2016 (12) TMI 98 - AT - Service Tax

Levy of tax - amount recovered from sale proceed of auction of unclaimed cargo - Cargo Handling Storage and Warehousing - interpretation of statute - Held that - the Revenue seek to charge service tax on the sale proceed from auction of abandoned goods though the person who stored the goods does not exist and there is no dealing with the said person. The appellant is selling the goods in open auction and receiving the sale proceed out of such auction, in this process no service recipient is existing. It is the foremost principle for levying service tax is that for provision of any service, provider and service recipient should exist then only the transaction of service can be completed by providing service of service provider and receiving the service by service recipient - In the present case, the service recipient does not exist. The activity is of sale of abandoned goods and the proceed of sale of goods does not attract any service tax. In CBEC s Master Circular No.96/7/2007-ST dated 2-08-2007. in Para 036.03. it has been clarified that Service tax is not leviable on a transaction treated as sale of goods and subjected to levy of Sales tax/VAT. Whether a given transaction between the service station and the customer is a sale or not, is to he determined taking into account the real nature and material facts of the transaction. Payment of VAT/sales tax on transaction indicates that the said transaction is treated as sale of goods. Thus in an unequivocal terms it is made clear in the instant Circular that value of goods on which VAT is paid is not chargeable to Service Tax and therefore for this reason. I hold that the amount collected by the Noticee towards sales/auction proceeds does not fall under the purview of Service tax. Levy of tax not justified - appeal dismissed - decided against appellant-Revenue.

Summary

Issues Involved:
1. Whether the proceeds from the auction of unclaimed cargo can be considered as storage and warehousing charges and thus be liable to service tax.

Detailed Analysis:

1. Demand for Service Tax on Auction Proceeds:
The appellant, engaged in Cargo Handling Storage and Warehousing under Section 65 of the Finance Act, 1994, was issued a show cause notice demanding service tax on the amount recovered from the auction of unclaimed cargo. The department contended that the proceeds from the auction should be treated as storage and warehousing charges, thus making them liable for service tax. The adjudicating authority, however, dropped the proceedings based on various judgments and Board's clarifications.

2. Arguments by the Revenue:
The Revenue argued that there was no dispute regarding the appellant providing storage and warehousing services. They asserted that the auction proceeds were essentially to compensate for warehousing storage charges and should be considered as service charges, thereby making them taxable.

3. Respondent's Defense:
The respondent's counsel argued that the issue was already settled by the Board's clarification, which stated that auction proceeds could not be considered as service charges and thus were not subject to service tax. They cited the Tribunal's judgment in the case of India Gateway Terminal (P) Ltd. Vs. Commissioner of C. Ex., Cochin, which supported their stance.

4. Tribunal’s Findings:
The Tribunal found that for service tax to be levied, there must be a service provider and a service recipient. In this case, the service recipient did not exist as the goods were abandoned and auctioned. The proceeds from the auction were not for any service provided but were from the sale of goods, which does not attract service tax. The Commissioner’s detailed findings, which were based on various authorities and judgments, were upheld.

5. Commissioner’s Detailed Findings:
The Commissioner noted that the main activity of the Noticees was receiving and storing containers with imported cargo. When cargo remained uncleared, it was auctioned under Section 48 of the Customs Act, 1962. The auction proceeds were used to recover storage and warehousing charges. However, the excess amount recovered was not considered as service charges but as a liability pending appropriation for three years. The retained amount did not carry the meaning of taxable warehousing charges as it was not taken as income into the books of account.

6. Legal Provisions and Clarifications:
The Commissioner referenced Section 150 of the Customs Act, 1962, which outlines the priority of payments from auction proceeds. The retained amount by the custodian was to be refunded to the owner of the goods, similar to the obligation of a Bailee. The Commissioner concluded that the auction proceeds were not for any service provided but were purely commercial transactions, exempt from service tax under Notification No. 12/2003 (ST) dated 2006.2003.

7. Supreme Court and Tribunal Precedents:
The Commissioner cited Supreme Court judgments in M/s Acer India Ltd. and Mathuram Agrawal v. State of Madhya Pradesh, which emphasized that taxation statutes must be interpreted based on clear and unambiguous language. The CBEC's Master Circular No. 96/7/2007-ST and Board's clarification F. No B/11/1/2002 also supported the view that auction proceeds are not subject to service tax.

8. Tribunal’s Conclusion:
The Tribunal agreed with the Commissioner’s findings and upheld the impugned order, dismissing the Revenue’s appeal. The Tribunal reiterated that no service tax could be levied on the auction proceeds as they were not considered service charges.

Order:
The proceedings initiated by the Show Cause Notice were dropped, and the Revenue’s appeal was dismissed. The Tribunal pronounced the judgment in court, agreeing with the detailed findings of the Commissioner and concluding that the auction proceeds did not attract service tax.