2014 (2) TMI 1129 - AT - Service Tax

Waiver of pre-deposit of Service tax - Sale and purchase of coal or Commission agent - Business auxiliary services - Held that - appellant is purchasing coal from the CIL under the cover of invoices raised by CIL on payment of Sales Tax. Further the coal purchased is being sold by them to small consumers in the country on the basis of invoices raised by the appellants and on payment of Sales tax. This fact, by itself, is sufficient to reflect upon the nature of the relationship being enjoyed by the appellant with M/s. Coal India Ltd. This shows that the appellant is a buyer and seller of coal and cannot be held to be providing any service to M/s. Coal India Ltd. - Following decision of Ahmedabad Stamp Vendors Association vs. Union of India 2002 (6) TMI 32 - GUJARAT High Court - Stay granted.

Summary

Issues:
Dispensing with the condition of pre-deposit of Service tax and penalty confirmed against the appellant for providing business auxiliary services by purchasing and selling coal to M/s. Coal India Ltd. The main issue is whether the appellant is liable to pay Service tax for the said activity.

Analysis:
The appellant, a cooperative society registered under the Multi State Cooperative Societies Act, 2002, entered into an agreement with Coal India Ltd. to purchase coal at a fixed price and sell it to customers at a higher price. The purchases were made on invoices from Coal India Ltd., with immediate payments made by the appellant. Sales tax was levied on these purchases. The coal was further sold to consumers at a 5% markup, with proper invoicing and sales tax payment by the appellant.

The Revenue alleged that the appellant's activities constituted business auxiliary services to Coal India Ltd., leading to a demand for Service tax for the period between February 2005 and March 2009. However, the Tribunal found that the appellant was merely buying and selling coal, not providing services to Coal India Ltd. The nature of the relationship between the parties indicated a buyer-seller dynamic, not a service provider-client relationship.

The Tribunal referred to a decision by the Gujarat High Court in a similar case involving stamp vendors, where buying and selling goods did not amount to providing services. This precedent supported the Tribunal's view that the appellant's activities did not fall under the category of taxable services. Additionally, other tribunal decisions cited by the Revenue were deemed irrelevant to the present case.

While ruling in favor of the appellant on the merits, the Tribunal also noted that a significant portion of the demand was time-barred, having been raised after a considerable period. There was no evidence of any intentional suppression of facts by the appellant. Consequently, the Tribunal decided to dispense with the pre-deposit condition of duty and penalty, staying the recovery during the appeal process.

In conclusion, the Tribunal allowed the stay petition, emphasizing that the appellant's activities did not constitute taxable services, and the demand raised was partially barred by limitation.