Commissioner Central GST And Cx Agra Vs Ganpati Mega Builders Ltd. (Allahabad High Court)
Allahabad High Court held that word ‘infrastructure’ in exemption notification no. 25/2012-ST dated 20.06.2012 includes all construction activities other than construction of market shed, shops etc. which are necessary for providing “Post-harvest infrastructure for agricultural produce”.
Facts- The respondent namely M/s Ganpati Mega Builders (India) Pvt ltd is a registered contractor with the service tax department and was engaged in providing services to the clients by way of construction services and work contract services.
The issue is about the demand of services tax under the head-“Work Contract Services” for construction of toilets, roads, sanitation, water reservoir, drinking water supply, sewage treatment plant etc, the services provided by the respondent to Rajya Krishi Utpadan Mandi Parishad.
The stand of the respondent is that Rajya Krishi Utpadan Mandi Parishad being a statutory authority created under the U.P. Krishi Utpadan Mandi Adhiniyam, 1964 is covered within the definition of “Government Authority” and is entitled for exemption under Clauses-12 and 13 of the Mega Exemption Notification no. 25/2012-ST dated 20.06.2012.
The stand of the revenue is that the respondent has wrongfully claimed exemption in respect of “Rajya Krishi Utpadan Mandi Parishad” under the said notification.
Conclusion- The word “infrastructure” thus to be given a purposive meaning under the exemption notification so as to include the underlying framework of the system. It would, thus, include all construction activities other than construction of market sheds etc which are necessary for providing “Post-harvest infrastructure for agricultural produce”.
The contention of the learned counsel for the department/revenue that the construction activities apart from market sheds, shops etc could not be included in Clause 14(d) of the notification no.25/2012-ST dated 20.06.2012, therefore, is not sustainable.
FULL TEXT OF THE JUDGMENT/ORDER OF ALLAHABAD HIGH COURT
Heard Sri Parv Agarwal learned counsel for the appellant and Sri Rahul Agarwal learned counsel for the respondent.
The defect pointed out in the present appeal has been removed. This Central Excise Appeal under Section 35(G) of the Central Excise Act, 1944 read with Section 83 of the Finance Act, 1994 read with Section 174 of the CGST Act, 2017, is against the order dated 19.08.2021 in Service Tax Appeal no.70729 of 2019 passed by the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Allahabad.
The respondent namely M/s Ganpati Mega Builders (India) Pvt ltd is a registered contractor with the service tax department and was engaged in providing services to the clients by way of construction services and work contract services.
The issue is about the demand of services tax under the head-“Work Contract Services” for construction of toilets, roads, sanitation, water reservoir, drinking water supply, sewage treatment plant etc, the services provided by the respondent to Rajya Krishi Utpadan Mandi Parishad. The stand of the respondent is that Rajya Krishi Utpadan Mandi Parishad being a statutory authority created under the U.P. Krishi Utpadan Mandi Adhiniyam, 1964 is covered within the definition of “Government Authority” and is entitled for exemption under Clauses-12 and 13 of the Mega Exemption Notification no. 25/2012-ST dated 20.06.2012. The stand of the revenue is that the respondent has wrongfully claimed exemption in respect of “Rajya Krishi Utpadan Mandi Parishad” under the said notification.
The dispute is about the financial year 2015-16. By the original order dated 31.12.2018, Joint Commissioner, (CGST) and Central Excise, Agra had levied service tax and penalty treating that the “work contract services” provided by the respondent was not entitled for exemption holding that the activities carried out by the Mandi Parishad, though a Government Authority, are commercial in nature and the respondent is not entitled to benefit of exemption from levy of service tax under the notification dated 20.06.2012 of their receipts from the Mandi Parishad. The matter was taken up in appeal before the CESTAT which was allowed vide order dated 19.08.2021.
It was held by the tribunal that the construction activity of the appellant for Mandi Samiti was covered by Clause 14(d) of Mega Exemption No.25/2012-ST dated 20.06.2012. The said relevant clause is to be noted hereinunder:-
“14. Services by way of construction, erection, commissioning, or installation of original works pertaining to,-
(d) Post-harvest storage infrastructure for agricultural produce including a cold storage for such purposes.“
Placing Clause-’14’ as extracted above, it is vehemently argued by Sri Parv Agarwal learned counsel for the appellant revenue that the exemption under the said Clause was only for the services by way of construction which are for providing Postharvest storage infrastructure. The construction of market shed, market yard etc for the purposes of storage of harvest agricultural produce were though permissible for exemption, but the roads and other construction works carried out by the respondent assessee will not fall within the exemption under the Notification dated 20.06.2012.
Sri Rahul Agarwal learned counsel for the respondent assessee, however, placing Clause 14(d) submits that the words “Post-harvest infrastructures” are to be given a purposive and wider meaning. The contention is that the word “Infrastructure” includes all such constructions which have been made for the purpose of Post-harvest storage. In the case at hand, for the purpose of creating adequate infrastructure for storage of crops and other agricultural produce after harvesting, it was imperative for the Mandi Samiti to provide the infrastructure which include roads, toilets, etc so as to utilise the area of storage to its fullest potential. “Post- harvest storage infrastructure” cannot be given a narrow meaning as per the suggestion of the learned counsel for the appellant. His further argument is that the findings returned by the Commissioner that the activities of Mandi Samiti are commercial in nature are without any basis.
Having heard learned counsels for the parties and perused the record.
Before dealing with the said submissions, we may note that the Krishi Utpadan Mandi Samiti falls within the definition of Government Authority under Clause 2(s) of the exemption notification which reads as under:-
“2.(s) “governmental authority” means a board, or an authority or any other body established with 90% or more participation by way of equity or control by Government and set up by an Act of the Parliament or a State Legislature to carry out any function entrusted to a municipality under article 243W of the Constitution.”
A Government Authority or any body as defined in Clause 2(s) is entitled for exemption under Clause-12.
The Krishi Utpadan Mandi Samiti is established by an Act of the State Legislature to provide for the regulation of sale and purchase of agricultural produce and for the establishment, superintendence and control of markets therefor in the State of Uttar Pradesh. Section 16 of U.P. Krishi Utpadan Mandi Adhiniyam has been placed before us to demonstrate that none of the functions and duties of the Committee are commercial or business in nature. Amongst its various functions, as mentioned in sub-Section (2) of Section 16, it is required to standardise specified agricultural produce and regulate trade charges, market practices and customary methods of sale and purchase of specified agricultural produce; to provide suitable amenities in the market yards; construct, repair and maintain link roads, pathways and market lanes and bye-lanes in the market area. It is to ensure fair dealings between the producers and the purchasers of specified agricultural produce. While discharging its functions, the Committee requires construction of shops, market yards, warehouses, for packaging, storage, cooling or bulk packaging etc in the market area, the constructions which were carried out by the respondents.
Having perused the scheme of the Mandi Samiti Act, none of the activities of the Mandi Samiti can be said to be for commerce, industries or any business purposes. The services provided by the respondent assessee to Mandi Samiti by way of construction, erection, commissioning or installation of original work pertaining to “Post-harvest storage infrastructure” for agricultural produce including a cold storage for such purposes are exempted by virtue of Clause-14. The words “Post-harvest storage infrastructure for agricultural produce” when examined carefully, shows that any construction, erection, commissioning or installation work for providing infrastructure for Post-harvest storage of agricultural produce would fall within the meaning of Clause-14. The words “Post-harvest storage infrastructure for agricultural produce” when read carefully would mean to include the work of constructions etc for creation of storage infrastructure for agricultural produce after harvesting and, thus, would be covered within the meaning of “Work Contract Services” exempted under Clause-14 of the Notification.
The literal meaning of word “infrastructure” in Black’s law dictionary 8th Edition further shows that it means the underlying framework of a system which means not only the construction activities such as shed but the underlying framework i.e supporting services such as roads, toilets etc are to be included in the word “infrastructure” which is needed for Post-harvest storage of agricultural produce.
The word “infrastructure” thus to be given a purposive meaning under the exemption notification so as to include the underlying framework of the system. It would, thus, include all construction activities other than construction of market sheds etc which are necessary for providing “Post-harvest infrastructure for agricultural produce”.
The contention of the learned counsel for the department/revenue that the construction activities apart from market sheds, shops etc could not be included in Clause 14(d) of the notification no.25/2012-ST dated 20.06.2012, therefore, is not sustainable.
As regards the findings in the order of the Commissioner that the activities of Mandi Samiti are commercial in nature, it may be noted that the said issue has been brought to its logical end with the decision of the Apex Court in Krishi Upaj Mandi Samiti vs Commissioner of C.Ex. & S.T., Alwar reported in 2022 (58) G.S.T.L. 129 9S.C).
It is evident from the Mandi Samiti Act that the Mandi Samiti is a Corporate body and all its functions and duties are directed towards regulating the sale and purchase of the agricultural produce. The Mandi Samiti is required to establish markets to exercise superintendence and control over the sale and purchase of the agricultural produce. The construction activities inside the Mandi area cannot be termed as business activities.
In the similar facts and circumstances of this Court in Central Excise Appeal no.06 of 2022 had taken a view that the provisions of Mega Exemption Notification in light of the functions and duties of the Krishi Utpadan Mandi Samiti would be applicable in case of “Work Contract Services” provided by the Contractor to Krishi Utpadan Mandi Samiti and the Contractor would be entitled to exemption from levy of service tax in view of the exemption notification no. 12/2012-ST. The argument of the learned counsel for the appellant revenue therein that the activity of letting/renting of Krishi Utpadan Mandi Samiti being commercial has been turned down.
For the aforesaid, no infirmity could be found in the order dated 19.08.2021 passed by the CESTAT, Allahabad.
The appeal is, accordingly, dismissed, at the admission stage itself.
