2013 (7) TMI 589 - AT - Service Tax

Leviability of service tax whether buffer stock subsidy would be leviable to service tax Commissioner (Appeals) decided in the favour of assessee - Held that - Buffer-stock subsidy cannot be considered as a consideration received for the services rendered thus not liable to service tax - The same has been settled in Commissioner of Central Excise, Chandigarh vs. Nahar Industrial Enterprises Ltd. (2010 (1) TMI 400 - PUNJAB & HARYANA HIGH COURT) - the sugar factories are storing the sugar for themselves thus there cannot be any service to self also, subsidies are negative taxation and there cannot be a positive tax on the same under service tax appeal decided against the revenue.

Summary

Issues:
Appeal against Order-in-Appeal regarding buffer stock subsidy not liable to service tax under storage and warehousing services.

Analysis:
The appeal was filed by the Revenue against Order-in-Appeal no. P-II/BKS/116-117/2006 dated 21/04/2006 passed by the Commissioner of Central Excise (Appeals), Pune-II. The Commissioner (Appeals) had ruled that the buffer stock subsidy received by the respondent-sugar factories was not subject to service tax under storage and warehousing services. The Revenue contested this decision, arguing that the subsidy was granted for expenses related to storage of goods, thus constituting consideration for services rendered. The learned Superintendent (AR) representing the Revenue reiterated the grounds mentioned in the appeal memorandum. However, no one appeared on behalf of the respondents during the proceedings.

The Tribunal carefully considered the Revenue's submissions and referred to a precedent set by the High Court of Punjab & Haryana in the case of Commissioner of Central Excise, Chandigarh vs. Nahar Industrial Enterprises Ltd. The High Court had concluded that buffer-stock subsidy should not be viewed as consideration for services rendered, thereby exempting it from service tax. The Court further emphasized that sugar factories store sugar for themselves, implying no service to others, and subsidies are a form of negative taxation not subject to positive tax under service tax laws. Based on this legal precedent and the merits of the case, the Tribunal found no justification for the Revenue's appeals and consequently dismissed them.