2010 (10) TMI 528 - AT - Service Tax

Waiver of pre-deposit - Business Auxiliary Service - The appellant-corporation, which is an undertaking of the Kerala State Government, had procuring Foreign Liquor, manufactured in various private distilleries - Sell these products of the distilleries either through their own outlets or through independent dealers - The liquor supplied by the distilleries was warehoused in the premises of the appellant and that, in relation to this and allied activities, the appellant collected various charges/fees from the distilleries - These charges/fees constituted the taxable value for the Revenue to levy Service Tax from the appellant - Appellant has succeeded in making a prima facie case by showing that they were purchasing liquor from the distilleries - It is settled law that, where there is sale of goods, there can be no levy of Service Tax on its value. Prima facie, no Service Tax is leviable on the amounts collected by the appellant from the distillers in connection with sale of goods - Hence, waiver of pre-deposit and stay of recovery

Summary

Issues:
Waiver of pre-deposit and stay of recovery in relation to Service Tax demands and penalties under the head 'Business Auxiliary Service' for the period 1-4-2007 to 31-3-2008.

Analysis:
The judgment involves the consideration of whether Service Tax is applicable to charges collected by an appellant from distilleries for the supply of liquor. The Commissioner confirmed three demands of Service Tax under the 'Business Auxiliary Service' category for a specific period and imposed penalties. The appellant, a corporation under the Kerala State Government, had a monopoly on procuring Foreign Liquor from private distilleries during the dispute period. The charges collected from distilleries were deemed taxable by the Revenue as consideration for Business Auxiliary Services. The Commissioner concluded that the appellant acted as an agent for the distilleries, not in a principal-to-principal relationship. The appellant argued that the transaction was a sale of goods, citing various documents and a Supreme Court judgment. The JCDR relied on a Kerala High Court judgment and an admission by the Corporation's signatory supporting the principal-to-agent relationship.

The Tribunal analyzed the evidence presented by both parties. It noted that the appellant had established a prima facie case of purchasing liquor from distilleries, emphasizing that where there is a sale of goods, Service Tax cannot be levied on its value. The Tribunal highlighted that the demand for Service Tax was on amounts collected for liquor sales, a fact not successfully rebutted by the Revenue. Referring to the Supreme Court's judgment acknowledging the sale of liquor by distilleries to the appellant, the Tribunal held that prima facie, no Service Tax was applicable to the amounts collected by the appellant for the sale of goods. Consequently, the Tribunal granted waiver of pre-deposit and stay of recovery for the dues against the appellants, scheduling the appeals for a future date as suggested by the JCDR.

In conclusion, the judgment addresses the core issue of whether Service Tax is leviable on charges collected by the appellant from distilleries for the sale of liquor. By examining the nature of the transaction and the legal precedents cited by both parties, the Tribunal ruled in favor of the appellant, granting relief from pre-deposit and recovery of dues pending further appeal hearings.