By TIOL News Service

MUMBAI, JULY 18, 2013: THE appellants are manufacturers of sugar. The Directorate of Sugar, Government of India, directed the appellants to keep a buffer stock of sugar in their factory for which they paid buffer stock subsidy.

As is their wont, the revenue took a view that the appellants had rendered a service to Government of India for which they received a consideration and therefore, the subject transaction is liable to the service tax under the category of "storage and warehousing services".

The lower authorities did the needful viz. issuing SCN and confirming them with sweetness.

The Commissioner(A) did not allow this sweetness to last. He allowed the appeals on the ground that the activity cannot be considered as a service as the goods belonged to appellant themselves and the storage was undertaken in respect of appellant's own goods; therefore, no service has been rendered. The lower appellate authority also held that the demands were time barred.

The Revenue was aggrieved with this order which left a bitter taste.

So, the CCE, Pune is before the CESTAT.

Nothing new was submitted by the Revenue representative except reiterating the grounds urged in the appeal memorandum.

The respondent submitted that the issue has been settled in their favour by the High Court of Punjab & Haryana in the case of Nahar Industrial Enterprises Ltd. - (2010-TIOL-547-HC-P&H-ST) wherein it is held as follows:

"9. From the perusal of above quoted Sections, it is apparent that service tax can be levied only if service of `Storage and Warehousing' is provided. Nobody can provide service to himself. In the present case, it is undisputed that the Respondent-Assessee stored the goods owned by himself. After the expiry of storage period, the Respondent-Assessee was free to sell to the buyers of its own choice. The Dealer-Assessee has stored goods in compliance to directions of government of India issued under Sugar Development Fund Act, 1982. The Respondent-Assessee has received subsidy not on account of services rendered to Government of India but has received compensation on account of loss of interest, cost of insurance etc. incurred on account of maintenance of stock. The act of Respondent- Assessee cannot be called as rendering of services. The Tribunal has rightly held that just because the storage period of free sale sugar had to be extended at the behest of Government of India, neither the Appellant- Revenue sugar mills becomes `Storage and Warehouse keeper' nor the Government of India become their client in this regard. The storage of specific quantity of free sale sugar cannot be treated as providing `Storage and Warehousing' services to the Government of India.

10. In view of the above, the appeal is bereft of merits and deserves to be dismissed. The appeal is accordingly dismissed and questions of law are answered in favour of Respondent-Assessee and against the Appellant- Revenue."

Noting that the facts involved in the cited decision are identical to those involved in the present appeal, the CESTAT followed the same and dismissed the appeals of the Revenue.

(See 2013-TIOL-1085-CESTAT-MUM)