2014 (12) TMI 329 - AT - Service Tax

Business Auxiliary Service - services rendered to sugar factory in relation to harvesting and transportation services of sugarcane - Benefit under Notification No. 13/2003 ST or 14/2003 ST - penalty u/s 76, 77 & 78 - Held that - Prima facie we are of the view that the appellant is not eligible for the benefit under Notification No. 13/2003-S.T. as the activity involved herein is harvesting of sugarcane and transportation of sugarcane from the fields to sugar factory. It is not in relation to sale or procurement of sugarcane and, therefore, Notification No. 13/2003-S.T. does not appear to be applicable to the facts of the present case. As regards the benefit under Notification No. 14/2004-S.T., the service has to be rendered in relation to agriculture. In the instant case the service has been rendered to the sugar factory and sugar is a manufactured product. Therefore, it cannot be said that the said service has been rendered to the client in relation to agriculture. Further, there is nothing available on record to show that the appellant was acting as a pure agent on behalf of the clients. The appellant was rendering service to third party namely, sugar factory, and the service was not rendered to the harvesting contractor or the transport contractor. The appellant was rendering the service by engaging harvesting contractors and transport contractors. Therefore, we are of the view that the appellants have not made out a prima facie case for complete waiver of pre-deposit of the dues adjudged. - Partial stay granted.

Summary

Issues:
- Classification of services under "Business Auxiliary Service" for sugarcane harvesting and transportation services
- Eligibility for exemption under Notification 13/2003-S.T. and Notification 14/2004-S.T.
- Applicability of "pure agent" concept in relation to Service Tax liability

Analysis:

Classification of services under "Business Auxiliary Service" for sugarcane harvesting and transportation services:
The appellants provided sugarcane harvesting and transportation services to a sugar factory, which the Revenue classified under "Business Auxiliary Service" for Service Tax purposes. The Revenue imposed Service Tax demands and penalties on the appellants, which were confirmed by the lower appellate authority. The appellants contended that they were eligible for exemptions under specific notifications due to dealing with agricultural produce. The Revenue argued that the services provided were not directly related to agriculture but to the sugar factory, making them ineligible for the exemptions. The Tribunal held that the appellants did not qualify for the exemptions and were not acting as pure agents, as they were engaged in the service provision to the sugar factory, not the harvesting or transport contractors.

Eligibility for exemption under Notification 13/2003-S.T. and Notification 14/2004-S.T.:
The appellants claimed exemption under Notification 13/2003-S.T. for services related to the sale or purchase of agricultural produce and under Notification 14/2004-S.T. for services related to agriculture inputs. The Tribunal found that the services provided, involving sugarcane harvesting and transportation to a sugar factory, did not align with the criteria specified in the notifications. The Tribunal concluded that the services were not directly linked to agriculture but to the manufacturing process at the sugar factory, thereby disqualifying the appellants from the exemptions.

Applicability of "pure agent" concept in relation to Service Tax liability:
The appellants argued that they acted as pure agents on behalf of the harvesting and transport contractors, thereby not liable to pay Service Tax. However, the Revenue contended that the appellants were earning commissions on the services provided, indicating they were not acting as pure agents. The Tribunal analyzed the nature of the services rendered and the relationship between the appellants, the contractors, and the sugar factory. It was determined that the appellants were not functioning as pure agents but as service providers to the sugar factory, leading to the imposition of a pre-deposit requirement for the Service Tax adjudged against them.

In conclusion, the Tribunal directed the appellants to make a pre-deposit of 50% of the Service Tax adjudged against them, with the balance amount waived upon compliance, and recovery stayed during the pendency of the appeals.