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2017 (2) TMI 1355 - AT - Service TaxBusiness Auxiliary Services - The process of threshing involves the separation of the lamina and the midrib from the tobacco leaves as they are to be processed and used separately in the manufacture of cigarettes and allied products - Department considered this activity as BAS and brought the assessees to the service tax net - Held that - As per N/N. 14/2004-S.T. BAS in respect of inter alia production of goods on behalf of client inter alia in relation to agriculture is exempted from service tax liability. This exemption got further broadbanded vide N/N. 19/2005 dated 7-6-2005 as a result of which such BAS in respect of production of processing of goods for; or on behalf of the client was exempted - the activity of the assessees is in relation to the agriculture and not subject to service tax as a Business Auxiliary Service even before or after the negative list was issued on 1-7-2012 - there are no merits in the impugned orders where the said activity of threshing and redrying was brought under BAS - demand set aside. GTA Service - assessee-appellants have brought the tobacco bundles from the auction platform to their factories - main plea of the assessees on this issue is that no consignment notes have been raised - Held that - Consignment notes can be issued in any form as seen from definition of GTA in Section 65(50)(b) of the Finance Act 1994 - In the instant cases the assessees are the service recipients for which they are paying the freight charges. When it is so then we are of the view that the Department has rightly applied GTA and demanded the service tax for the reason that without an accompanying paper/document goods cannot be received without which is the basis of amount for payment - demand under GTA Service upheld. Renting of immovable property for commercial purpose - Department has demanded the service tax under sub-section (105)(zzzz) of Section 65 of Finance Act 1994 w.e.f. 1-6-2007 under the head of renting of immovable property services - Held that - It is an undisputed fact that the immovable property in question was given for the purpose of commercial activities. When it is so then the service tax is leviable - demands on Renting of Immovable Property confirmed. Demand of service tax on commission paid to foreign agents - Held that - It appears that foreign agent acted as an agent outside India in relation to sale of the processed tobacco - Hence the amount of commission paid shall be liable to service tax the liability thereof being on the appellant-assessee under reverse charge mechanism in terms of Rule 2(1)(d)(iv) of the Service Tax Rules - demand upheld. Penalty - Held that - If the service tax is paid within the period of 6 months then penalty was not leviable under Section 80(2) of the Finance Act 1994 which was introduced by the Budget of 2012 - cases remanded for de novo consideration only on the issue of penalties on tax demands. Appeal allowed in part and part matter on remand.
Issues Involved:
1. Demand of service tax on Business Auxiliary Service (BAS) 2. Demand of service tax on Goods Transport Agency (GTA) service 3. Demand of service tax on Renting of Immovable Property Service 4. Demand of service tax on commission paid to foreign agents 5. Imposition of penalties Issue-wise Detailed Analysis: 1. Demand of Service Tax on Business Auxiliary Service (BAS): The appellants argued that their activities of threshing and redrying tobacco leaves are agricultural in nature and should be exempt from BAS under Notification No. 14/2004 and subsequent amendments. They cited Circular No. 143/12/2011 which clarified that such activities are related to agriculture and thus exempt. The Tribunal agreed, noting that these activities do not alter the essential characteristics of the agricultural produce. The Tribunal cited the Supreme Court's definition of agricultural products and previous cases supporting the exemption. Consequently, demands of service tax on BAS were set aside, and related departmental appeals were dismissed. 2. Demand of Service Tax on Goods Transport Agency (GTA) Service: The appellants contended that they engaged private truck operators who did not issue consignment notes, thus not qualifying as GTA. However, the Tribunal noted that consignment notes can be issued in any form and that the appellants, as service recipients, paid the freight charges. The Tribunal upheld the demands, referencing the definition of GTA in Section 65(50)(b) of the Finance Act, 1994, and previous Tribunal decisions. Therefore, the appeals on this issue were dismissed. 3. Demand of Service Tax on Renting of Immovable Property Service: The Tribunal found that the appellants had rented out immovable property for commercial purposes, making them liable for service tax under Section 65(105)(zzzz) of the Finance Act, 1994, effective from 1-6-2007. The Tribunal upheld the demands, noting that the property was indeed used for commercial activities. Hence, appeals on this issue were dismissed. 4. Demand of Service Tax on Commission Paid to Foreign Agents: In the case of DTE Exports (P) Ltd., the Tribunal upheld the demand of service tax on commission paid to foreign agents, classifying it as a taxable service under Clause (19)(1) of Section 65 of the Finance Act, 1994. The liability was on the appellant under the reverse charge mechanism as per Rule 2(1)(d)(iv) of the Service Tax Rules. The appeal on this issue was dismissed. 5. Imposition of Penalties: The Tribunal noted that in some cases, the service tax was paid along with interest, questioning the imposition of penalties. Citing the case of Sethi Tools Pvt. Ltd. v. CCE, CC & ST, Vadodara-II, the Tribunal observed that penalties might not be leviable if the tax was paid within six months. The Tribunal remanded the issue of penalties for de novo consideration, directing the authorities to reassess the imposition and quantum of penalties concerning demands on GTA, Renting of Immovable Property, and commission paid to foreign agents. Conclusion: - Demands of service tax on BAS were set aside, and related appeals allowed. - Demands of service tax on GTA and Renting of Immovable Property were upheld, and related appeals dismissed. - Demand of service tax on commission paid to foreign agents was upheld, and related appeal dismissed. - The issue of penalties was remanded for reconsideration. (Order pronounced and dictated in open Court)
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