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2023 (10) TMI 230 - AT - Service TaxLevy of Service Tax - collection of fees in discharge of sovereign functions - time limitation - penalty - HELD THAT - As per the portal of Ministry of Commerce, it is seen that the appellant is an autonomous body, and its role is to ensure that products notified under the Export (Quality Control and Inspection) Act 1963 meet the requirements of the importing countries in respect of their quality and safety. In order to understand whether the appellant is discharging sovereign function, it is important to understand the nature of the appellant. It is accepted that the appellant is a body created under Section 7 of Export (Quality Control and Inspection) Act, 1963. The Export Inspection Agency is under the administrative and technical control of the Export Inspection Council. The appellant is the certifying authority for different food products which are to be exported to other countries as per the Free Trade Agreements executed between India and other nations. The appellant collects a fee for the purpose of examination, quality control or inspection - Though the appellant s function is essential for inspection of export goods, but the usage of the term may in Section 3 of the Export (Quality Control and Inspection) Act, 1963, for the establishment of the Export Inspection Council, thus making it NOT a mandatory statutory duty activity of the Government. Consequently, it cannot be said that the appellant is discharging mandatory/statutory obligation. The contention of the appellant that the functions of Technical Inspection and Certification services rendered by them is a statutory function, cannot be accepted - As this issue was dealt in great detail by the Supreme Court in its decision in KRISHI UPAJ MANDI SAMITI, NEW MANDI YARD, ALWAR VERSUS COMMISSIONER OF CENTRAL EXCISE AND SERVICE TAX, ALWAR 2022 (2) TMI 1113 - SUPREME COURT there cannot be any other varying interpretation taken subsequent to this judgment. Accordingly, the appellant is providing service any undertakes Technical, Inspection and Certification service and the same cannot take the garb of sovereign/statutory function. Collection of fee as mandated by the Central Government - HELD THAT - In the instant case, the findings in the impugned order and the arguments of the learned Authorised Representative that as the money is not deposited in the Government Treasury, and is available with the appellant is agreed upon. The same is the consideration received by the appellant for providing the Consultancy Service which admittedly is not transferred to the Government treasury. Hence this money cannot be equated with fee collected for discharging sovereign function. Time Limitation - HELD THAT - The appellant is an autonomous body though under the Government of India but providing the services of technical inspection and certification against consideration. Therefore, they were liable to tax, and this has been made quite clear in the said notification, which was issued in July, 2009. Consequently, the claim of the appellant that there was confusion with the regard to the applicability of service tax on test charges till the issuance of the clarification dated 19/03/2011 cannot be accepted. It is brought on record that the appellant was apprised about the service tax liability on the impugned services through an office memorandum dated 19.03.2011. However, despite receiving the clarification, the appellant failed to get themselves registered and deposit their service tax liability to the government exchequer - this establishes their intention to avoid payment of duty. Penalty u/s 78 of FA - HELD THAT - A plain reading of the provisions of Section 78 of the Finance Act, 1994, before the amendment makes it clear that the quantum of penalty to be imposed shall be equal 100% of the amount of such service tax. It is noted that the present demand covers the period from 2008 09 to 2013 14 (up to November, 2013) Therefore, the penalty for the period prior to 08.04.2011 should have been equal to 100% of the service tax not paid for this period. In view of the legal position prior to 08.04.2011, it is held that the Commissioner had erred in extending the benefit of reduced penalty under Section 78(1) for the period 2009-09 to 07.04.2011. However, the benefit of reduced penalty under the amended provision of section 78(1) was available to the appellant post 08.04.2011. The demand and the interest confirmed in the impugned order upheld - the penalty u/s 78 for the period prior to 08.04.2011, shall be equal to the service tax not paid by the appellant. For the period post 08.04.2011, the benefit of the amended penal provision is extended to the appellant. Appeal of Revenue allowed.
Issues Involved:
1. Whether the services provided by the appellant are exigible to service tax as they are sovereign functions. 2. Whether the demand for the period 2008-09 to 2011-12 is barred by limitation. 3. Whether the penalties imposed under Section 76 and Section 77 are justified. Summary: 1. Sovereign Functions and Service Tax Liability: The primary issue was whether the services provided by the appellant, a body created under Section 7 of the Export (Quality Control and Inspection) Act, 1963, were sovereign functions exempt from service tax. The appellant argued that their activities were statutory obligations performed in public interest, with fees collected as compulsory levies deposited into the Government treasury, citing CBEC Circulars No. 89/7/2006-ST and No. 96/7/2007-ST. However, the Tribunal noted that the fees collected were not deposited into the Government treasury but into the Council's fund, thus not qualifying as sovereign functions. The Tribunal relied on the Supreme Court's judgment in Krishi Upaj Mandi Samiti, which distinguished between mandatory statutory duties and discretionary functions. Consequently, the Tribunal held that the appellant's services were not exempt from service tax as they were not mandatory statutory obligations. 2. Limitation Period for Demand: The appellant contended that the demand for the period 2008-09 to 2011-12 was barred by limitation, arguing that there was no clarity on the applicability of service tax on their services until the TRU's clarification dated 19.03.2011. The Tribunal, however, noted that Notification No. 17/2009-ST dated 07.07.2009, which provided for the refund of service tax paid by exporters for technical inspection and certification services, clearly indicated that such services were liable to tax. The Tribunal concluded that the appellant's claim of confusion was unfounded, and the extended period of limitation was applicable due to the appellant's failure to register and pay service tax despite being aware of their liability. 3. Penalties under Section 76 and Section 77: The Tribunal upheld the penalties imposed under Section 76 and Section 77 of the Finance Act, 1994. It noted that the appellant had continued to avoid payment of service tax even after being apprised of their liability through an office memorandum dated 19.03.2011. The Tribunal held that the penalty for the period prior to 08.04.2011 should be equal to 100% of the service tax not paid, as per the legal provisions before the amendment. For the period post 08.04.2011, the benefit of the reduced penalty under the amended provisions was extended to the appellant. Conclusion: The Tribunal dismissed the appeal filed by the appellant, upholding the demand and interest confirmed in the impugned order. The appeal filed by the department was allowed, modifying the penalty provisions as indicated. The Tribunal pronounced its decision in open court on 05.10.2023.
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