2019 (12) TMI 724 - AT - Service Tax

Classification of services - warehousing services to be used by the Food Corporation of India through M/s PUNGRAIN - agreement for providing of warehouse and other ancillary services such as security, insurance provision of main power, weigh bridge operation, etc. - whether classified under storage and warehousing services or under renting of immovable property services for agriculture use both prior to 01.07.2012? - exempt services or not? HELD THAT - The perusal of the agreement and the monthly bill raised by the appellant leaves no doubt that the service provided by the appellant is not merely of renting of godown to M/s PUNGRAIN but it is along with the preservation, maintenance and security services, which subsequently are being used by Food Corporation of India (FCI) for storage of the food grains. This aspect regarding the storage of the food grains is also not disputed by the Department - It is the contention of the Department that the appellant has not directly provided the warehouse storage services, but it is through M/s PUNGRAIN to F.C.I. This issue has come up for decision before this Tribunal in the case of PUNJAB STATE WAREHOUSING CORPORATION VERSUS CCE, CHANDIGARH 2018 (2) TMI 154 - CESTAT CHANDIGARH wherein it has been held that such services would be more appropriately covered under the category of storage and warehousing services in terms of Section 65(105)(zza) of the Act. Thus, the service provided by the appellant is covered under the category of storage and warehousing services and renting of immoveable property services in terms of Section 65(105)(zzzz) of the Act as defined in the impugned order. Demand pertaining to the period after 01.07.2012 - declared services or not - HELD THAT - The impugned order has considered the services under the category of declared service under Section 66E of the Act, wherein at the Sl. No. (a) renting of immoveable property has been treated to be deemed service under the negative list. However, on perusal of the provisions, it is found that the services being rendered by the appellant would be more appropriately covered under the category of the services which are under the negative list vide entry no. 66D(v) - the impugned order is incorrect in holding the services rendered by the appellant in the category of declared service. Appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
1. Classification of Services: Whether the services provided by the appellant fall under "Renting of Immovable Property Services" or "Storage and Warehousing Services."
2. Applicability of Service Tax: Whether the services are taxable under the relevant provisions of the Finance Act, 1994, both prior to and after the introduction of the negative list regime on 01.07.2012.

Issue-wise Detailed Analysis:

1. Classification of Services:
The primary issue in this case is the classification of services provided by the appellant to 'PUNGRAIN' under an agreement dated 14.01.2013. The appellant argued that the services should be classified as "Storage and Warehousing Services" for agricultural produce, which are non-taxable, rather than as "Renting of Immovable Property Services." The appellant provided services including security, insurance, manpower provision, and weighbridge operation, which they claimed fell under the category of storage and warehousing services. The Department, however, classified these services as renting of immovable property, attracting service tax under Section 66B read with 66E of the Finance Act, 1994, after the introduction of the negative list regime.

The Tribunal examined the agreement and monthly bills raised by the appellant, which indicated that the services provided were not merely renting of godowns but included preservation, maintenance, and security services. The Tribunal referenced previous decisions, particularly in the cases of Punjab State Warehousing Corporation vs. CCE, Chandigarh, which held that such services are more appropriately classified under "Storage and Warehousing Services" as per Section 65(105)(zza) of the Act. The Tribunal concluded that the services provided by the appellant fall under "Storage and Warehousing Services" rather than "Renting of Immovable Property Services."

2. Applicability of Service Tax:
The Tribunal also addressed the applicability of service tax for the period after 01.07.2012, when the negative list regime was introduced. The Commissioner had classified the services under "declared service" as per Section 66E of the Act, which includes renting of immovable property. However, the Tribunal found that the services provided by the appellant, being related to storage and warehousing of agricultural produce, would fall under the negative list entry no. 66D(v), which exempts such services from service tax.

The Tribunal noted that the impugned order incorrectly classified the services under the declared service category and held that the services rendered by the appellant are exempt from service tax under the negative list provisions. Consequently, the demand for service tax and associated penalties for the period after 01.07.2012 was found to be unsustainable.

Conclusion:
The Tribunal set aside the impugned order, concluding that the services provided by the appellant are classified under "Storage and Warehousing Services" and are exempt from service tax both prior to and after 01.07.2012. The appeal was allowed with consequential relief, and the demand for service tax and penalties was quashed.