2013 (7) TMI 207 - AT - Service Tax

Business Support Service (BSS) appellant constructed infrastructural facilities for marketing of agricultural produce and given to the farmers for marketing their produce - department contented that market fee collected is liable to service tax under the category of Business Support Service - rent received is liable under the category of Renting of Immovable Property Held that - The appellant is not liable to pay service tax on the market fee collected by them - the services rendered is covered under Business Auxiliary Services and are exempted from service tax under Notification NO. 14/2004-ST with reference to the constitution and functions the services provided were out of the market fee collected from the licensees and not in the nature of outsourced services which did not appropriately fall under the category of Business Support Services - Development and maintenance of agricultural market infrastructure is for the benefit of all users rather than an activity solely in the interest of licensees. Demand of penalty - appellant had discharged service tax liability with interest within the time period stipulated - the appellant is not liable to any penalty on the delayed payment appeal decided in the favour of assessee.

Summary

Issues:
1. Liability of service tax on market fee collected by Agricultural Produce Marketing Committee (APMC) under the category of 'Business Support Service'.
2. Liability of service tax on rent received by APMC from traders for renting shops under the category of 'Renting of Immovable Property'.

Analysis:

Issue 1: Liability of service tax on market fee collected by APMC under the category of 'Business Support Service'
The appellant, APMC, Nagpur, constructed infrastructural facilities for marketing agricultural produce and collected a market fee under Section 73 of the Maharashtra Agricultural Produce Marketing (Regulation) Act, 1963. The department contended that the market fee collected is liable to service tax under 'Business Support Service'. However, the appellant argued that Circular No. 157/8/2012 clarified that services provided by APMC fall under Business Auxiliary Services (BAS) and are exempt from service tax under Notification No. 14/2004-ST. The Circular highlighted that APMCs provide basic facilities for the benefit of all users and are not rendering 'business support service' to licensees. The Tribunal concurred with this interpretation and held that the demand under 'Business Support Service' was not sustainable in law.

Issue 2: Liability of service tax on rent received by APMC for renting shops under the category of 'Renting of Immovable Property'
The appellant received rent from traders who hired shops in the market area. The department asserted that this rent is liable to service tax under 'Renting of Immovable Property' category. The appellant admitted the liability and discharged the service tax with interest within the stipulated time under Section 80 of the Finance Act, 2012. The Tribunal acknowledged the compliance and held that no penalty was imposable on the appellant for the delayed payment of service tax in respect of 'Renting of Immovable Property Service'. Consequently, the demand under this category was set aside, and the appeal was allowed.

In conclusion, the Tribunal allowed the appeal, stating that the appellant was not liable to pay service tax on the market fee collected under 'Business Support Service' and was exempt under 'Business Auxiliary Service'. Additionally, the appellant had fulfilled the service tax liability with interest within the prescribed time for 'Renting of Immovable Property Service', leading to the setting aside of any penalty. The stay application was also disposed of accordingly.