2014 (5) TMI 726 - AT - Service Tax

Technical inspection and certification agency - sovereign and public activities - activities of technical inspection and certification of seeds produced by seed producers in Maharashtra State as per the Seeds Act, 1966 - Circular No. 89/7/2006-ST dated 18.12.2006 - Penalty - Interest - Held that - The said Seed Act provided for regulating the quality of certain varieties of notified seeds for sale. It is noted that the provisions of the said Act are applicable only for the notified varieties of seeds. Further even in respect of notified varieties of seeds no such certification is required, if the seeds are grown by a person and sold or delivered by him on his own premises direct to another person for being used by that person for the purpose of sowing or planting. It is thus clear that only if somebody wants to sale specified varieties of seeds through the intermediaries or in the market then certification from the appellant or similarly placed agency is required. Activities of the appellant cannot be considered as mandatory and statutory functions provided by a sovereign/public authority. - the activities of the appellant are not covered by the said Circular dated 18.12.2006 and are chargeable to Service Tax under the Technical Inspection and Certification Service. - Decided against the assessee. Extended period of limitation - Held that - Service became taxable with effect from 1.7.2003 and the appellant started collecting the same with effect from 1.4.2005 and the amount collected by the appellant was initially kept in bank account which alongwith interest have already been deposited with the revenue. Keeping in view the fact that the service became chargeable to service tax only with effect from 1.7.2003, the fact that appellant is an organization controlled by the Government of Maharashtra, the certification of the seed is done by the appellant as per the provisions of the Seeds Act, 1966 read with Seeds Rules, 1968, the said Act provides for regulating the quality of certain seeds for sale, we do not find that ingredients of proviso to Section 73 of the Finance Act, 1994 are present in the facts and circumstances of the case. Therefore, the demand within the normal period of limitation is only upheld and that beyond the same is set aside - Decided partly in favour of assessee.

Summary

Issues:
1. Whether the appellant's activities of technical inspection and certification of seeds are liable to service tax under the Technical Inspection and Certification Service.
2. Whether the extended period of limitation was correctly invoked in demanding service tax from the appellant.
3. Whether penalties under Sections 76, 77, and 78 of the Finance Act, 1994 are imposable on the appellant.

Analysis:

Issue 1: Liability to Service Tax
The appellant, an Autonomous Body engaged in certifying seeds under the Seeds Act, 1966, argued that their activities are statutory functions and therefore not liable to service tax. They cited Circular No. 89/7/2006-ST to support their contention. However, the Tribunal held that the appellant's activities do not fall under mandatory and statutory functions provided by a sovereign/public authority, as clarified in the Circular. The Tribunal also referred to Circular No. 59/8/2003-ST, stating that technical inspection and certification services are taxable. The Tribunal concluded that the appellant's services are chargeable to Service Tax under the Technical Inspection and Certification Service.

Issue 2: Extended Period of Limitation
The appellant argued against the invocation of the extended period of limitation, citing confusion even among departmental officers regarding the applicability of service tax. They highlighted that they started collecting service tax from 1.4.2005 and promptly deposited the collected amount with interest. The Tribunal noted that the service became taxable from 1.7.2003 but upheld the demand only within the normal period of limitation, setting aside the demand beyond that period.

Issue 3: Imposition of Penalties
The Tribunal set aside the penalties under Sections 76, 77, and 78 of the Finance Act, 1994, considering the appellant's status as a government-controlled organization and the absence of willful intention to evade service tax. The Tribunal confirmed the demand within the normal period of limitation under Section 73 and upheld the interest payable under Section 75 of the Finance Act, 1994, and Section 11DD of the Central Excise Act, 1944.

In conclusion, the Tribunal held that the appellant's activities are subject to service tax under the Technical Inspection and Certification Service, upheld the demand within the normal limitation period, set aside penalties, and confirmed the interest payable. The appeal was disposed of accordingly.