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2016 (8) TMI 147 - AT - Service TaxTechnical Inspection and Certification Service of seeds produced by the seeds producer - issuing the certificates - Extended period of limitation - revenue submitted that the activity undertaken by the respondents is not a sovereign function as per the section 9 of the seeds act, 1966 - Held that - the activity undertaken by the respondents are not a sovereign function and the respondents are liable to pay service tax on their activity under category of Technical Inspection Clarification Services . The show cause notice have been issued by the invoking extended period of limitation, the demand of extended period of limitation is not sustainable as there was no mala-fide intention of the respondents not to pay service tax in the light of the clarification issue by the Commissioner of Servicer Tax Ahmadabad on 27-09-2006 - demand of extended period of limitation is not sustainable. Demand confirmed for the normal period only. - assessee is entitle for cum tax benefit - Decided partly in favor of Revenue.
Issues:
Appeal against dropping of service tax demand by Ld. Commissioner (A) - Activity of Technical Inspection and Certification Service of seeds - Applicability of service tax under section 65(105)(zzi) of Finance Act, 1994 - Sovereign function exemption - Interpretation of Seeds Act, 1966 - CBEC circular no. 89/7/2006-S.T - Maharashtra State Seeds Certification Agency case - Extended period of limitation for demand - Cum tax benefit - Penalties under sections 76, 77, and 78 of the Finance Act, 1994. Analysis: The case involved an appeal by the revenue against the dropping of the service tax demand by the Ld. Commissioner (A) concerning the activity of Technical Inspection and Certification Service of seeds. The revenue contended that the activity did not qualify as a sovereign function and cited the Maharashtra State Seeds Certification Agency case where a similar service was held taxable. The respondents argued that their activity was a sovereign function as clarified by the Gujarat State Seed Certification Agency and the Circular dated 27.09.2006. The tribunal analyzed the provisions of the Seeds Act, 1966, and noted that the service provided by the respondents was optional, not mandatory, thus losing the characteristic of a sovereign function. The tribunal also referred to Circulars issued by the CBEC to support the taxability of such services. The tribunal further discussed the Circulars issued by the CBEC regarding technical inspection and certification services, emphasizing that activities performed by sovereign/public authorities under the provision of law do not constitute taxable services. The tribunal found that the activities of the appellant were not mandatory and statutory functions provided by a sovereign/public authority. The tribunal upheld that the service provided by the respondents fell under the category of "Technical Inspection Clarification Services" and was liable for service tax. Regarding the demand within the extended period of limitation, the tribunal held that it was not sustainable due to the absence of mala-fide intention by the respondents not to pay service tax, supported by a clarification from the Commissioner of Service Tax Ahmadabad. The tribunal also granted cum tax benefit to the respondents since they did not recover any amount over and above the charges paid by the service recipient for certification of seeds. Consequently, the tribunal set aside the penalties under sections 76, 77, and 78 of the Finance Act, 1994, and remanded the matter back to the adjudicating authority for quantification of the demand of service tax. In conclusion, the tribunal set aside the impugned orders, upheld the demand of service tax within the normal period with cum tax benefit, and remanded the matter for quantification. No penalties were imposed due to the lack of mala-fide intention. The appeals were disposed of accordingly.
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