By TIOL News Service

MUMBAI, FEB 25, 2013: THERE are two appeals which have been taken up together for consideration by the CESTAT.

In the first appeal, the appellant, Suvarna Sanjivani Sugarcane Transport Pvt. Ltd. provided sugar cane harvesting and transportation services to M/s. Sanjivani (T) SSK Ltd. The department was of the view that the said service is classifiable under “Business Auxiliary Service” and the consideration received is liable to service tax. Accordingly, a service tax demand of Rs. 19,07,585/- was confirmed along with interest & penalty. Since the Commissioner(A) dismissed their appeal, the appellant is before the CESTAT.

In the second appeal, the appellant M/s. Amrut Sanjivani Sugarcane Transport Pvt. Ltd. rendered sugarcane harvesting and transportation services to M/s. Sanjivani (T) SSK Ltd. during the period 2005-06 to 2008-09. A similar demand of ST under the head “BAS” was issued and confirmed for the sum of Rs. 57,35,805/- with interest and penalty. Since the CCE, Aurangabad was the adjudicating authority an appeal against the same is filed before the CESTAT.

It is submitted that -

+ during the impugned period in terms of Notfn. 13/2003-ST the services provided by the commission agent in relation to sale or purchase of agricultural produce was exempt from service tax. Since they dealt with sugar cane which is an agricultural produce, they are eligible for the exemption.

+ Alternatively, under Notification 14/2004-ST dated 10/09/2004, exemption from service tax is available in respect of ‘Business Auxiliary Service' relating to procurement of goods and service which are inputs for the client and provided in relation to agriculture, printing, textile processing or education. Since sugar cane is an input for the sugar factory, they are eligible for the benefit of this exemption.

+ It is also submitted that the payments received by the appellants towards harvesting and transportation have been given to the labour contractors and the transporters and on the commission retained by them, they have paid the service tax.

+ the appellants were acting as a ‘pure agent' on behalf of the harvesting contractors and the transport contractors and accordingly they are not liable to pay any service tax.

The Revenue representative submitted that the contract entered into by the appellants is not for sale or purchase of agricultural produce but for harvesting and transport of sugarcane and, therefore, same would not qualify for benefit under Notification No. 13/2003-ST. Similarly, the benefit under Notification No. 14/2004-ST will be available only if the procurement of goods and services are provided in relation to agriculture. In the instant case the service has been rendered to the sugar factory and sugar being a manufactured product, it cannot be considered as an agricultural produce and consequently the service cannot be said to have been rendered in relation to agriculture. Furthermore, there is nothing in writing on behalf of the harvest contractor and the transport contractor and the very fact that the appellant was earning commission on the activity undertaken by him would also show that he was not acting as a pure agent.

The Bench observed -

“5.1 Prima facie we are of the view that the appellant is not eligible for the benefit under Notification No. 13/2003-ST as the activity involved herein is harvesting of sugar cane and transportation of sugar cane from the fields to sugar factory. It is not in relation to sale or procurement of sugar cane and therefore, Notification No. 13/2003-ST does not appear to be applicable to the facts of the present case. As regards the benefit under Notification No. 14/2004-ST, the service has to be rendered in relation to agriculture. In the instant case the service has been rendered to the sugar factory and sugar is a manufactured product. Therefore, it cannot be said that the said service has been rendered to the client in relation to agriculture. Further, there is nothing available on record to show that the appellant was acting as a pure agent on behalf of the clients. The appellant was rendering service to third party namely, sugar factory, and the service was not rendered to the harvesting contractor or the transport contractor. The appellant was rendering the service by engaging harvesting contractors and transport contractors. Therefore, we are of the view that the appellants have not made out a prima facie case for complete waiver of pre-deposit of the dues adjudged.”

In fine, the appellants were directed to make a pre-deposit of 50% of the Service Tax dues adjudged against them and report compliance.

A bitter pill : See -

++ 2012-TIOL-1419-CESTAT-MUM where it is held -

4. We find that the adjudicating authority in the impugned order held that the applicant has undertaken the activity of harvesting sugarcane and its transportation to sugar factory from the fields of farmers and this activity is in relation to sale of sugarcane by farmers and purchase of sugarcane by the sugar factory and service provided of a commission agent. In view of this finding, we find that the applicant is entitled for the benefit of Notification no. 13/2003-ST which provides exemption from payment of service tax in respect of service provided under "Business Auxiliary Service" in relation to the sale of agricultural products. Hence, pre-deposit of duty, interest and penalty is waived and recovery of the same is stayed during the pendency of the appeal.

++ 2013-TIOL-304-CESTAT-MUM where it is held -

4. We find that the adjudicating authority in the impugned order held that the appellant has undertaken the activity of harvesting sugarcane and its transportation to sugar factory from the fields of farmers and this activity is in relation to sale of sugarcane by farmers and purchase of sugarcane by the sugar factory and service provided of a commission agent. In view of this finding, we find that the appellant is entitled for the benefit of Notification No. 13/2003-ST which provides exemption from payment of service tax in respect of service provided under “Business Auxiliary Service” in relation to the sale of agricultural products.

4 # . In view of these observation, the appeal is allowed with consequential relief, if any and the impugned order is set aside.

(See 2013-TIOL-365-CESTAT-MUM)