Mandi Samiti's activities? The appellant (revenue) argued that the Krishi Utpadan Mandi Samiti engages in business activities by letting out shops and market sheds for rent. Therefore, construction activities for such purposes are excluded from exemption under sub-Clause (a) of Clause 12, which exempts construction of civil structures predominantly for use other than for commerce, industry, or business. The appellant relied on the fact that the Mandi Samiti earns rent from these properties. The respondent (assessee) argued that the Krishi Utpadan Mandi Samiti falls within the definition of "governmental authority" under Clause 2(s) of the notification. They contended that the Mandi Samiti's functions, as defined under the U.P. Krishi Utpadan Mandi Adhiniyam, 1964, are regulatory and not commercial or business-oriented. The construction of market facilities is essential for its regulatory functions, and renting out shops is a method of regulation, not a commercial business activity. The respondent relied on decisions in Shapporji Paloonji and Company Pvt Ltd vs C,C C.Ex & S.T. Patna, Bharat Bhushan & Company vs State of Haryana, and Krishi Upaj Mandi Samiti vs Commissioner of C. Ex. & S.T., Alwar.