Summary
The Supreme Court upheld service-tax exemption rulings concerning construction for IIT Patna and NIT Rourkela. Under the amended definition of governmental authority, bodies set up by a parliamentary or State enactment formed an independent category. The conditions concerning 90% government participation and municipal functions qualified the separate category of bodies established by government. The Revenue’s appeals were dismissed.
Issues
- Whether the amended definition subjected statutory bodies to the 90% participation and municipal-function conditions.
- Whether ambiguity or potential revenue impact justified the Revenue’s narrower interpretation.
Provisions considered
- Clauses 2(s) and 12(c), as amended on 30 January 2014, Mega Service Tax Exemption Notification No. 25/2012-STThe disjunctive categories in amended clause 2(s) brought the statutory educational institutions within governmental authority; the trailing conditions applied only to category (ii). The construction exemption rulings were upheld. (¶¶ 4–7, 14–28, 34)
Held
- The word or separated two independent categories. A body set up by an Act under clause 2(s)(i) did not also have to satisfy the trailing conditions applicable to a body established by government under clause 2(s)(ii). (¶¶ 15–24, 27–28)
- The semicolon following category (i), contrasted with the comma after category (ii), supported the plain disjunctive reading. Punctuation assisted construction without displacing the ordinary meaning. (¶ 25–28)
- The rule resolving ambiguity in an exemption provision in favour of Revenue was not disputed, but it did not apply because this definition admitted only one plausible construction. (¶ 29–30)
- A broader fiscal effect does not itself create ambiguity or authorise rewriting clear notification language to secure the Revenue’s desired outcome. (¶ 31–33)
Result
Revenue’s appeals dismissed without costs. Patna and Orissa High Court judgments concerning the exemption and refund relief upheld.