By TIOL News Service

MUMBAI, JULY 04, 2014: A Service tax demand of Rs.3.26 crores, interest and penalties was confirmed on the ground that the applicant had provided Business Auxiliary Services.

Before the CESTAT with a stay application/appeal, it is contended by the applicant that they are engaged in the activity of cutting, harvesting and transportation of sugarcane. Earlier, a show cause notice was issued to the appellant on the ground that the applicants were providing Manpower Supply Agency service and the Tribunal in their own case had held that the activity undertaken by the applicant is not classifiable under manpower supply service and more appropriately covered under Business Auxiliary Service.

It is further submitted that the present demand is in respect of the amount received from the sugar factory over and above the amounts which they received in respect of cutting, harvesting and transportation of sugar cane; that it is the contention of the Revenue that applicant had procured the goods or services which are input for the client i.e. Sugar factory; they are acting as intermediary or agent,and, therefore, the said services are classifiable as Business Auxiliary Service.

The appellant contends that in case the amount in question is treated as commission received for sale and purchase of agricultural produce then vide notification no. 13/2003-STdt. 20.06.2003 as amended the same is exempted from service tax.

The Revenue representative objected to this claim by submitting that in the present case the applicants are not undertaking the activity of sale/purchase of the agricultural produce but were only providing Business Auxiliary Service by supplying inputs to their clients i.e. to the sugar factory.

The Bench observed -

"6. We have gone through the show cause notice as well as adjudication order. In the show cause notice in para 9, it was specifically mentioned that applicants are acting as an agent on behalf of sugarcane growing farmers for providing service to the sugar factory in relation to the procurement of goods or services which are inputs for the client. The amounts in question are in respect of the harvesting and transportation of the sugar cane to the factory and activity undertaken by the commission agent in relation to the sale and purchase of agricultural produce is exempted from service tax as per Notification no. 13/03-ST dt.20.06.2003 as amended. In view of the above, prima facie we find that the applicants have made out a strong case in their favour. Therefore, the pre deposit of dues are waived and recovery of the same is stayed during the pendency of the appeal…"

The stay petition was allowed.

(See 2014-TIOL-1200-CESTAT-MUM)