ST - Activity of cutting and packing of lettuce, onion and salad mix is in relation to agriculture, hence not liable to service tax: CESTAT
By TIOL News Service
MUMBAI, MAY 10, 2017: THE issue involved is -
(a) Whether the appellant has rendered the services of 'Business Auxiliary Service' and is liable to pay service tax or otherwise, and
(b) Whether the appellant is required to discharge the service tax under 'Consulting Engineer' service by way of reverse charge mechanism for transfer of technical know-how or otherwise.
The facts:
+ The appellants were carrying out the activity of cutting and packing of lettuce, onion and salad mix on behalf of M/s Hardcastle Restaurants Pvt. Ltd. (HRPL) . It is the case of Revenue that this activity would fall under the category of 'business auxiliary service' under the Head of 'production or processing of goods for, or on behalf of client'.
+ The second demand of service tax is in respect of the amounts paid by appellant to an entity situated abroad for technical knowhow assistance rendered for setting up the plant. The period involved is prior to 18.04.2006.
The demands have been confirmed by the CST, Mumbai .
Before the CESTAT, in appeal, the appellant submitted that –
++ Activities carried out by appellants in respect of cutting and packing of lettuce, onion and salad mix would be covered under exemption notification 14/2004-ST as amended by 19/2005-ST and Circular No. 143/12/2011-ST dated 26.04.2011 which talks about these kind of services rendered to processing service of 'agriculture produce'. Reliance is also placed on the decision in Tasty Bite Eatables Ltd. – 2015-TIOL-2288-CESTAT-MUM involving an identical issued.
++ Service tax liability on transfer of technical know-howis not covered by the definition of 'Consulting Engineering service' and is covered by various decisions of the Tribunal - 2004-TIOL-710-CESTAT-MUM, 2008-TIOL-2375-CESTAT-BANG, 2011-TIOL-748-HC-KAR-ST, 2007-TIOL-609-CESTAT-BANG.
++ Adjudicating authority has erred in confirming the demand raised under reverse charge mechanism for the period prior to 18.04.2006. Moreover, Consulting Engineering Service can only be provided by a Engineering firm prior to 01.05.2006 and design and drawing are treated as goods by the customs authorities and the appellant has already discharged customs duty on such design and drawing which are imported for the erection of the facilities; that the supply of technical know-how between associated enterprises and any transaction between them is not taxable prior to 10.05.2008. Sify Technologies Ltd. - 2011-TIOL-123-CESTAT-MAD.
The AR justified the demand.
The Bench considered the submissions and inter alia observed thus –
++ Activity of processing the vegetables by the appellant will be in relation to 'agriculture' hence not liable to service tax under business auxiliary services. Tasty Bite Eatables Ltd. – 2015-TIOL-2288-CESTAT-MUM relied upon]. Since the Tribunal has already taken a view on identical issue, no reason to deviate from such a view. The demands confirmed under 'Business Auxiliary Service' on the appellants are unsustainable and are set aside.
++ Agreement entered by appellants with the foreign entity is in respect of transfer of technical know-how and design and drawing in order to establish the facility in India. There is no consultancy or technical assistance extended/given by the Engineering firm; same does not come within the purview of “Consulting Engineer's Service”.
The impugned orders were set aside and the appeals were allowed.
(See 2017-TIOL-1566-CESTAT-MUM)
