2023 (8) TMI 538 - AT - Service Tax

Classification of services - Business Auxiliary services or not - weighment charges, collected by the appellants, from their customers, charges constitute the consideration for the Business Auxiliary Service or not - HELD THAT - The service alleged to have been rendered by the appellants, does not appear to fall under any of the sub causes (i) to (vii) of Business Auxiliary Service. The Revenue did not produce any evidence to show that there is an agreement or an understanding between appellant and their customers for rendering of any service; there is no agreement on any consideration. The nature of service should emanate from the terms of the contract or agreement or understanding mutually agreed upon by the parties. Alternatively, the service, if any, has to fulfill the criterion laid down under the definitions provided by the statute for various services. In the instant case the Revenue fails to establish either of the conditions. It is found that weighment, by the appellants, is done to ensure that the declared quantity of grains is supplied by the agencies; therefore, it cannot be said that the weighment is a service, leave alone Business Auxiliary Service; deduction of weighment charges is not a consideration towards any service rendered. The appellants are deducting certain charges, in addition to weighment charges, towards the allowance for moisture if any. The impugned order cannot be sustained and is liable to be set aside - Appeal allowed.

Summary

Issues involved:
The issues involved in the judgment are whether weighment charges collected by the appellant constitute consideration for "Business Auxiliary Service" and whether the appellants are liable to pay service tax for the period 2004-05 to 2006-07.

Issue 1: Weighment charges as consideration for Business Auxiliary Service

The appellant, M/s Food Corporation of India (FCI), procures grain through State Government Agencies and directly from millers. The appellant causes weighment of trucks at the time of unloading in their godowns, deducting charges for weighment from payments made to the supplying agencies. The Revenue contended that these weighment charges constitute consideration for Business Auxiliary Service rendered by the appellants. A show cause notice was issued seeking to recover service tax. The lower authority confirmed the demand and penalties. The Commissioner upheld the order. The appellant argued that they did not render any service to customers, and the weighment charges were for recovery purposes, not remuneration for service.

Issue 2: Interpretation of Business Auxiliary Service

The definition of "Business Auxiliary Service" was examined, and it was found that the service alleged to be rendered by the appellants did not fall under any sub-clauses (i) to (vii). No evidence was produced to show an agreement or understanding for service between the appellants and their customers. The weighment was done to ensure the declared quantity of grains, not as a service. The Tribunal's decision in a similar case was cited, stating that weighment does not constitute a service related to the promotion, marketing, or sale of goods. The Tribunal concluded that the weighment charges were not consideration for any service rendered.

Judgment:

The Tribunal found that the Revenue failed to establish that the weighment charges constituted consideration for Business Auxiliary Service. The appellants were deducting charges for weighment and moisture allowance, not as remuneration for services. The impugned order was set aside, and the appeal was allowed.