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TMI Blog2025 (4) TMI 246X X X X Extracts X X X X X X X X Extracts X X X X ..... One only) proposed vide said SCN against M/s UP Cooperative Cane Unions Federation Ltd. 12, Rana Pratap Marg, Lucknow-226001 under the provisions of Section 73(2) of the Finance Act, 1994, for the reasons discussed hereinabove. (c) I order to recover interest at applicable rates from M/s UP Cooperative Cane Unions Federation Ltd. 12, Rana Pratap Marg, Lucknow-226001 under Section 75 of the Finance Act 1994, on the amount confirmed in Point (a) above, for the reasons discussed hereinabove; (d) I also impose penalty of Rs 2,09,92,444/- (Rupees Two Crore, Nine Lakh, Ninety Two Thousand, Four Hundred and Forty Four only) upon M/s UP Cooperative Cane Unions Federation Ltd, 12, Rana Pratap Marg, Lucknow-226001, under Section 78(1) of the Finance Act, 1994, for the reasons discussed hereinabove, (e) I order to recover interest to the tune of Rs 15,850/- (Rupees Fifteen Thousand Eight Hundred and Fifty only) from M/s UP Cooperative Cane Unions Federation Ltd, 12, Rana Pratap Marg, Lucknow-226001 under Section 75 of the Finance Act, 1994, for the reasons discussed hereinabove, (f) I also impose penalty of Rs 10,000/- (Rupees Ten Thousand only) upon M/s UP Cooperative Cane Unions Fe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 193000 15% 28950 Total 2839499 373981 2.5 During the period April 16 to September 16, appellant had deposited the service tax after the due date The interest due in respect of late payment is detailed in table below:- (in Rs.) Month ST Liability Challan Value Due date Payment Date number of days. Interest due @24 % Apr 269783 161871 06-05-2016 06-07-2016 61 6494 107912 06-05-2016 06-07-2016 61 4328 May 215825 215825 06-06-2016 06-07-2016 30 4257 Jun 223268 167454 06-07-2016 06-07-2016 0 0 55814 06-07-2016 27-07-2016 21 771 Total 15850 2.6 All the observations would communicated to the appellant vide letter dated 12.04.2019 and they were requested to attend the Pre-SCN consultation in the matter, appellant denied the same. 2.7 The following material facts has been suppressed by the appellant- * the noticee did not reported the correct net taxable value in the ST-3 Returns vis-à-vis the income booked by them in their respective Profit & Loss Statements. * the noticee took exemption without quoting/providing relevant n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant's federation runs its day to day management under controls and supervision of its managing director and secretary, who are UP Government employees. * Appellant is a government authority as defined by Notification No.25/2012-ST dated 20.06.2012. They are performing functions entrusted to a municipality under Article 243W of the Constitution. * As the appellant is government authority, the services are exempt. * Appellant cooperated with the department at the time of audit, filing of reply alongwith required documents as called by the audit. * As the activities of appellants falls under the definition of agricultural extension service, which falls under clause (d) of Section 66D of Finance Act, 1994. In view of the objectives of appellant-federation and its activities, being agricultural extension services, service tax is not leviable on the activities of appellant-federation except renting from immovable properties. * Cane Societies like IFFCO and KRIBHCO are giving training to the cane growers as per the direction and guidance of appellant-federation. * Service charges on pesticides, fertilizers and agricultural equipment are being determined by the Registrar, Co-op ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bligation, liability, forfeiture or punishment, as aforesaid, and any such investigation, inquiry, verification (including scrutiny and audit), assessment proceedings, adjudication and other legal proceedings or recovery of arrears or remedy may be instituted, continued or enforced, and any such tax, surcharge, penalty, fine, interest, forfeiture or punishment may be levied or imposed as if these Acts had not been so amended or repealed." On going through the plain language of Clause (e) of Section 174(2) ibid (reproduced above), it is unambiguous/clear that repeal of Chapter V of the Finance Act, 1994, will not have any effect on any proceeding such as investigation, inquiry, verification (including Scrutiny and Audit), adjudication etc. in respect of duty/tax/interest/penalty etc. which was leviable under erstwhile Central Excise Act, 1944 or Chapter V of the Finance Act, 1994. In other words, even after 01.07.2017, all the proceedings (including Audit) may be instituted against an assessee/taxpayer, for acts of contravention of provisions of Central Excite Act, 1944 or Chapter V of the Finance Act, 1994 committed by him prior to 01.07.2017. 13.3 Further, as far as judgm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 95/- is proper or otherwise. Issue No.3:- Whether the extended period of limitation provided for recovery of Service Tax to the tune of Rs.2,11,84,995/- under proviso to Section 73(1) of the Finance Act. 1994, is invokable in the present case or otherwise. Issue No.4:- Whether the penalty proposed under Section 78(1) of the Finance Act 1994 on the Noticee is proper or otherwise Issue No.5:- Whether the demand of Interest to the tune of Rs. 15,850/- proposed vide said SCN under Section 75 of the Finance Act, 1994 is sustainable on merits or otherwise. Issue No.6- Whether Penalty to the tune of Rs. 10,000/- proposed vide said SCN under Section 77(1)(a) of the Finance Act, 1994 is sustainable on merits or otherwise. 15 Now, I take up these issues one by one. 15.1 ISSUE No.1 15.1.1 At the outset, I take up the issue that whether the Demand of Service Tax to the tune of Rs.2.11,84,995/- proposed vide said SCN is sustainable on merits under the provisions of Finance Act, 1994 (and rules made thereunder) or otherwise. 15.1.2 The said demand of Service Tax to the tune of Rs.2,11,84,995/- can be segregated in following components- * Demand of Rs 2,08,11,014/- which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mbers of other local authorities whe receive any consideration in performing the functions of that office as such member, or (B) the duties performed by any person who holds any post in pursuance of the provisions of the Constitution in that capacity, or (C) the duties performed by any person as a Chairperson or a Member or a Director in a body established by the Central Government or State Governments or local authority and who is not deemed at an employee before the commencement of this section, Explanation-2 For the purposes of this clause, the expression "transaction in money or actionable claim shall not include- (i) any activity relating to use of money or its conversion by cash or by any other mode. from one form, currency or denomination, to another form, currency or denomination for which a separate consideration is charged. (ii) any activity carried out, for a consideration, in relation to, or for facilitation of, a transaction in money or actionable claim, including the activity carried out (a) by a lottery distributor or selling agent on behalf of the State Government, in relation to promotion, marketing, organizing, selling of lottery or facilitating in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... duction of any agricultural produce including cultivation harvesting, threshing plant protection or testing: (ii) supply of farm labour, (iii) processes carried out at an agricultural farm including tending, pruning, cutting, harvesting drying, cleaning, trimming, sun drying, fumigating, curing sorting grading cooling or bulk packaging and such like operations which do not alter the essential characteristics of agricultural produce but make it only marketable for the primary market, (iv) renting or leasing of agro machinery or vacant land with or without a structure incidental to its use: (v) loading, unloading, packing, storage or warehousing of agricultural produce, (vi) agricultural extension services; (vii) services by any Agricultural Produce Marketing Committee or Board or services provided by a commission agent for sale or purchase of agricultural produce: Further, the term 'agricultural extension has been defined vide Section 65B(4) of Finance Act, 1994, as under 65B(4) "agricultural extension" means application of scientific research and knowledge to agricultural practices through jarmer education or training, The noticee has referred to its b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of payments from respective CCDS's and was receiving Service Charges from IFFCO/KRIBHCO, in lieu of the same Accordingly, it can be deduced that, in the present case, the noticee was the Service Provider who has charged consideration in various forms from the service receivers ie., CCDS's (Co-operative Cane Development Societies) and M/s KRIBHCO/IFFCO, It was not the case where the noticee was providing services to any farmer I have also gone through the letters dated 22.02.2018, 20.06.2018 and 10.09.2018 produced by the noticee to substantiate their claim that they were engaged in training of farmers, and have observed that vide said letters, the noticee directed CCDS's to send their staff/officials, for being trained by trainers of IFFCC, in proper usage and marketing of Fertilizers/Insecticides/Agricultural Equipments etc. so that business of society is boosted, hence I am unable to appreciate the contention of the noticee that they were engaged in training of farmers In-fact, I find that the noticee along with their member-societies were promoting/marketing the products of manufacturers of M/s IFFCO/KRIBHCO. Hence, it can be inferred that the noticee did not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as been raised on the income accrued from various CCDS's and KRIBHCO/IFFCO is liable to be confirmed." 4.3 The claim of the appellant that they are a governmental authority and exempt from payment of service tax under Sl.No.39 of Notification No.25/2012-ST needs to be rejected for the reason that the issue involved is no longer res-integra in view of the decision of Hon'ble Supreme Court in the case of M/s KRISHI UPAJ MANDI SAMITI 2022 (58) GSTL 129 (SC), wherein following has been held:- "4.7 It is submitted that in the present case, the language used in the exemption circular 2006 is very clear and unambiguous. That as per the 2006 circular issued by the Board, only such activities performed by the public authorities which are in their very nature statutory obligations, the fee collected by them for performing such activities is a compulsory levy as per the provisions of the relevant statute and is deposited into the Government Treasury, shall not be subjected to tax. It is submitted that in paragraph 3, it is specifically made clear that if such authorities perform a service, which is not in the nature of statutory activity and the same is undertaken for consideration and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gn/public authority required to be provided under a statute can be considered as 'provision of service' for the purpose of levy of service tax. The issue has been examined. The Board is of the view that the 2. activities performed by the sovereign/public authorities under the provision of law are in the nature of statutory obligations which are to be fulfilled in accordance with law. The fee collected by them for performing such activities is in the nature of compulsory levy as per the provision 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. However, if such authority performs a service, which is not in the 3. nature of statutory activity and the same is undertaken for consideration not in the nature of statutory fee/levy, then in such cases ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... results in absurdity, which is so not found in the present case. 8.4 Now, so far as the submission on behalf of the respondent that in the event of ambiguity in a provision in a fiscal statute, a construction favourable to the assessee should be adopted is concerned, the said principle shall not be applicable to construction of an exemption notification, when it is clear and not ambiguous. Thus, it will be for the assessee to show that he comes within the purview of the notification. Eligibility clause, it is well settled, in relation to exemption notification must be given effect to as per the language and not to expand its scope deviating from its language. Thus, there is a vast difference and distinction between a charging provision in a fiscal statute and an exemption notification. 9. In the present case, it is the case on behalf of the appellants that the activity of rent/lease/allotment of shop/land/platform/space is a statutory activity and the Market Committees are performing their statutory duties cast upon them under Section 9 of the Act, 1961 and therefore they are exempted from payment of service tax on such activities. The aforesaid submission seems to be attra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ury or bank and it shall not be withdrawn upon except in accordance with these rules." 10.1 Now, so far as the submission on behalf of the appellants relying upon Rule 45 of the Rules, 1963 that the fees, which is collected shall be deposited with the Government Treasury and therefore also the Market Committees are exempted from payment of service tax is concerned, it is to be noted that on fair reading of Rule 45, the amount of fee so collected on such activities - rent/lease shall not go to the Government. Rule 45 provides how the money received by the Market Committees shall be invested and/or deposited. It provides that all money received by the Market Committee shall be credited to the fund called the Market Committee Fund. It further provides that all money paid into the Market Committee Fund shall be credited once a week in full into Government Treasury or sub-treasury, or a bank duly approved for this purpose by the Director and all balance from the fund shall be kept in such treasury or sub-treasury or bank and it shall not be withdrawn except in accordance with the Rules. Therefore, it does not provide that on deposit of the money received by the Market Committees into ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... way of application of scientific research and knowledge to agricultural practices through farmer education or training. 4.6 We find that in the case of Frontier Agro Tech Pvt Ltd. [2018-TIOL-96-CESTAT-CHANDIGARH], Chandigarh Bench has in case of similar services being provided has held as follows: "8. We have gone through the agreement as well as photographs. As per agreement, the appellant is required to provide following services:- "Work & Services: Agriculture Extension Services The Service Provider agrees to disseminate the knowledge of DuPont derived through years of scientific research in Crop protection techniques to farmers through training to facilitate better yield and productivity and in furtherance of the above objective perform all of the following functions relating to Agriculture Extension Services & farmer training activities including (i) Understand problems which a farmer face from pests while growing crops and then performing all farmer training activities. (ii) Provide feed-back from farmers to Dupont on problems and constraints in crop protection. (iii) Create a linkage between farmers and Dupont to facilitate Dupont scientists to understand th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s meets: - * Small meets wherein Appellant addresses 25 to 30 farmers; and * Large meets wherein Appellant addresses 50 to 100 farmers. Empirical training The appellant also undertakes empirical assignments wherein the theoretical knowledge is to put to application. Under this category, Appellant takes a portion of volunteering farmer's land, and competes against the farmer's traditional methods. Thereafter, the farmer can clearly perceived the benefits of following modern methods of farming over their traditional methods. Through this, the farmers in surrounding areas too learn about modern methods. The Appellant also highlights the incorrect practices adopted by volunteering farmer and suggests the farming practice best suited to the circumstances. Harvesting Days Various stages are involved in cultivation, such as sowing, tilling, flowering, fruition or pod initiation, pod filling, harvesting etc. The season for harvesting is equally important as the season of sowing. The appellant trains the farmers in the best harvesting practices. Stewardship The appellant also conducts programs wherein it intimates precautions required to be observed by farmers du ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t received remuneration by way of marketing and promotion or sale of the product of their principal. For that, the appellant is getting separate commission on which they are discharging service tax liability. Therefore, on the basis of remuneration, it cannot be held that the appellant is providing service of marketing and promotion. 12. We further take note of the fact that the Agricultural Extension Services are not taxable under clause of Section 66D of the negative list which is reproduced as under:- "Section 66 (d) services relating to agricultural by way of: (i) Agricultural operations directly related to production of any agricultural produce including cultivation, harvesting, threshing, plant protection or testing. (ii) Supply of farm labour. (iii) Processes carried out at an agricultural farm including tending, pruning, cutting, harvesting, drying, cleaning trimming, sun drying, fumigating, curing, sorting, grading, cooling or bulk packaging and such like operations which do not alter the essential characteristics of agricultural produce but make it only marketable for the primary market. (iv) Renting or leasing of agro machinery or vacant land with or wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n on Insecticides: Similarly as described above, the Cane Unions Federation also provides necessary direction to Cane Development Societies in purchasing and sale of insecticides. As per selling rate agreement of insecticides 1993-94 (RUD-6) (which is operational till the impugned period of the SCN), while selling the insecticides to the sugar cane farmers, the CDS charges 6% Margin money (in the name of Cane Federation) on purchase value of the insecticides. Accordingly, on the basis of total purchase value of the insecticides the CUF raised Invoices to different Cane Development Societies on annual basis for getting its margin money @ Rs.6% on the value of Insecticides purchased during the said financial year. (RUD-7) c) Margin Money/Commission on Agricultural Equipments: Similarly, as discussed above and as per selling rate agreement of Agricultural equipment 1993- 94 (RUD-8) the CUF decides the purchase and sale price of agricultural equipment and according to this all Cane Development Societies were engaged in purchasing and sale of agricultural equipments. While selling these equipments to the sugar cane farmers, the CDS charges 6% Margin money (in the name of Cane Federati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sum every year as may be fixed by the Registrar, towards the full or partial recoupment of expenditure incurred or likely to be incurred in respect of supervision of societies by the federal authority or authorities mentioned in sub-section (1). Whereas, as per rule 391. (a) of Uttar Pradesh Co-operative Societies Rules, 1968, the Registrar may, under sub-section (2) of Section 123, fix the amount of contribution to be paid by a co-operative society or class of co-operative societies towards expenditure in respect of supervision of the societies and where such contributions (hereinafter referred as supervision fees) are to be paid by a co- operative society affiliated to a Central Co-operative Bank, the Registrar may order the bank to pay supervision fees on behalf of the affiliated society, whereupon the bank shall pay such fees. 6) Whereas, w.e.f. 01.07.2012, all the services have been brought under Service Tax net excluding those specified in negative list under Section 66(D) of the Finance Act, 1994. Since the activities/transactions as discussed above are not covered in the negative list, therefore, it appears that the aforesaid transaction is taxable to Service Tax under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... titioner is entitled to cum tax benefit, however declined to grant relief. 7. A Division Bench of this Court in the case of Idea Cellular Ltd. (Supra) dismissed appeal of the revenue which was filed against order of Tribunal, who had held that party has not collected any service tax from the Sim Card subscribers, thus value of sim cards sold to the subscribers shall be deemed to be cum tax price. Division bench of Tribunal in the case of Raj Catering Services (Supra) while confirming demand of service tax extended benefit of cum tax value as department calculated service tax on the gross amount charged by Appellant. 8. The Respondent considered value appearing in 26AS Form cum tax value and Settlement Commission on the basis of sample invoices found that Petitioner is entitled to benefit of cum tax value. The Settlement Commission has further noted that tax was collected but not deposited. The gross value was shown in the balance sheet as well Form 26AS. There seems no reason to deny benefit of cum tax value in view of the fact that price appearing in 26AS Forms was admittedly cum tax price and as per judgments cited by Petitioner gross value is considered as cum tax. The Sett ..... X X X X Extracts X X X X X X X X Extracts X X X X
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