1. M/s. India Trade Promotion Organization (ITPO) has been registered as a charitable organization under Section 25 of the Companies Act 1956. The main objectives of this organization as enumerated in Memorandum of Association are as under:- To promote, organize and participate in industrial trade and other fairs and exhibitions show-rooms and depots in India and abroad and to take all measures Incidental thereto for boosting up country's trade.
To publicize in India and abroad International Trade Fairs and Exhibitions to be held in India and invite the foreign participants to participate in them.
To organize and undertake trade in commodities connected with or relating to such fairs, exhibitions show-rooms and depots in India and abroad and to undertake the purchase, sale, storing and transport of such commodities in India or anywhere else in the world.To undertake promotion of exports and to explore new markets for traditional items of export and develop exports of new items with a view to maintaining, diversifying and expanding the export trade.
2. ITPO organizes trade fairs in its Pragati Maidan complex. Business participants in those trade fairs hire out halls/stalls belonging to ITPO for the purpose of displaying their products and to carry out business operations during the fair. These stalls are hired out to participants in fairs organized by parties other than ITPO. The Election Commission of India also hired out ITPO's premises for storing ballot boxes, election materials and for counting votes. Rent was paid to ITPO in all these cases of hiring of its stalls. In the order impugned in this appeal Commissioner of Central Excise (Appeals) Delhi has held that ITPO functions in renting out its stalls as a "mandap Keeper" and rents received are liable to service tax as value of "service provided to client by a mandap keeper in relation to the use of a mandap" 3. In the present appeal, ITPO has contended that the renting out of premises to participants of trade fairs as well as the Election Commission do not come in the category of service provided by Mandap Keeper and, therefore, the service tax demand confirmed in the impugned order is not legally sustainable.
4. Section 65 of the Finance Act 1944 contains definitions of "mandap", "mandap keeper" and taxable service." The dispute is to be required decided in the light of these definitions. In order to facilitate the discussion of the issue, we read these definitions: (22) "mandap" means any immovable property as defined in section 3 of the Transfer of Property Act, 1882 and includes any furniture, fixtures, light fittings and floor coverings therein let out for consideration for organizing any official, social or business function; (23) "mandap keeper" means a person who allows temporary occupation of a mandap for consideration for organizing any official, social or business function; (m) to a client, by a mandap keeper in relation to the use of a mandap in any manner including the facilities provided to the client in relation to such use and also the services, if any, rendered as a caterer," 5. Firstly, the appellant contends that its stalls do not fall in the category of 'mandap'. Secondly, it is contended that trade fairs do not fall in the category of "official, social or business functions" mentioned in the definition under serial No.23. Since we are of the opinion that the decision on the second contention raised by the appellant is sufficient to dispose of the present appeal, we are not going into the first contention as to whether ITPO's stalls and structures constituted mandap.
6. The point being made by the appellant is that the definition 23 makes a clear distinction between 'functions' organised and normal, work of organizations. It is the appellant's contention that only consideration received for allowing "temporary occupation of a mandap" "for organizing any official, social or business function" is liable to service tax and not the consideration received for allowing the occupation of a mandap for carrying out official, social or business activities. The appellant has relied on the definition and meaning of the word "function" to bring out the contrast between functions and work. It is pointed out that in the context of the definition, organizing a function has the meaning of organizing an impressive, elaborate or formal ceremony. According to the appellant this is in contrast with the day-to-day carrying out of official work, social activities or business. As against this the Revenue's contention is that the distinction sought to be made by the appellants is incorrect.
It is pointed out that the terms 'business' and 'function' are inter-changeable and as per the Collins Paper Back English Thesaurus the word "function" also means "activity". The Revenue contends that there is no distinction to be made between business activity and business function. It is also pointed out that according to World Book Encyclopedia Part-II business includes the activities of all commercial producers of goods and services. Thus the meaning of the term 'business' has to be read along with the term "function" and "business function' would mean functions/activities related to business.
7. The appellant has also emphasized that a trade fair is not ceremonial business function but a market itself. It is being pointed out that Encyclopedia Britannca Vol 11 explains Trade Fair as "Temporary market organized to promote trade, where buyers and sellers gather and transact business". Reliance has also been placed in the following extracts from other authoritative texts: 1. III. Trade shows Need Planning" By Adin Talbar GOING INTO TRADE FAIRS" Published by International Trade Centre UNCTAD/GATT. There are many kinds of trade fairs and exhibitions: international and solo, vertical and horizontal, public and specialized, home and overseas. Although their purposes vary, they all have one element in common: they are glorified market places. Here buyer meets seller; manufacturer and exporter rub shoulders with competitor or importer.
In the blaring noise of the trade fair that is open to the wide public, or in the antiseptic atmosphere of the professional exhibition - in all of them the business of careful examination of new products for immediate or eventual purchase is being conducted on a common meeting ground.
In both ancient and medieval times, fairs contained the same basic elements: the sellers and buyers met to transact business, and the public had fund watching and, in doing so, developed effective new demand for the products displayed. In modern times, fairs also hold a two-fold promise for exhibitors: that they will be able to find suitable agents and that, through them, they will be able to market their products.
But for developing countries, is a trade fair the proper place to market products? Provided it is the right fair, the answer is very definitely: Yes. Nothing has been invented that can really take the place of this organized, open-market show case. The question is, rather, how and when and where should the newcomer take advantage of the expensive opportunities that trade fairs or exhibitions offer." 2. New Face for Trade Fairs (By Jacques Kunstenaar).Trade fairs are the oldest trade promotion instruments know to man. The main feature responsible for the success of the fair throughout the centuries have remained more or less the same, regardless of whether the fair took place hundreds of years ago or in 1974. A fair is a place where producers can, in a minimum of time, show their lines to hundreds or even thousands of prospects, many of whom they would never have thought of contacting. Often they can do this at far less expense than would be incurred by representatives visiting even a small percentage of the group of interested parties assembled. Exhibitors can observe what their competitors are doing, see what new lines they have on hand and what prices they are charging.
The visitor, on the other hand, is offered an optimum opportunity to weigh the advantages and disadvantages of a whole series of competitive products and to discuss prices and terms. He can also talk over any necessary alterations to adjust the product to his own particular needs. He can see the product, perhaps watch it in motion, tough it, handle its, may be taste it.
While the primary aim of the modern international fair is to develop a market rather than on-the spot sales, the "old fashioned" marketplace type of fair, where the end consumer makes direct purchases, is still going. Although mainly of regional scope, fairs of this latter kind exist and prosper in both industrialized and developing countries." 3. Organizers Manual for Effective Participation in International Trade Fairs" ESCAP Trade Promotion Centre of the United Nations "Trade fairs are not simply a matter of prestige. The bright colors in which they are dressed, the attractions which they offer, the incidental ceremonial which accompanies them have only one aim; to attract buyers and consumer. The essential aim of trade fairs is to facilitate selling But to sell what, how, when and where? Setting clear objectives is the first and most important step in planning and implementing a country's effective participation in a trade fair." 8. We have perused the records and have considered the submissions made by both sides. The definitions of "mandap keeper" states that he is a person who allows "temporary occupation of a mandap for consideration for organizing any official, social or business function.' Taxable service has also been defined to cover such letting out of a mandap.
Due importance has to be given to the words "temporary occupation" and for organizing any function" figuring in these definitions. These are expressions used deliberately to limit the scope of the levy.
Otherwise, the levy would cover permanent occupation of mandaps for carrying out official, social or business activities and work. The distinction made is clear. The contrast made between carrying out official, social and business activities on the one hand and organizing functions/events relating to these is clear from the words used. The levy covers only rents from functions/events. Therefore, we are of the opinion that the term function used in the definition cannot be equated with "activity", as contended on behalf of the revenue even though dictionaries may list that meaning also under that term. The argument raised by the revenue forgets that the meaning of a word is to be derived from the context in which the word is used. In the context in which the word is used in Section 65, its appropriate meaning is a ceremony. Since trade fairs are temporary markets as explained in the above texts, the use of the stalls of ITOP for trade fairs was use for business as such, and not for ceremony.
9. The above position is brought out even more clearly from the renting out of stalls to the Election Commission. That Commission has the power and duty to conduct elections to various legislatures. It carries out that function normally from its permanent office. Making arrangements for voting, storing of ballot boxes, counting of ballots etc. are essential parts of the official work of the Election Commission. At times, when the work load increases and cannot be carried out from its regular offices, the Election Commission hires out other people's premises like schools or ITPO's Stalls for carrying out these official activities. these are different from a ceremony organized, e.g.
celebration of the Silver Jubilee of the Election Commission of India or Honouring the Commissions functionaries or other persons connected with it. Similarly, a business organization in manufacturing or marketing carries out its normal business of manufacturing, buying and selling in the routine manner from its assigned premises or its direct selling. On occasion, it may hire out an additional premise for carrying out its business activities of buying, selling etc. A trade fair is such an occasion. A trade fair brings together large numbers of connected parties at a fixed place during a short time so that buyer, seller and other contacts are facilitated. The participants in such a trade fair get together at the fair premises and carry out their normal business activities during the assigned period from the new premises; nevertheless, the activity taking place is the normal business activity and not a business ceremony. The difference is only with regard to the place and time and not about the work itself. A trade fair is nothing but a temporary market place, because what goes on at the fair is business as usual and not a business function. It is clear from the material produced by the appellant that trade fairs can be taken only as temporary markets and not ceremonies.
10. In view of the above, we are firmly of the view that the interpretation sought to be placed by the Revenue is contrary to the scheme of the service tax on mandap keepers. If the word function in the definition is to be taken to be mean "activity" and service tax is to be imposed on that basis, all official, social and business activities would be rendered liable to service tax. That is to say, anyone who rents out his premises to the Election Commission will be liable to pay service tax on the consideration received. Same would be the position of persons who rent out premises for office, business or social activities. This clearly is not the intention of the legislature, because the definition limits the levy to temporarily organized official, social or business functions is ceremonies.
11. The services tax demand made on the appellant/ITPO with regard to rental receipts from participants in trade fairs and the Election Commission is not legally tenable in as much, in those cases ITPO was not functioning as a mandap keeper allowing temporary use of the mandap "for organizing any official, social or business function" and the demand is required to be set aside. Interest and penalty have no independent standing. They too fail. Accordingly, we set aside the impugned order and allow the appeal.