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TMI Blog2023 (10) TMI 230X X X X Extracts X X X X X X X X Extracts X X X X ..... strative and technical control of Export Inspection Council. The appellant is the field organisation of Export Council under Free Trade Agreement executed between India and foreign nation's products, eligible for Certificate of Origin required for preferential treatment in exporting country. This was subject to the said product being certified by certifying authority approved by both the countries. In pursuance to the said FTA, the appellant has been recognised as certificating authority for different food products. The Department alleged that the service provided by the appellant were exigible to service tax. Two show cause notices dated 17.04.2014 and 17.04.2015 were issued for the period 2008-09 to November 2013 wherein service tax of Rs. 11,01,17,328/- was demanded. The first appeal has been filed by the Department for failure of imposition of appropriate penalty by the Commissioner. The assessee who is referred as appellant herein after has filed the appeal against the demand and penalties imposed in the impugned order. 3. The learned counsel for the appellant submitted that the appellant performs sovereign function of the State and thus not liable to pay service tax for coll ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mitted that all Export Inspection Agencies have been notified by the Central Government by way of issue of a Notification under Section 7 of the 1963 Act. Three such Notifications were issued in the years 1966, 1968 and 2003. It was also made clear by the EIC vide their letter dated 29.10.2013 addressed to all Commissioner of Customs that EIA are authorized to issue health certificates in respect of peanut and peanut product. They have reiterated that EIC/EIAs has been recognized as Competent Authority for issuance of health certificate for European Union and Malaysia as they have to implement the responsibilities assigned by Government of India. The learned counsel submitted that it would relevant to stated that the Fee collected by the agencies is fixed by the Government of India. He relied on the Public Notice No. 40/2009-2014 (RE-2010) dated 9th March, 2011, and other similar Notifications issued for other products, which includes specification of fees. All the Notifications mentioned that the fee to be paid is the fee for testing as fixed by the Central Government. Rule 14 specifies how and where the fund given to the Council is to be deposited, and Rule 16, provides that acco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssue prior to that date. In such circumstances, the appellant had the bona fide belief that they were not liable to pay tax on their income generated from these services based on the previous circulars of the Government. Therefore, the larger period is not liable to be invoked as the non-payment was not with the intention to evade tax. Further, for the same reason, no penalty could be imposed under Section 78 of the Finance Act, 1994. The same was also not imposable as per the provisions of Section 80 ibid. He relied on the Delhi High Court decision which held that the appellant is a statutory body empowered to inspect and issue certificates. Further, the Mumbai Bench of the Tribunal while dealing with the issue of levy of service tax on service charges collected by Maharashtra Industrial Development Corporation (MIDC) dismissed department's appeal observing that it is the statutory obligation of MIDC to provide and maintain amenities in industrial estates and thus, no service tax can be charged for discharging statutory function. The case of appellant is similar to MIDC as the appellant is also discharging statutory function wherein it is obliged to inspect and certify all the not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ernment Treasury. It will go to the Market Committee Fund and will be used by the market committee(s). In the facts of the case on hand, such a fee collected cannot have the characteristics of the statutory levy/statutory fee. Thus, under the Act, 1961, it cannot be said to be a mandatory statutory obligation of the Market Committees to provide shop/land/platform on rent/lease. If the statute mandates that the Market Committees have to provide the land/shop/platform/space on rent/lease then and then only it can be said to be a mandatory statutory obligation otherwise it is only a discretionary function under the statute. If it is discretionary function, then, it cannot be said to be a mandatory statutory obligation/statutory activity. Hence, no exemption to pay service tax can be claimed." 8. The learned Authorised Representative submitted that in the governing section for EIA, the word used is 'may' and not 'shall'. Hence, it cannot be said that the appellant were discharging mandatory/statutory obligations. 9. The learned Authorised Representative submitted that Section 10(3) of Export (Quality Control and Inspection), Act lays down that the Council shall have its own fund. Rul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... performed by a sovereign/public authority under the provisions of any law, do not constitute taxable services. Any amount/fee collected in such cases are not to be treated as consideration for the purposes of levy of Service Tax. 33. However, if a sovereign/public authority provides a services, which is not in the nature of an statutory activity and the same is undertaken for a consideration (not a statutory fee), then in such cases, Service Tax would be leviable as long as the activity undertaken falls within the scope of a taxable service as defined." 11. The learned Authorised Representative concluded his arguments by stating that the adjudicating authority has rightly concluded that the appellant is not discharging sovereign functions. As regards the Department's appeal, the learned Authorised Representative submitted that the benefit of reduced penalty was not available as the show cause notice period is 2008-09 to 2012-13. The entire period is not after 8.4.2011, therefore, the adjudicating authority had erred in extending the benefit of 1st proviso to Section 78(1). For the subsequent period as well, the adjudicating authority had erred in imposing penalty under the amend ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such activities is in the nature of compulsory levy as per the provisions of the relevant statute, and it is deposited into the Government treasury. Such activity is purely in public interest and it is undertaken as mandatory and statutory function. These are not in the nature of service to any particular individual for any consideration. Therefore, such an activity performed by a sovereign/public authority under the provisions of law does not constitute provision of taxable service to a person and, therefore, no service tax is leviable on such activities. 3. However, if such authority performs a service, which is not in the nature of statutory activity and the same is undertaken for a consideration not in the nature of statutory fee/levy, then in such cases, service tax would be leviable, if the activity undertaken falls within the ambit of a taxable service." 13. In order to understand whether the appellant is discharging sovereign function, it is important to understand the nature of the appellant. It is accepted that the appellant is a body created under Section 7 of Export (Quality Control and Inspection) Act, 1963. The Export Inspection Agency is under the administrative ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e particular activities are mandatory statutory, the legislature has used the word "shall". Therefore, when under subsection (2) of section 9, the word used is "may", the activities mentioned in the subsection 9(2)(xvii) cannot be said to be mandatory statutory duty and/or activity. Under section 9(2), it is not mandatory statutory duty casted upon the market committees to a lot/lease/rent shop/platform/land/space to the traders. Hence such an activity cannot be said to be mandatory statutory activity as contended on behalf of the appellants. Even the fees which is collected is not deposited into the government treasury. It will go to the Market Committee Fund and will be used by the market committee(s). In the facts of the case on hand, such a fee collected cannot have the characteristics of the statutory levy/statutory fee. Thus, under the act, 1961, it cannot be said to be a mandatory statutory obligation of the market committees to provide shop/land/platform or rent/lease. If land/shop/platform/space on rent/lease then and then only it can be said to be mandatory statutory obligation otherwise it is only a discretionary function under the statute. If it is discretionary functio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... within the scope of a taxable service as defined." 15. In view of the above discussions and decisions, we are unable to accept the contention of the appellant that the functions of Technical Inspection and Certification services rendered by them is a statutory function. We have also considered the decisions quoted by the learned counsel for the appellant. As this issue was dealt in great detail by the Supreme Court in its decision in Krishi Upaj Mandi Samiti (supra) there cannot be any other varying interpretation taken subsequent to this judgment. Accordingly, we hold that the appellant is providing service any undertakes Technical, Inspection and Certification service and the same cannot take the garb of sovereign/statutory function. 16. We now address the second contention of the appellant that they are collecting the fee as mandated by the Central Government. We note that the learned AR has argued before us that Section 10(3) of Export (Quality Control and Inspection), Act lays down that the Council shall have its own fund. Rule 14 of Export (Quality Control and Inspection) Rules, 1964, lays down that it shall consist of income and receipts of the Council from other sources ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Market Committee fund. It will continue to be the market committee fund. Even it is the case on behalf of the appellants that the fees collected, which will be deposited in the Market Committee fund will be utilised by the Market Committee for expanding/benefit of the Market Committee etc." (Emphasis supplied) 17. In the instant case, we concur with the findings in the impugned order and the arguments of the learned Authorised Representative that as the money is not deposited in the Government Treasury, and is available with the appellant. The same is the consideration received by the appellant for providing the Consultancy Service which admittedly is not transferred to the Government treasury. Hence this money cannot be equated with fee collected for discharging sovereign function. 18. The learned counsel for the appellant has submitted that the demand for the period 2008-09 to 2011-12 is barred by limitation, as the same was issued on 17.04.2014. The appellant has relied on the TRU's clarification dated 19/03/2011 wherein it was clarified that service tax was leviable on test charges. It has been contended before us that the issue of the aforesaid clarification clearly indica ..... X X X X Extracts X X X X X X X X Extracts X X X X
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