By TIOL News Service

MUMBAI, JUNE 19, 2013: THE appellant constructed infrastructural facilities for marketing of agricultural produce and the same was given to the farmers for marketing their produce. The appellant collected a market fee @ 1.05% under Section 73 of the Maharashtra Agricultural Produce Marketing (Regulation) Act, 1963. They have also rented out shops to various traders in the market. During the period 2006-07 to 2010-11 the appellant received market fee amounting to Rs. 58,39,90,519/- and during the period 2006-07 to 2010-11 they received a sum of Rs. 70,50,487/- by way of rent from the traders who hired the shops on rent. The department was of the view that the market fee collected by APMC is liable to service tax under the category of ‘Business Support Service' and the rent received is liable to service tax under the category of 'Renting of Immovable Property'.

The CCE, Nagpur confirmed the Service Tax demand of Rs.6.61 crores under the category of BSS and Rs.7.86 lakhs under ‘Renting of Immovable Property' along with penalties and interest.

Before the CESTAT, the appellant submits -

+ vide Circular No. 157/8/2012 dated 27/04/2012, the Board has clarified that the services rendered by Agricultural Produce Marketing Committee is covered under Business Auxiliary Services (BAS) and not under Business Support Services (BSS) & the services so rendered (BAS) are exempt from service tax under Notification No. 14/2004-ST and accordingly service tax is not leviable on the market fee collected by the APMC.

+ Therefore the demand of Rs.6,60,97,186/- under the category of ‘Business Support Services' is not sustainable in law.

+ The same circular further clarifies that in case the APMC charges any amount for renting of shops in the market area, etc. they would be liable to service tax under the respective taxable heads.

+ As such the demand under the category of ‘Renting of Immovable Property' amounting to Rs. 7,86,465/- is sustainable and the same along with interest thereon has been discharged on 27/11/2012. Further, vide Section 80 of the Finance Act, 2012 in respect of services rendered under the category ‘Renting of Immovable Property' covered under sub-clause (zzzz) of Clause (105) of Section 65, no penalty shall be imposable for failure to pay the tax under Sections 76 or 77 or 78 of the Finance Act if the amount of service tax along with interest is paid in full within a period of six months from date of enactment of the Finance Bill, 2012. The Finance Bill become Finance Act on 28/05/2012 and, they have discharged the service tax liability along with interest on 27/11/2012 and, therefore, they are eligible for the benefit of the provisions of Section 80 of the Finance Act, 2012 and accordingly no penalty is imposable on them.

The Revenue representative confirmed the facts stated by the appellant.

The Bench extracted the contents of the Board Circular dated 27/04/2012 and observed -

“6.1 From the above circular it is clear that the appellant is not liable to pay service tax on the market fee collected by them under the category of ‘Business Support Service' and are exempt from payment of service tax under the category of ‘Business Auxiliary Service' under Notification NO.14/2004-S.T. Therefore, the demand confirmed in the impugned order under the category of ‘Business Support Service' does not sustain.

6.2 As regards the demand of service tax on ‘Renting of Immovable Property Service', the appellant had discharged service tax liability with interest within the time period stipulated under Section 80 of the Finance Act, 2012. In view of the above position, the appellant is not liable to any penalty on the delayed payment of service tax in respect of ‘Renting of Immovable Property Service' and accordingly we set aside the same.”

In fine, the appeal was allowed.

In passing : The Board Circular clarifying that APMC is not liable to pay Service Tax on the market fees collected from licencees as same is exempted in terms of notification 14/2004-ST is dated 27/04/2012. Inspite of the above, the CCE, Nagpur chose to confirm the demand of Rs.6,60,97,186/- and impose penalties by passing an order-in-original dated 26/09/2012.

Harassment by any other name would still smell sweet!

(See 2013-TIOL-923-CESTAT-MUM)