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2023 (9) TMI 21 - HC - Service TaxScope of SCN - Rectification of Mistake Application dismissed in cursory manner without discussing various judgments - Business Auxiliary Services - N/N. 13/2003-ST dated 20.06.2003 - testing services on animals were specifically excluded from the definition of Technical Testing services or not. Whether the Tribunal was right in passing the impugned order beyond the allegations made in the show cause notice both on merits and limitations? - HELD THAT - In the present proceeding Show Cause Notice dated 15 April, 2009, was issued for the period of 1 July, 2003 to September, 2004 - the Respondent failed to prove that there was suppression on the part of Appellants as during the period from July 2003 to September 2004, the Appellant had claimed exemption under the Notification No. 13/2003. Hence, in the present proceedings, the extended period of limitation as per Section 73(1) proviso could not have been invoked and the demand vide Show Cause Notice dated 15 April 2009, for the period of 1 July 2003 to September 2004 was barred by limitation. Whether the Hon'ble Tribunal was right in dismissing the Rectification of Mistake Application in cursory manner without discussing various judgments cited by the Appellant which are squarely applicable to the facts of the present case and without considering written submission filed post hearing? - HELD THAT - A Division Bench of this Court in Electropneumatics 2014 (9) TMI 242 - BOMBAY HIGH COURT held that minimum expectation from tribunal was complete application of mind to controversy dealing with submissions canvassed orally and in writing and by reasoned order whether to uphold or reject them. The proceedings were remanded back to the tribunal so as grant to the assessee on opportunity to argue its case completely. It was observed that it was not possible to ascertain from tribunal s order as to which of contentions have been dealt with and considered - question answered in favour of Appellant and against the Revenue, as in the order passed on the ROM the CESTAT has not recorded any findings on the position in law as canvassed by the petitioner which had a material bearing on the orders passed by the tribunal. Whether the Tribunal was correct in not considering the decision of the coordinate bench in the case of Chahabria Marketing Ltd. V. Commissioner of Service Tax, Mumbai 2016 (3) TMI 1050 - CESTAT MUMBAI which holds that exemption under Notification No. 13/2003-ST dated 20.06.2003 is available to all services provided under Business Auxiliary Service? - HELD THAT - In Chahabria Marketing decided by the CESTAT Mumbai it was held that the benefit of exemption was available to all the business auxiliary Services provided by a commission Agent. On behalf of the Revenue, no reason pointed as to why the decision in Chahabria Marketing as referred by the CESTAT in the notification in question, would not be applicable in the appellant s case so as to grant the benefit of the exemption for the period covered by the Show Cause Notice. The tribunal thus has erred in not considering that the issue was covered by the decision of Chahabria Marketing. For such reasons, the Question of Law answered in favour of Appellant, and hold that the exemption benefits as per Notification No. 13/2003, is available to the services provided under Business Auxiliary Services for the period in question. Whether the Tribunal was correct in restricting the scope of exemption under Notification No. 13/2003-ST dated 20.06.2003 to the sub-category of promotion and marketing of Business Auxiliary Services and not the entirety of Business Auxiliary Services ? - HELD THAT - The notification in question clearly exempts the business auxiliary services provided by a commission agent and such commission agent should cause sale or purchase of goods, on behalf of another person for a consideration which is based on the quantum of such sale or purchase - in view of interpretation of the notification once it is established that the Appellant is a commission agent of Venco/VRB, any service provided to them which falls under the definition of business auxillary services will be exempt from Service Tax prior to 9 July, 2004. Therefore the Appellant is entitled to the benefit of the said notification No. 13/2003 during the period in dispute and therefore the demand is unsustainable. The Supreme Court in Federal Bank 2016 (3) TMI 354 - SUPREME COURT held that Section 65(12) of the Act covers all charging services rendered by banks and hence by express provisions in the same very section, cash management services stood excluded from the purview of service tax. On account of such exclusion the authorities cannot levy service tax by indirect method of charging the same services under the head business auxiliary service . The Tribunal erred in restricting the scope of exemption under Notification No. 13/2003 to promotion and marketing of Business Auxiliary Services . The benefits of notification applies to entire Business Auxiliary Service . Hence, the question of law is answered in favour of Appellant. Whether the Tribunal was correct in holding that services in the nature of veterinary services and Technical Testing services will fall under the taxable category of Business Auxiliary Services when at the relevant point of time the testing services on animals were specifically excluded from the definition of Technical Testing services ? - HELD THAT - If the main service as Commission agent of providing service of promotion and marketing is exempted, the incidental services in the nature of laboratory testing, analysis and veterinary services ought to be exempted as well. There cannot be a situation where the main service is exempt and all other services in relation to the same are excluded. Appellant carries out various laboratory analysis and tests in respect of the chicks and the services provided by them are in relation to the brooding, growing and laying of birds which includes routine diagnostic services, specialized laboratory examinations, analysis of feed and feed ingredients and water related tests. In the present proceedings the issue is whether Veterinary Services and Pathological laboratory Testing of chicks, will fall into Business Auxiliary Services , therefore, Sub-section (106) of Section 65, cannot be read so as to exclude chicks - It is opined that sub-section (106) of Section 65, would include poultry (chicks) also. Therefore, chicks being animals are specifically carved out of the ambit of Service tax in relation to technical testing and laboratory and analysis services. Services of testing and analysis in relation to animals are clearly excluded from the technical testing and analysis service as defined under Section 65(106) of the Finance Act, and therefore there will be no liability for payment of Service tax on them - A Division Bench of the Punjab Haryana High Court in Dr. Lal Path 2007 (9) TMI 26 - HIGH COURT OF PUNJAB HARYANA AT CHANDIGARH held that the expression Technical Testing and Analysis does not include any testing or analysis service provided in relation to human being or animals. The question answered in favour of Appellant to hold that at relevant time the services in the nature of Veterinary Services and Technical and Laboratory Testing Services did not fall under taxable category of Business Auxiliary Services. Interest and penalty - HELD THAT - The interest provided under Section 61(2) has no independent or separate existence. When the goods are wholly exempted from the payment of duty on removal from the warehouse, one cannot be saddled with the liability to pay interest on a non-existing duty. Payment of interest under Section 61(2) is solely dependent upon the eligibility or factual liability to pay the principal amount, i.e., the duty on the warehoused goods at the time of delivery. At that time, the principal amount (duty) is not payable due to exemption. So, there is no occasion or basis to levy any interest either. The Appellant hence would also be not liable to pay interest. Also as we have held that Appellant was not liable to pay taxes, during the relevant time, there is no question of imposing penalty u/s. 78 of the Act, as there is no suppression of taxable service provided during the material time. The questions of law are answered in favour of the Appellant, and against the Respondent - Appeal allowed.
Issues Involved:
1. Whether the Tribunal was right in passing the impugned order beyond the allegations made in the show cause notice both on merits and limitations. 2. Whether the Tribunal was right in dismissing the Rectification of Mistake Application in a cursory manner without discussing various judgments cited by the Appellant. 3. Whether the Tribunal was correct in not considering the decision of the coordinate bench in the case of Chahabria Marketing Ltd. v. Commissioner of Service Tax, Mumbai. 4. Whether the Tribunal was correct in restricting the scope of exemption under Notification No. 13/2003-ST dated 20.06.2003 to the subcategory of promotion and marketing of "Business Auxiliary Services" and not the entirety of "Business Auxiliary Services". 5. Whether the Tribunal was correct in holding that services in the nature of "veterinary services" and "Technical Testing services" fall under the taxable category of "Business Auxiliary Services". Summary: Issue 1: Tribunal's Order Beyond Show Cause Notice The appellant contended that the Tribunal's order went beyond the allegations made in the show cause notice. The show cause notice dated 15 April 2009 was issued for the period from 1 July 2003 to September 2004, invoking the extended period of limitation of 5 years under Proviso to Section 73(1) of the Finance Act 1994. The appellant argued that the notice was barred by limitation, citing the Supreme Court's judgment in Padmini Products, which held that mere failure or negligence does not attract the extended period. The court found that the extended period of limitation could not have been invoked, and the demand was barred by limitation. Issue 2: Dismissal of Rectification of Mistake Application The appellant argued that the Tribunal dismissed the Rectification of Mistake (ROM) application without discussing the judgments cited. The Supreme Court in Shukla Brothers emphasized that recording reasons is essential for justice, and a Division Bench in Electropneumatics held that the Tribunal must provide a reasoned order. The court found that the Tribunal did not record any findings on the legal positions canvassed by the appellant, thus answering this issue in favor of the appellant. Issue 3: Non-Consideration of Coordinate Bench Decision The appellant cited the decision in Chahabria Marketing Ltd., where it was held that the exemption under Notification No. 13/2003-ST applies to all Business Auxiliary Services provided by a commission agent. The Supreme Court in Fujifilm and a Division Bench in N.P. Earth emphasized the need for judicial discipline and consistency. The court found that the Tribunal erred in not considering the decision in Chahabria Marketing, answering this issue in favor of the appellant. Issue 4: Restriction of Exemption Scope The appellant claimed that the exemption under Notification No. 13/2003-ST should apply to the entirety of Business Auxiliary Services, not just promotion and marketing. The court noted that the notification exempts all business auxiliary services provided by a commission agent. The Supreme Court in Federal Bank held that authorities cannot levy service tax indirectly on exempted services. The court concluded that the Tribunal erred in restricting the exemption scope, answering this issue in favor of the appellant. Issue 5: Classification of Veterinary and Technical Testing Services The appellant argued that veterinary and laboratory testing services were incidental to promotion and marketing services and should be exempt. Section 65(106) excludes testing services on animals from the definition of "Technical Testing services." The court noted that services related to animals are excluded from service tax and cited Dr. Lal Path's judgment supporting this view. The court concluded that these services did not fall under the taxable category of Business Auxiliary Services, answering this issue in favor of the appellant. Conclusion: All five issues were answered in favor of the appellant. The court quashed the impugned orders, allowed the appeal, and held that the appellant was not liable for service tax, interest, or penalties for the relevant period.
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