Custom, Excise & Service Tax Tribunal
Up Cooperative Cane Unions Federation ... vs Ce & Cgst Lucknow on 2 April, 2025
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
ALLAHABAD
REGIONAL BENCH - COURT No. I
(E-Hearing)
Service Tax Appeal No.70274 of 2020
(Arising out of Order-in-Original No.05/Adj/Commr/AUDIT-LKO/SKS/2019-20
dated 16/03/2020 passed by Commissioner Central Excise & CGST, Lucknow)
M/s UP Cooperative Cane Unions Federation Ltd.,
.....Appellant
(12, Rana Pratap Marg, Lucknow-226001)
VERSUS
Commissioner of Central Excise &
CGST, Lucknow ....Respondent
(7-A, Ashok Marg, Lucknow) APPEARANCE:
Shri Dharmendra Kumar, Chartered Accountant for the Appellant Shri Manish Raj, Authorised Representative for the Respondent CORAM: HON'BLE MR. AJAY SHARMA, MEMBER (JUDICIAL) HON'BLE MR. SANJIV SRIVASTAVA, MEMBER (TECHNICAL) FINAL ORDER NO.70157/2025 DATE OF HEARING : 06 March, 2025 DATE OF PRONOUNCEMENT : 02 April, 2025 SANJIV SRIVASTAVA:
This appeal is directed against Order-in-Original No.05/Adj/Commr/AUDIT-LKO/SKS/2019-20 dated 16/03/2020 passed by Commissioner Central Excise & CGST, Lucknow. By the impugned order following has been held:-
"Order
(a) I confirm the Service Tax demand of Rs.2.09,92,444/-
(Rupees Two Crore, Nine Lakh, Ninety Two Thousand, Four Hundred and Forty Four only) proposed vide said SCN against M/s UP Cooperative Cane Unions Federation Ltd, 12, Rana Pratap Marg, Lucknow-226001 Service Tax Appeal No.70274 of 2020 2 under the provisions of Section 73(2) of the Finance Act, 1994, for the reasons discussed hereinabove,
(b) I drop the Service Tax demand of Rs 1,92 551/-
(Rupees One Lakh Ninety Two Thousand Five Hundred and Fifty 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 Federation Ltd, 12, Rana Pratap Marg, Lucknow- 226001, under Section 77(1)(a) of the Finance Act, 1994, for the reasons discussed hereinabove;"
2.1 Appellant is a cooperative union registered with Service Tax Department for paying service tax under the category of Renting of Immovable Property provided by them.
Service Tax Appeal No.70274 of 2020 3 2.2 During the course of audit for the period from 2013-14 to 2016-17 it was observed that apart from rental receipts appellant has also booked income under various other heads, as detailed in table below:-
(in Rs.) Financial Commission Commission Commission Income Total Year on on on Agr. from Service fertilizers Insecticide Equipment Charge 2013-14 11941780 6639413 0 3313234 21894427 2014-15 13638932 4976866 0 4072829 22688627 2015-16 12964094 5508392 995521 2770162 22238169 2016-17 12916560 8323639 668141 3076071 24984411 TOTAL 51461366 25448310 1663662 13232296 91805634 2.3 On the basis of enquiries investigations made it was observed that appellant had failed to discharge the service tax as detailed below in respect of the amount so received towards the provision of services:-
(in Rs.) Financial Total Service Tax Service Tax liability incl.
Year Rate (%) all cess
2013-14 21894427 12.36% 2706151
2014-15 22688627 12.36% 2804314
2015-16 22238169 14.5% 3224335
2016-17 24984411 15.00% 3747662
TOTAL 91805634 12482662
2.4 Appellant had also received amounts under the category of
"Contribution Income" on which they failed to discharge service tax as detailed in the table below:
(in Rs.) Period Contribution Income for Service Tax Service Tax State Cane Service Authority Rate (%) incl. all cess 2013-14 1,07,33,382 12.36% 13,26,646 2014-15 1,77,28,521 12.36% 21,91,245 2015-16 1,63,90,579 14.50% 23,76,634 2016-17 12916560 15.00% 24,33,827 TOTAL 6,10,77,997 83,28,352 2.5 Appellant had booked expenditure the head of legal expenses on which they were required to pay service tax as detailed below under reverse charge mechanism, which they failed to discharge:
Service Tax Appeal No.70274 of 2020 4 (in Rs.) Financial Legal Service Tax Rate Service Tax payable (incl. all Year Expenses (%) Cess) 2013-14 58179 12.36% 7191 2014-15 1750760 12.36% 216394 2015-16 837560 14.5% 121446 2016-17 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 Challan Due date Payment Date number of Interest Liability Value days. due @24 % 161871 06-05-2016 06-07-2016 61 6494 Apr 269783 107912 06-05-2016 06-07-2016 61 4328 May 215825 215825 06-06-2016 06-07-2016 30 4257 167454 06-07-2016 06-07-2016 0 0 Jun 223268 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 notification/circular regarding the same. had the enquiry/verification was not conducted by the department, such short-payment of Service Tax would have gone un-noticed.
Therefore, extended period of limitation provided under proviso to Section 73 (1) of the Finance Act was applicable and appellant was also liable to penalties under Section 78 of the Finance Act.
Service Tax Appeal No.70274 of 2020 5 2.8 Show cause notice dated 16/04/2019 was issued to the appellant, asking them to show cause as to why-
"(i) Service Tax amounting to Rs.2,11,84,995/- (Rupees Two Crores, Eleven Lakhs, Eighty Four Thousand, Nine Hundred and Ninety Five Only) (including all applicable cess) should not be demanded and recovered from them under the proviso to Section 73(1) of the Finance Act, 1994 read with Section 142 & 174 of Central Goods & Services Tax Act, 2017, for the reasons detailed here-in-
above.
(ii) Interest at the applicable rates on the aforesaid amount of Service Tax should not be demanded and recovered from tham under Section 75 of the Finance Act, 1994, for the reasons detailed here-in-above.
(iii) Penalty under Section 78(1) of the Finance Act, 1994 should not be imposed upon them, for the reasons discussed here-in-above.
(iv) Interest amounting to Rs.15,850/- (Rupees Fifteen Thousand, Eight Hundred and Fifty Only) should not be demanded and recovered from them under Section 75 of the Finance Act, 1994, for the reasons discussed here-in- above.
(v) Penalty amounting to Rs. 10,000/- (Rupees Ten Thousand Only) should not be imposed upon them under Section 77(1)(a) of the Finance Act, 1994, for the reasons discussed here-in-above."
2.9 The said show cause notice was adjudicated as per the Order-in-Original referred in para 1 above.
2.10 Aggrieved appellant have filed this appeal.
3.1 We have heard Shri Dharmendra Kumar learned Chartered Accountant appearing for the appellant and Shri Manish Raj learned Authorised Representative appearing for the revenue.
3.2 Arguing for the appellant learned Counsel submits that-
Service Tax Appeal No.70274 of 2020 6 Hon‟ble Governor of Uttar Pradesh appointed appellant as Co-operative federation authority of all co-operative cane societies for supervision.
They are implementing state government policies by complying government orders from time to time. Registrar of cane is government employee, whose instruction and directions are binding upon appellant‟s federation. Appellant‟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- operative society and commission/margin money on fertilizers, insecticides and equipments are determined by Registrar Co-operative cane Society.
They have not suppressed any facts from the department and hence extended period of limitation is not invokable in Service Tax Appeal No.70274 of 2020 7 the present case. Penalty under Section 78 of the Act is also not imposable for this reason.
3.3 Learned Authorised Representative reiterates the findings recorded in the orders of the lower authority.
4.1 We have considered the impugned orders along with the submissions made in appeal and during the course of argument.
4.2 Impugned order records following findings, for the proceedings against the appellant:-
"13.1 Before going into merits of the case, I would like to consider the technical submission of the noticee that the officers of the Central Excise & Service Tax, Audit Commissionerate-Lucknow (or CGST & Central Excise, Audit Commissionerate-Lucknow we f 01.07.2017) were not empowered/authorized to conduct Service Tax Audit which has culminated in issuance of the said SCN. The noticee has referred to Section 173 of the Central Goods & Services Tax Act, 2017 and has contended that Chapter V of the Finance Act, 1994, has been omitted w.e.f.01.07.2017.
13.2 In this regard, I find that despite of the fact that Chapter V of the Finance Act, 1994, has been omitted vide Section 173 of CGST Act, 2017 (wef.01.07.2017), a saving clause in form of Section 174(2)(e) of the CGST Act, 2017 has been provided which reads as under-
"174(2) The repeal of the said Acts and the amendment of the Finance Act, 1994 (32 of 1994) (hereafter referred to as "such amendment" or "amended Act", as the case may be) to the extent mentioned in the sub-section (1) or section 173 shall not-
(a) ..................................................................................or
(b).................................................................................or
(c) ...............................................................................or
(d) ..................................................................................or Service Tax Appeal No.70274 of 2020 8
(e) affect any investigation, inquiry, verification (including scrutiny and audit), assessment proceedings, adjudication and any other legal proceedings or recovery of arrears or remedy in respect of any such duty, tax, surcharge, penalty, fine, interest, right, privilege, obligation, 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 judgments cited by noticee in support of their claim are concerned, find that-
In cases of SKP SECURITIES LTD. Versus DEPUTY DIRECTOR (RA-IDT) reported in 2013 (291) ELT 33 Service Tax Appeal No.70274 of 2020 9 (Cal.), INFINITY INFOTECH PARKS LTD. Versus UNION OF INDIA reported in 2014 (36) STR. 37 (Cal) and SADBHAV ENGINEERING LIMITED Versus UNION OF INDIA reported in 2016 (46) ST.R. 22 (Guj.), the matter under consideration before Hon'ble High Courts was audit of private limited companies by officers of CAG and hence the said cases are not applicable to the facts of the present case.
The judgments rendered by Hon'ble High Court of Delhi in case of TRAVELITE (INDIA) Versus UNION OF INDIA reported in 2014 (35) STR. 653 (Del) and in case of MEGA CABS PVT. LTD. Versus UNION OF INDIA reported in 2016 (43) STR. 67 (Del) have been stayed by Hon'ble Supreme Court of India and hence the said judgments (as we!! as those judgments which have been delivered on the basis of them) will not come to aid of the noticee. The observations/views of Hon'ble High Courts in case of MASCOT ENTRADE PVT LTD. Versus UNION OF INDIA (reported in 2018 (9) G.STL 5 (Gau.)) and MAGMA HDI GENERAL INSURANCE COMPANY LTD. Versus UNION OF INDIA [reported in 2016 (44) S.TR. 231 (Cal)) are interim in nature and cannot be held as final authority on the issue.
13.4 It is worth noting that in the present case, the noticee did not contest the institution/commencement of Service Tax Audit ab-initio, however on being issued said SCN (wherein various contraventions of Chapter V of the Finance Act, 1994 have been alleged) they have started contesting the audit conducted by the officers of CGST & Central Excise, Audit Commissionerate-Lucknow.
13.5 Accordingly, it can safely be concluded that the said contention of the noticee is devoid of any merit & is a mere after-thought and hence is liable to be set-aside.
Service Tax Appeal No.70274 of 2020 10 14 After perusing the case records, I find that there are 6 issues which are to be decided in the present case:-
Issue No.1:- Whether the Demand of Service Tax to the tune of Rs.2,11,84,995/-proposed vide the SCN is sustainable on merits under the provisions of the Finance Act, 1994 (and rules made thereunder) or otherwise.
Issue No.2:- Whether the demand of applicable Interest proposed under Section 75 of the Finance Act, 1994 on the Noticee for non-payment of Service Tax to the tune of Rs 2,11,84,995/- 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 Service Tax Appeal No.70274 of 2020 11 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 has been raised on the income accrued from various CCDS's and KRIBHCO/IFFCO.
Demand of Rs.3,73,981/- which has been raised under Reverse Charge Mechanism on the expenditure incurred on Advocates / Firm of Advocates for obtaining Legal Services.
15.1.3 As far as demand of Service Tax to the tune of Rs. 2,08,11,014/- is concerned, I find that the said demand has been raised on following incomes -
Income booked under the head of 'Commission on Fertilizers', 'Commission on Insecticides', 'Commission on Agricultural Equipments' and 'Contribution Income' which has been accrued from various CCDS's Income booked under the head of 'Service Charges' which has been accrued from IFFCO/KRIBHCO 15.1.4 As far as provisions relating to Service Tax (provided in Chapter V of the Finance Act, 1994 and effective from 01.07.2012) are concerned, any activity which qualifies the definition of 'Service' provided in Section 65B(44) of the Finance Act, 1994 and which is not listed either under 'Negative List of Services' (provided in Section 66D of the Finance Act, 1994) or under 'Mega Exemption Notification' (provided vide Notification No.25/2012-ST dated 20.06.2012) will be liable to Service Tax at applicable rates.
15.1.5 The term 'Service' has been defined vide Section 65B(44) of the Finance Act 1994, as under.-
Service Tax Appeal No.70274 of 2020 12 "65B(44) "service" means any activity carried out by a person for another for consideration, and includes a declared service, but shall not include-
(a) an activity which constitutes merely,-
(i) a transfer of title in goods or immovable property, by way of sale, gift or in any other manner; or
(ii) such transfer, delivery or supply of any goods which is deemed to be a sale within the meaning of clause (294) of article 366 of the Constitution; or
(iii) a transaction in money or actionable claim.
(b) a provision of service by an employee to the employer in the course of or in relation to his employment;
(c) fees taken in any Court or tribunal established under any law for the time being in force Explanation-1 For the removal of doubts, it is hereby declared that nothing contained in this chance shall apply toー (A) the functions performed by the Members of Parliament. Members of State Legislative Members of Panchayats. Members of Municipalities and Members 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, Service Tax Appeal No.70274 of 2020 13 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 organizing lottery of any kind, in any other manner, in accordance with the provisions of the Lotteries (Regulation) Act, 1998,
(b) by a foreman of chit fund for conducting or organizing a chit in any manner.
Explanation-3. For the purposes of this Chapter-
(a) an unincorporated association or a body of persons, as the case may be, and a member thereof shall be treated as distinct persons;
(b) an establishment of a person in the taxable territory and any of his other establishment in a non- tacable territory sholl be treated as establishments of distinct persons.
Explanation 4- A person carrying on a business through a branch or agency or representational office in any territory shall be treated as having an establishment in that territory"
In view of above definition, it can be observed that any activity which has been carried out by a person for any Service Tax Appeal No.70274 of 2020 14 other person for a consideration qualifies the definition of 'Service' and for the purpose of said definition, a body (or association) of persons and a member thereof shall be treated as distinct persons. In other words, a body/association of persons and its members are to be treated as distinct persons for the purpose of Service Tax From the facts of the present case, it is evident that the noticee was carrying out various activities (detailed in Para 3 above) for various other persons (ie., their member Co- operative Cane Development Societies, M/s IFFCO & M/s KRIBHCO) and was also receiving monetary consideration for the same which was duly reflected in their books of accounts. Hence, I hold that the activities undertaken by the noticee are squarely covered under the definition of 'Service' provided vide Section 65B(44) of the Finance Act, 1994 (as amended).
15.1.6 Vide written submission dated 13.05.2019, the noticee has contended that the activities carried out by them (or impugned services provided by them), are exempted from purview of Service Tax, in as much as, they are covered under 'agricultural extension services' specified in sub-clause (vi) of Clause (d) of Negative List of Services provided vide Section 66D of Finance Act 1994. For the sake of discussion. I hereby reproduce the said Clause (d) of Section 660 ibid below:-
66D(d) services relating to agriculture or agricultural produce 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, Service Tax Appeal No.70274 of 2020 15 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 bye-laws (reproduced in Para 10.2 above) and has contended that as CCDS's (which are their members) as well as M/s KRIBHCO/IFFCO are giving training to cane farmers, hence they are covered under Agricultural Extension Services (as defined above). The noticee has also produced copies of letters dated 22.02.2018, 20.06.2018 and 10.09.2018 issued by them to Officials of CCDS's to support their contention.
Further, the noticee has contended that the Commission/Margin Money was earned by them as financial help.
15.1.7 I have carefully gone through the contention of the noticee (along with documents produced to support them) vis-à-vis relevant provisions of Finance Act, 1994, and I observe that for determining taxability under Service Tax Service Tax Appeal No.70274 of 2020 16 Regime, it is imperative to clearly figure out the Service Provider and Service Receiver.
For contention of the noticee (ie, they were providing Agricultural Extension Services) to hold true, it is to be proved beyond doubt that they were applying scientific research and knowledge to agricultural practices through farmer education or training In other words, it is to be proved that they were educating the farmers by imparting them training (or knowledge) based on scientific research.
From the facts of the present case and on bare perusal of the bye-laws of the noticee (provided by them vide written submission dated 13.05.2019 and reproduced in Para 10.2 above), it is apparent that:-
the noticee, by virtue of being apex body of all CCDS's of state of Uttar Pradesh, was primarily engaged is performing various activities for their members (i.e., CCDS's) only. In other words, the noticee was primarily engaged in providing services to their member CCDS's only not to any farmer. For performing the said activities, the noticee was:-
o charging supervision fees from various CCDS's (which was shown as contribution income in books of accounts).
o receiving Commission/Margin Money on the sale of Insecticides/Fertilizers/Agricultural Equipments by CCDS's to Cane farmers (which was shown as Commission/Margin Money Fertilizers/insecticides/Agricultural Equipments in books of accounts) from o the noticee was also co-ordinating with the manufacturers of Fertilizers / Insecticides /Agricultural Equipments (such as IFFCO/KRIBHCO) regarding dispatching of goods to CCDS's and regarding receipt of payments from respective CCDS's and was Service Tax Appeal No.70274 of 2020 17 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 provide any agricultural extension services to any farmer which would make them eligible for exemption under negative list cl services provided vide Section 66D of the Finance Act, 1994.
Further, I find that it is a well settled proposition of law that in case of exemption, the onus is on the claimant to prove that he is entitled for that exemption. In this case, since the noticee has not discharged the onus regarding entitlement of exemption hence the claim of the noticee is liable to be rejected and demand is liable to be confirmed. Reliance can be placed on following judgments of Hon'ble Apex Court-
Service Tax Appeal No.70274 of 2020 18
(i) COMMISSIONER OF C EX, NEW DELHI Versus HARI CHAND SHRI GOPAL reported in 2010 (260) E.LT. 3 (SC), wherein it was held that:-
"22. The law is well settled that a person who claims exemption or concession has to establish that he is entitled to the exemption or concession. A provision providing for an exemption, concession or exception, as the case may be, has to be construed strictly with certain exceptions depending upon the settings on which the provision has been placed in the Statute and the object and purpose to be achieved. If exemption is available on complying with certain conditions, the conditions have to be complied with. The mandatory requirements of those conditions must be obeyed or fulfilled exactly, though at times, some latitude can be shown, if there is a failure to comply with some requirements which are directory in nature, the non-compliance of which would not affect the essence o substance of the notification granting exemption."
(ii) MERIDIAN INDUSTRIES LTD. Versus COMMISSIONER OF CENTRAL EXCISE reported in 2015 (325) E.L.T. 417 (S.C.), wherein it was observed that:-
13. The appellant is seeking the benefit of exemption Notification No. 8/97-C.E. Since it is an exemption notification, onu lies upon the appellant to show that its case falls within the four corners of this notification and is unambiguously covered by the provisions thereof. It is also to be borne in mind that such exemption notifications are to be given strict interpretation and, therefore, unless the assessee is able to make out a clear case in its favour, it is not entitled to claim the benefit thereof.
15.1.8 In view of my discussions in Para 15.1.1 to 15.1.7 above, I hold that the demand of Service Tax to the tune Service Tax Appeal No.70274 of 2020 19 of Rs. Rs.2,08,11,014/- which has 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:-
"4.7It 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 not in the nature of a statutory fee/levy then, in such cases, the service tax would be leviable if the activities undertaken falls within the ambit of taxable service.
4.8It is submitted that in the present case, the activity of renting/leasing performed by the Market Committees cannot be said to be in the nature of a statutory activity and the fee collected cannot be said to be in the nature of a statutory fee/levy. It is contended that the allotment/rent/lease of shop/land is for a consideration and it is not the mandatory statutory activity/duty to provide on rent/lease the shop/platform/land to the traders.
Service Tax Appeal No.70274 of 2020 20 4.9It is further submitted that even subsequently and on and after 1-7-2012 such an activity is put in the Negative List. That from the aforesaid, the intention of the legislature can be gathered. That if the activities, which are now put in the Negative List were already exempted from service tax, as per the case on behalf of the respective Market Committees in view of 2006 circular, in that case, there was no necessity for the Revenue to put such services in the Negative List subsequently.
4.10Making the above submissions, it is prayed to dismiss the present appeals.
5.Heard the Learned Counsel for the respective parties at length.
6.At the outset, it is required to be noted that the respective Market Committees are claiming exemption under the 2006 circular. The exemption circular issued by the Board reads as under :-
Circular No. 89/7/2006, dated 18-12-2006 :-
"A number of sovereign/public authorities (i.e., an agency constituted/set up by Government) perform certain functions/duties, which are statutory in nature. These functions are performed in terms of specific responsibility assigned to them under the law in force. For examples, the Regional Reference Standards Laboratories (RRSL) undertake verification, approval and calibration of weighing and measuring instruments; the Regional Transport Officer (RTO) issues fitness certificate to the vehicles; the Directorate of Boilers inspects and issues certificate for boilers; or Explosive Department inspects and issues certificate for petroleum storage tank, LPG/CNG tank in terms of provisions of the relevant lows. Fee as prescribed is charged and the same is ultimately deposited into the Government Treasury.
A doubt has arisen whether such activities provided by a sovereign/public authority required to be provided under a Service Tax Appeal No.70274 of 2020 21 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, service tax would be leviable, if the activity undertaken falls within the ambit of a taxable service."
7.As per the exemption circular only such activities performed by the sovereign/public authorities under the provisions of law being mandatory and statutory functions and the fee collected for performing such activities is in the nature of a compulsory levy as per the provisions of the relevant statute and it is deposited into the Government Treasury, no service tax is leviable on such activities. In paragraph 3, it is also specifically clarified that if such authority performs a service, which is not in the nature of a statutory activity and the same is undertaken for consideration, then in such cases, service tax would be leviable, if the activity undertaken falls within the ambit of a taxable service. Thus, the language used in the 2006 Service Tax Appeal No.70274 of 2020 22 circular is clear, unambiguous and is capable of determining a defined meaning.
8.The exemption notification should not be liberally construed and beneficiary must fall within the ambit of the exemption and fulfil the conditions thereof. In case such conditions are not fulfilled, the issue of application of the notification does not arise at all by implication.
8.1It is settled law that the notification has to be read as a whole. If any of the conditions laid down in the notification is not fulfilled, the party is not entitled to the benefit of that notification. An exception and/or an exempting provision in a taxing statute should be construed strictly and it is not open to the Court to ignore the conditions prescribed in the relevant policy and the exemption notifications issued in that regard.
8.2The exemption notification should be strictly construed and given a meaning according to legislative intendment. The Statutory provisions providing for exemption have to be interpreted in light of the words employed in them and there cannot be any addition or subtraction from the statutory provisions.
8.3As per the law laid down by this Court in a catena of decisions, in a taxing statute, it is the plain language of the provision that has to be preferred, where language is plain and is capable of determining a defined meaning. Strict interpretation of the provision is to be accorded to each case on hand. Purposive interpretation can be given only when there is an ambiguity in the statutory provision or it results in absurdity, which is so not found in the present case.
8.4Now, 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, Service Tax Appeal No.70274 of 2020 23 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 attractive but has no substance. Section 9(2) is an enabling provision and the words used is "market committee may". It is to be noted that in so far as sub-section (1) of Section 9 is concerned, the word used is "shall". Therefore, wherever the legislature intended that the particular activity is a mandatory statutory, the legislature has used the word "shall". Therefore, when under sub-section (2) of Section 9, the word used is "may", the activities mentioned in Section 9(2)(xvii) cannot be said to be mandatory statutory duty and/or activity. Under Section 9(2), it is not a mandatory statutory duty cast upon the Market Committees to allot/lease/rent the shop/platform/land/space to the traders. Hence, such an activity cannot be said to be a 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, Service Tax Appeal No.70274 of 2020 24 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.
10.The next provision relied upon by the appellants - respective Market Committees is Rule 45 of the Rajasthan Agricultural Produce Markets Rules, 1963 (hereinafter referred to as "Rules, 1963"), which reads as under :-
"45. The Market Committee fund. - All money received by the Market Committee shall be credited to the fund called the Market Committee fund. Except where Government on application by the Market Committee or otherwise shall direct, all money paid into the Market Committee fund shall be credited at least once a week in full into Government treasury or sub-treasury, or a bank duly approved for this purpose by the Director. All balance from the fund shall be kept in such treasury or sub- treasury or bank and it shall not be withdrawn upon except in accordance with these rules."
10.1Now, 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 Service Tax Appeal No.70274 of 2020 25 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 the Government Treasury/sub-treasury or a bank duly approved, it ceases to be the 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 utilized by the Market Committee for expanding/benefit of the Market Committee etc.
11. Even otherwise, it is to be noted that on and after 1- 7-2012, such activities carried out by the Agricultural Produce Market Committees is placed in the Negative List. If the intention of the Revenue was to exempt such activities of the Market Committees from levy of service tax, in that case, there was no necessity for the Revenue subsequently to place such activity of the Market Committees in the Negative List. The fact that, on and after 1-7-2012, such activity by the Market Committees is put in the Negative List, it can safely be said that under the 2006 circular, the Market Committees were not exempted from payment of service tax on such activities. At this stage, it is required to be noted that it is not the case on behalf of the Market Committees that the activity of rent/lease on shop/land/platform as such cannot be said to be service. However, their only submission is that the Market Committees are exempted from levy of service tax on such service/activity as provided under the 2006 Service Tax Appeal No.70274 of 2020 26 circular, which as observed hereinabove has no substance."
4.4 This decision has been followed by the Hon‟ble Apex Court subsequently in following cases:
Agriculture Produce Marketing Committee Gazipur [(2023) 2 Centax 293 (S.C.)] Gujarat Industrial Development Corporation [(2023) 5 Centax 171 (S.C.)] Thus the submission made by the appellant that they are not liable to pay service tax being government authority in respect of the services in dispute, is thus devoid of merits, in view of the above referred decisions.
4.5 We also do not find any merits in the submissions that the services provided by the appellant under the category of agricultural extension services. The term „agricultural extension services‟ has been defined under Section 65B(4) of the Finance Act. It means „application of scientific research and knowledge to agricultural practices through farmer education or training‟.
Impugned order has concluded that appellant is not providing any such services which are so defined by 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 Service Tax Appeal No.70274 of 2020 27 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 the crop requirement and develop solutions for crop protection.
(iv) Explain the farmers about the manner of usage of Crop protections products including action, mixing process, contact or systematic action, insect killing process.
(v) Create awareness about the crop protection techniques to increase production healthy crop, quality in seed, satisfy for crop.
(vi) Time of application of crop protection products, (1) spray herbicide (2) spray insecticides (3) spray fungicide, (4) Application of Fertilizers, Micro Nutrients and Seed selection.
(vii) How to use insecticides product safely without being unsafe to our body and also our crop product, does and point of purchasing (Shop), per acre dose and per acre water quality.
(viii) Field demonstrations including, area measure, water and dose, crop stage, demo plot location
(ix) Farmer group meetings
(x) Management, commitment and participatory methodologies as a sequel to the feedback from training programmes
(xi) Farmer field day on demo plot, observing the results and then conduct field day.
Service Tax Appeal No.70274 of 2020 28
(xii) Agriculture Extension Services, which cover all operations in relation to farmer training & application of knowledge for better performance of agriculture operations."
9. We find that the services provided by the appellant in the nature of following:-
"General Farmer training;
Empirical training;
Training for the harvest; and Stewardship.
The detail of each activities is as under:-
General Farmer Training Under farmer training, the appellant trains farmers in the best agricultural practices resulting in higher yields. Various factors affected the yields of a crop, such as (i) Soil type and conditions (ii) Time of sowing; (iii) Availability of water;
(iv) Availability of nutrients; (v) Weather conditions; (vi) Weed management of water; (vii) Pest management; (viii) Disease control; (ix) Timely harvesting. The appellant trains the farmers in ways to bring the vital yield-affecting factors in its favour. The appellant also lays emphasis on agronomy, nutrition, water management etc. Further, the farmers are made aware of yield parameters.
These trainings are conducted in the following formats:
One to one format wherein Appellant interacts with farmers on one to one basis:
Group format wherein Appellant interacts with a small group of 5 to 10 farmers; and Farmers meets:
- Small meets wherein Appellant addresses 25 to 30 farmers; and
- Large meets wherein Appellant addresses 50 to 100 farmers.
Service Tax Appeal No.70274 of 2020 29 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 during and after application of pesticides. The appellant also teaches farmers the meaning of product labels and signs, cautions farmers about spurious and duplicate products in market, safe destruction of used pesticide bottles, etc."
10. The appellant has provided above services to that effect the appellant has produced photograph. We have seen the photographs. In the photographs, nowhere it is coming out that the appellant is doing marketing and promotion of the product of their principal. Moreover, in the impugned order, the Ld. Commissioner has observed that the "Agricultural Extension Service" is of scientific research and knowledge by observing that "None of the supporting documents which Service Tax Appeal No.70274 of 2020 30 the Noticee have submitted to substantiate their claim that they have been providing Agricultural Extension Service, could show that the farmers were being given any training through scientific research and knowledge to agriculture practices through farmer education and training." We have gone through the definition of agricultural extension under Section 65B (4) of the Finance Act, 1994 which is as under:-
"Agricultural Extension means application of scientific research and knowledge to agriculture practices through farmer education and training."
11. As per said definition, the appellant was required to provide scientific research and knowledge to agriculture practices through farmer education and training. As per agreement, the appellant has provided the said service. The finding of the Ld. Commissioner is not appreciable. Accordingly, the same is turned down.
10. We take note of the fact that the appellant has provided ample evidence in respect of nature of the services provided by them by way of photographs and agreement of other materials but the Revenue has not come with an evidence that the appellant was engaged in the marketing and promoting the product of their principal while providing Agricultural Extension Service. Therefore, we hold that the appellant is not providing any taxable service but is providing only Agricultural Extension Service.
11. Another ground for confirmation of demand is that the appellant is receiving remuneration in terms of sale by the appellant of the product of their principal. In fact, it is only mode of calculation of remuneration of the service provided by the appellant but the same cannot be termed that the appellant 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 Service Tax Appeal No.70274 of 2020 31 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 without a structure incidental to its use;
(v) Loading, unloading, packing, storage or warehousing or agricultural produce,
(vi) Agricultural extension services"
13. As on merits the services rendered by the appellant are "Agricultural Extension Services" and are covered under negative list as per section 66D of the Finance Act, 1944, therefore, we hold that the appellant is not liable to pay service tax."
4.7 The nature of the services provided by the appellant for which the said payments have been received have been detailed in the show cause notice stating as follows:
4. Whereas, M/s U.P Cooperative Cane Unions Federation Ltd, is a Co-operative Society registered under U.P Cooperative Societies Act, 1965 and it is apex body of all Cooperative Cane Development Society (CDF) situated Service Tax Appeal No.70274 of 2020 32 in U.P and thus, CDF are members of the CUF. The primary objective of creating such apex body is to improve sugar cane industry including the betterment of sugar cane farmers. To achieve their goal, the CUF has to perform some specified duties Basically, the CUF works as a coordinator among the cane farmers, CDF, Chini Mills and suppliers of Fertilizer/ insecticide and other agricultural equipments They ensure timely supply of Cane to Sugar Mills, timely payment to Cane Farmers facilitating in distribution of fertilizers & insecticides alongwith ensuring timely payment to suppliers of fertilizers etc.
5) Whereas, during the course of Audit, it has been learnt from the Balance Sheets and P&L Account of the party, bills/invoices issued by them including ledger accounts that their main source of income is from the following activities-
a) Margin Money/Commission on Fertilizers: The Cane Unions Federation as an . apex body of the Cane Development Societies works as a coordinator and facilitator in purchasing and distribution of Fertilizers manufactured by M/s IFFCO 8 Ms KRIBHCO. Each Cane Development Society sends report/data to the Cane Unions Federation informing them the quantity of Fertilizer purchased by them during the financial year. On the basis of said information, the CUF getting its margin money/commission by issuing invoices/Debit Advices on annual basis at prescribed rates i.e.demanding a margin money @ Rs.50/-per MT on purchase of Urea and @ Rs.62/- per MT on purchase of DAP & NPK during the respective financial year (RUD-
5).
b) Margin Money/Commission 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 Service Tax Appeal No.70274 of 2020 33 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 Federation) on purchase value of the agricultural equipments. Thereafter, on the basis of total purchase value of the agricultural equipments, the CUF raised Invoices to different Cane Development Societies on annual basis for getting its margin money @ Rs.6% of the purchase value of agricultural equipments
d) Income from Service Charge: The Cane Unions Federation has also made agreements with M/s Indian Farmers Fertilizer Cooperative Limited (IFFCO) and Ms Krishak Bharati Cooperative Ltd (KRIBHCO) on service related matter which are available for the financial year 2014-15 to 2016-17. (RUD-9). Through these annual agreements, both Fertilizer Suppliers basically wants to ensure their timely payment from the Cane Development Societies and to ensure proper delivery of fertilizers from the respective warehouses as per delivery order. For providing such type of services by Service Tax Appeal No.70274 of 2020 34 the CUF, both fertilizers suppliers will pay Rs.20/- per MT as service charge' to the CUF on purchasing of Indigenous Urea. Accordingly Invoices were issued by the CUF to M/s IFFCO and M/s KRIBHCO on annual basis attracting Service Charges @ Rs.20/- per MT on purchasing of Indigenous Urea,
e) Contribution Income: It appears from the P&L Account of the party along with its ledger account that they have received huge amount under the head contribution for state cane service authority'. Such income is prescribed contribution income received from the different Cane Development Societies and as per rule 391 (a) of Utar Pradesh Co-operative Societies Rules, 1968 the CUF is collecting supervision fee In this regard, the relevant paras of the Acts and Rules are produced below:
Section 123 of Uttar Pradesh Co-operative Societies Act, 1965 provides that-
Constitution or recognition of co-operative federal authority to supervise working of co-operative societies. -
(1) The State Government may constitute or recognise one or more co-operative federal authorities, in such manner as may be prescribed and subject to such conditions as the State Government may impose, for the supervision of co- operative societies or a class of co-
operative societies and may grant loans or subsidies to such authority or authorities in the manner prescribed, (2) The State Government may, by general or special order, require a co-operative society or a class of co-operative societies to make contribution of such a 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).
Service Tax Appeal No.70274 of 2020 35 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 Negative Service Tax Regime"
4.8 From the above we note that the services provided by the appellant were in nature of the services which were towards commission for the sale of farm equipments, fertilizers, insecticides and pesticides. None of the services provided by the appellant were in nature of training of farmers etc to get covered under the category of Agricultural Extension Services, as have been held in the above referred decision of Chandigarh Bench. In this decision, liability to pay service tax on all the commissions received towards sale of insecticides and pesticides have been upheld. Following the above decision we also uphold the demand of the Service Tax made on the services other than the "Agricultural Extension Services". From the facts as noted above we find that none of the services provided by the appellant would fall under the category of agriculture extension services we uphold the entire demand made.
4.9 In respect of the legal expenses we find that impugned order extended the benefit by reducing the taxable value to the extent as claimed by the appellant. In their appeal or during the Service Tax Appeal No.70274 of 2020 36 argument no infirmity has been pointed out by the appellant in respect of the demand confirmed under this head. We also note that appellant do not dispute there liability to pay interest in case of delay in payment of service tax.
4.10 Appellant has claimed that benefit of cum tax benefit should be allowed to them. We are in agreement with the submissions made by the appellant in this respect as we find that the appellant has not collected any service tax separately from their service recipients and thus the inevitable conclusion is that the gross consideration received by the appellant and reflected in their balance sheet was inclusive of service tax. In case of Balaji Manpower Services [2019 (31) G.S.T.L. 418 (P&H)] Hon‟ble Punjab and Haryana High Court has held as follows:
"6.The conceded position emerging from record is that the Petitioner declared lesser value of service in the service tax returns than value shown in the balance sheet and 26AS Forms. The Respondent considered value shown in 26AS Forms as "cum tax value" and compared with value shown in balance sheet. The Petitioner submitted sample invoices and certificate of Chartered Accountant certifying that invoices were inclusive of service tax. The Settlement Commission found that Petitioner 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.
Service Tax Appeal No.70274 of 2020 37
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 Settlement Commission has found that tax was collected but not deposited but there is nothing on record to show that tax was collected over and above value appearing in balance sheet rather value appearing in 26AS Form has been considered as cum tax price. Thus we find no reason to deny benefit of cum tax value."
4.11 Thus the amount of the tax due from the appellant needs to be re-determined by the original authority after allowing the benefit of cum tax value. For the limited purpose of re- computing the tax demand after allowing this benefit the matter needs to be remanded back to the original authority.
4.12 We find that appellant have never disclosed the facts in relation to provisions of these services to the department, and had not reflected the same in ST-3 returns which was filed by the appellant. Further though they got themselves registered for payment of service tax under the category of "Renting of Immovable Property", they deliberately never provided any information in respect of these services. They have in their returns deliberately suppressed the gross value of consideration received with intention to evade payment of service tax. In absence of provisions of any such information, the charge of suppression against the appellant is maintainable and as the same resulted in non-payment of the service tax due, the intend to evade payment of taxes was also there. It is not even the case of the appellant that they were under a bonafide belief that these services were not due in respect of these amounts Service Tax Appeal No.70274 of 2020 38 calculated and if such relief existed with on the basis of the same, as we find merits in invocation of extended period, the penalties imposed under Section 78 is justifiable, in view of the decision of Hon‟ble Supreme Court in the case of Union of India v. Rajasthan Spinning & Weaving Mills [2009 (238) E.L.T. 3 (S.C.)]. However the quantum of penalty shall be re-determined on the basis recomputed tax demand.
5.1 Appeal is partly allowed to the extent indicated in para 4.10, 4.11 and 4.12, and the matter is remanded to the original authority for re-computation of demand after allowing the cum tax benefit to the appellant.
5.2 As matter is significantly old, in remand proceedings original authority should re-compute the tax amount and the penalty under Section 78 within three months of receipt of this order.
(Order pronounced in open court on-02 April, 2025) (AJAY SHARMA) MEMBER (JUDICIAL) (SANJIV SRIVASTAVA) MEMBER (TECHNICAL) akp