2018 (2) TMI 1922 - AT - Service Tax

Benefit in respect of sale or purchase of agriculture produce - N/N. 13/2003 ST dated 20.06.2003 - appellant used the services of overseas agents for procurement of orders and paid commission to such agents - demand of service tax - HELD THAT - The N/N. 13/2003 as amended by Notification No. 8/2004 dated 09.07.2004 has extended the benefit to commission agents in relation to sale or purchase of agriculture produce. The nuts are to be treated as Agriculture Produce . The activity of the appellant is to remove the shell and recover the cashew kernels - this is very much covered under the definition of Agriculture Produce and hence the benefit of the Notification will be allowable to the appellant. Also the applicability of the Notification was clarified by the CBEC through clarification No. 143/12/2011-ST dated 26.05.2011 in which it has been specifically explained that the benefit is extendable to cashew nuts. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Liability to pay service tax on commission paid to overseas agents under reverse charge mechanism.
2. Interpretation of Notification No. 13/2003 ST dated 20.06.2003 regarding the benefit in respect of sale or purchase of agriculture produce.

Analysis:
1. The appellant, engaged in the manufacture and export of cashew kernels, used overseas agents for procurement of orders and paid commission. The Department contended that service tax was payable on such commission under Section 66A of the Finance Act 1994. The dispute revolved around the applicability of Notification No. 13/2003 ST dated 20.06.2003, which extended benefits for agriculture produce transactions. The authorities denied this benefit to the appellant, leading to the appeal.

2. The Tribunal examined the definition of "Agriculture Produce" as per the notification, which included nuts within its scope. Considering that cashew kernels are obtained by removing the shell, a process falling under the definition, the Tribunal concluded that cashew nuts are indeed agricultural produce. Furthermore, the Central Board of Excise and Customs (CBEC) clarified in a notification that the benefit extends to cashew nuts. Consequently, the Tribunal held that the appellant's activity falls within the ambit of agriculture produce, entitling them to the benefit of the notification. As a result, the impugned order was overturned, and the appeal was allowed.