2016 (2) TMI 27 - AT - Service Tax

Business Auxiliary Service but not commission agent service - claim of exemption in relation to agriculture produce - acting as an agent for a number of South Indian Tea Estates in the marketing and sale of their tea overseas and are professional tea taster. - it is submitted that, appellant was undertaking the service on behalf of the tea exporters in various ways in respect of export of tea which is an agricultural produce and therefore, the demand of tax is unsustainable. - Exemption Notification no. 13/2003 Held that - in the whole process of export of tea, they guide exporters suitably in achieving the objectives to fulfil the contractual obligation. The activity is undertaken by the service provider to market tea among foreign buyers as covered under the scope of Business Auxiliary Service. Appellant s activities are not only restricted to sale, but includes host of other activities including assisting in the system of grading and standardization of tea for the purpose of export and also deals with details such as colour, taste, quality and quantity for export of tea and are professional tea taster. They also monitor the shipment of the goods and verify shipment documents, port regulations and other formalities for export of tea. Therefore, we find that the above activities do not fall within the meaning of commission agent. Accordingly, we hold that the appellant s activities are rightly covered under the category of BAS other than commission agent. Therefore, the question of appellant claiming tea as agricultural produce, which is applicable for only commission agent and not applicable to the appellant assessee s case. Accordingly, we hold that the demand along with interest is liable to be upheld. - Decided against the assessee.

Summary

Issues Involved:
1. Classification of services provided by the assessee under "Business Auxiliary Service" (BAS).
2. Applicability of service tax exemption for commission agents dealing with agricultural produce.
3. Imposition of penalties under Sections 76 and 78 of the Finance Act.

Issue-wise Detailed Analysis:

1. Classification of Services Provided by the Assessee:
The primary issue was whether the services provided by the appellant, M/s. Container Tea and Commodities (CT&C), fell under the category of "Business Auxiliary Service" (BAS). The appellant acted as an agent for South Indian Tea Estates, assisting in the marketing and sale of tea overseas. The adjudicating authority demanded tax under BAS, which includes activities such as promotion, marketing, and sale of goods produced by the client. The appellant's activities included fixing tea prices, negotiating contracts, grading and standardizing tea, and monitoring shipments. The Tribunal concluded that these activities were comprehensive and not limited to mere sale, thus falling under BAS as defined in Section 65(19) of the Finance Act.

2. Applicability of Service Tax Exemption for Commission Agents:
The appellant argued that their services were exempt from service tax under Notification No. 13/2003-ST, which exempts commission agents dealing with agricultural produce. They contended that tea is an agricultural produce and their role as commission agents should exempt them from service tax. However, the Tribunal noted that tea undergoes significant processing before becoming marketable, thus not qualifying as agricultural produce under the said notification. The Tribunal also highlighted that the appellant's activities went beyond those of a typical commission agent, including various auxiliary services. Therefore, the exemption for commission agents dealing with agricultural produce was deemed inapplicable.

3. Imposition of Penalties:
The Revenue appealed for the imposition of penalties under Sections 76 and 78 for non-payment of service tax. The Tribunal acknowledged that the appellant had paid the entire dues during the investigation. Given the initial ambiguity regarding service tax applicability and the appellant's belief that they were exempt, the Tribunal found a bona fide doubt existed. Invoking Section 80 of the Finance Act, the Tribunal waived the penalties, considering the overall circumstances and the appellant's compliance post-investigation.

Conclusion:
The Tribunal upheld the demand for service tax under BAS, rejecting the appellant's claim for exemption as commission agents dealing with agricultural produce. The citations provided by the appellant were found irrelevant as they pertained to commission agents, not applicable to the appellant's broader range of services. The penalties were waived, recognizing the bona fide doubt and the appellant's subsequent compliance. The Revenue's appeal for penalties was rejected, and the assessee's appeals were partly allowed.