2015 (9) TMI 417 - HC - Service Tax

Storage and Warehouse Services - Levy of service tax on supervision charges paid to the Government - For the purpose of deputing staff for supervision of the work, the charges levied at 5% were levied under Section 28-A of Madhya Pradesh Excise Act, 1915 - charges in respect of storage of Foreign Liquor undertaken by the Liquor Contractor in the warehouse - Held that - That being so, the activities of the staff appointed to supervise the work of the warehouse and the act of the State Government in appointing the supervisor does not fall within the purview of providing service by a service provider to a client. In view of the above, we see no error in the order passed by the Tribunal holding that the supervision in the warehouse undertaken by the State Government does not amount to service and is not taxable under the head Storage and Warehouse Services . It does not fulfil the requirement of service as provided under Section 65(105)(zza) of the Finance Act, 1994 and is not included in the purview of the words Storage and Warehouse Services - On the contrary, it is only a fees levied for the supervision undertaken by the State Government to ensure proper functioning of the warehouse and storage in accordance to the statutory requirement. - appeals dismissed - Decided against the revenue.

Summary

Issues:
1. Whether charges levied under Section 28-A of Madhya Pradesh Excise Act, 1915 are liable to Service Tax as defined under Section 65(105)(zza) of the Finance Act, 1994.

Analysis:

Issue 1:
The case involved appeals by the Revenue questioning the tenability of orders passed by the Customs, Excise and Service Tax Appellate Tribunal regarding the charges levied under Section 28-A of the Madhya Pradesh Excise Act, 1915. The main question was whether these charges are liable to Service Tax as defined under the Finance Act, 1994. The Excise Officer had engaged staff to supervise the storage of Foreign Liquor by a Contractor in a warehouse, as per statutory requirements. The staff's supervision was enabled by Section 28-A of the Excise Act, allowing the Government to recover supervision charges from the Contractor. The Revenue argued that the supervision charges collected were for services provided by the Government in ensuring proper storage, making it taxable. However, the Tribunal held that the supervision was a statutory duty, not a service, and thus not liable for Service Tax.

The Court analyzed the concept of 'service' under the Finance Act, 1994, as explained by the Supreme Court in a previous case. It highlighted that service tax is imposed when a service provider renders a service to a customer. In this context, the supervision by the State Government's staff did not constitute a service provided to the Contractor but was a monitoring activity to ensure compliance with statutory provisions regarding liquor storage. The Court concluded that the supervisory staff's actions did not fall under the definition of providing a service to a client. Therefore, the Tribunal's decision that the supervision charges were not taxable under 'Storage and Warehouse Services' was upheld.

In conclusion, the Court dismissed the appeals by the Revenue, affirming the Tribunal's decision that the supervisory charges under Section 28-A of the Madhya Pradesh Excise Act, 1915 were not liable for Service Tax as they did not meet the criteria for being classified under 'Storage and Warehouse Services' as per the Finance Act, 1994. The charges were deemed as fees for ensuring proper warehouse functioning in accordance with statutory requirements, not as a taxable service provided by the State Government.