Custom, Excise & Service Tax Tribunal
Maharashtra State Seed Certification ... vs Commissioner Of Customs & Central ... on 4 April, 2014
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL WEST ZONAL BENCH AT MUMBAI COURT NO. I Appeal No. ST/96/2008 (Arising out of Order-in-Original No. 01/ST/2008/C dated 18.2.2008 passed by Commissioner of Customs & Central Excise, Nagpur.) For approval and signature: Honble Mr.S.S. Kang, Vice President Honble Mr. P.K. Jain, Member (Technical) ==========================================================
1. Whether Press Reporters may be allowed to see : No the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?
2. Whether it should be released under Rule 27 of the :Yes CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?
3. Whether Their Lordships wish to see the fair copy : Seen of the Order?
4. Whether Order is to be circulated to the Departmental : Yes authorities?
========================================================== Maharashtra State Seed Certification Agency Appellant (Represented by: Mr. Bharat Raichandani, Advocate) Vs Commissioner of Customs & Central Excise, Nagpur Respondent (Represented by: Mr. Rakesh Goyal, Additional Commissioner (AR)) CORAM:
Honble Mr.S.S. Kang, Vice President Honble Mr. P.K. Jain, Member (Technical) Date of Hearing : 14.03.2014 Date of Decision: 04.04.2014 ORDER NO..
Per: P.K. Jain
1. The appellant is an Autonomous Body registered as a society under the Societies Registration Act, 1860. Appellants are engaged in the activities of technical inspection and certification of seeds produced by seed producers in Maharashtra State as per the Seeds Act, 1966 (Act No. 54 of 1966) and the Seeds Rules, 1968.
2. The appellants charge fee for the said certification as prescribed under the said Rules. A new Service titled as Technical Inspection and Certification Service became leviable to Service Tax with effect from 1.7.2003. As per Section 65 (108) of the Finance Act, "Technical Inspection and Certification" means inspection or examination of goods or process or material or any immovable property to certify that such goods or process or material or immovable property qualifies or maintains the specified standard, including functionality or utility or quality or safety or any other characteristic or parameters, but does not include any service in relation to inspection and certification of pollution levels.
Further, Section 65 (109) of the said Act defines technical inspection and certification agency as follows:
Technical Inspection and Certification Agency means any agency or person engaged in providing service in relation to technical inspection and certification.
3. The appellant did not take registration for providing the said service nor collected the service tax. They started collecting the service tax for the said service only with effect from 1.4.2005. A demand notice was issued to them on 27.11.2006 demanding the service tax on the services provided by them during the period 1.7.2003 to 31.3.2006 invoking the extended period of limitation. It was also proposed in the said Show Cause Notice that the service tax collected from their clients attract the provisions of Section 11D of the Central Excise Act, 1944 as made applicable to service tax and therefore proposed to recover the service tax amounting to Rs. 77,12,518/- collected by them during the period 2005-06. The notice also proposed to recover interest under Section 11DD on the said amount. The case was adjudicated by the impugned order wherein the adjudicating authority confirmed the demand, confirmed recovery of Rs. 77,12,518/- under Section 11D, interest under Section 11DD, interest on the demand of Rs. 1,52,53,807/- under Section 75 of the Finance Act, 1994. Penalties under Section 76, 77 and 78 of the Finance Act, 1994 were also confirmed.
4. The appellants are before us against the said order.
5. Heard both sides.
6. The learned counsel for the appellants main contention was that the appellant is doing the certification work as envisaged under the Seeds Act, 1966 and the Rules made thereunder. According to the learned counsel seeds cannot be sold without a certification, and under the Act and the Rules the appellants are certifying agency who are required to ensure minimum limits of germination and purity etc and they start inspection right from the time of growing of such seeds. The learned counsel took us through the Seeds Act and the Rules made thereunder to emphasize the point that the appellants are doing statutory functions and therefore no tax is leviable on the services provided by them as clarified by the Board vide Circular No. 89/7/2006-ST dated 18.12.2006. The learned counsel also argued that this Tribunal has been consistently taking a view that in view of the said circular statutory functions are not liable to service tax and in support of his contention he quoted the following Tribunals decisions:
(i) CCE, Indore vs Ankit Consultancy Ltd 2007 (6) STR 101 (Tri-Del);
(ii) CC, CE & ST, Hyderabad II vs C.S. Software Enterprises Ltd 2008 (10) STR 367 (ST-Bang);
(iii) Central Power Research Institute vs CCE, Bangalore II 2006 (3) STR 637 (Tri-Bang).
(iv) Electrical Inspectorate, Government of Karnataka vs CST, Bangalore reported in 2008 (9) STR 494 (Tri-Bang);
(v) Commissioner of Customs & Central Excise, Hyderabad II vs CMC Ltd reported in 2007 (7) STR 702 (Tri-Bang).
7. The learned counsel also contended that the extended period of limitation has been invoked in the present case and there was definite confusion in the minds of even the departmental officers. The Commissioner Service Tax, Ahmedabad vide his letter dated 1.8.2006 has clarified to Gujarat State Seeds Certification Agency that no service tax is leviable. He also stated that in view of the fact that there was confusion even in the minds of the departmental officers, there is no case whatsoever for invoking the extended period of limitation. The learned counsel further stated that with effect from 1.4.2005 even though they were of the view that service tax is not leviable, the appellant started collecting the same and kept the entire amount in a separate bank account and the amounts so collected alongwith interest has already been deposited with the Revenue. This itself shows that there was no wilful intention to evade service tax. Learned Counsel also argued that appellant being a Government agency there cannot be any intent to evade payment of duty. Even the certification charges are decided by the Government and they as Certifying Agency cannot change the same without the approval of the Government. The learned counsel stated that in view of this position no penalty is imposable on the appellant.
8. The learned A.R., on the other hand, argued that the Circular No. 89/7/2006-ST dated 18.12.2006 is very specific to the sovereign and public authorities and is relating to mandatory and statutory functions. The services provided by the appellant cannot be considered as a mandatory and statutory function, nor the appellant is a sovereign/public authority. The cases discussed in the Circular are entirely different in nature. The learned A.R. also argued that at the time of introduction of service tax on technical inspection and certification Board vide Circular No. 59/8/2003-ST dated 20.6.2003 (para 25) has very clearly stated that such services would be chargeable to service tax. He also argued that it is only vide Notification No. 10/2010-ST dated 27.2.2010 that the Government has decided to grant exemption to taxable services provided by the Central or State Seeds Certification Agencies. If the appellant was a sovereign/public authority and was carrying out the mandatory and statutory function there were no need to issue such a notification. The learned A.R. also argued that while it is true that a clarification was issued by the Commissioner of Service Tax vide letter dated August 01, 2006 on the issue, however, the said clarification was withdrawn on 27.10.2006 itself. Even the said clarification was beyond the period covered by the demand notice.
9. We have considered the rival submissions. We have also gone through the Seeds Act, 1966 as also the Rules made thereunder. The said Seed Act provided for regulating the quality of certain varieties of notified seeds for sale. It is noted that the provisions of the said Act are applicable only for the notified varieties of seeds. Further even in respect of notified varieties of seeds no such certification is required, if the seeds are grown by a person and sold or delivered by him on his own premises direct to another person for being used by that person for the purpose of sowing or planting. It is thus clear that only if somebody wants to sale specified varieties of seeds through the intermediaries or in the market then certification from the appellant or similarly placed agency is required. We have gone through the Boards Circular relied upon by the appellant which is reproduced below:
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 laws. 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 statute can be considered as provision of service for the purpose of levy of service tax.
2. The issue has been examined. The Board is of the view that the 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 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.
4. Trade and field formation may be advised accordingly. The appellant is a Society registered under the Societies Registration Act. In our careful consideration we do not consider that activities of the appellant can be considered as mandatory and statutory functions provided by a sovereign/public authority.
10. We also see the clarification provided by para 2.5 in Circular No. 59/8/2003-ST dated 20.6.2003, which reads as under:
2.5 TECHNICAL INSPECTION AND CERTIFICATION SERVICES:
A doubt has been raised whether certification given in respect of immovable property should fall under the purview of technical inspection and certification services`. In this regard it may be recalled that earlier, CBEC vide its order No. 1/1/2002, dated 26.02.2003, issued under Section 37B (of the Central excise Act as made applicable to service tax) had clarified that certification given under authority of any code or statute can not be considered as a consulting engineer service. However, the new service included in 2003 budget, namely technical inspection and certification services` would cover certification of all types including that of immovable property. Therefore, it is clarified that such services become taxable from the notified date.
11. Keeping in view the said two Circulars as also the provisions of the said Act and the Rules made thereunder, we have no hesitation in holding that the activities of the appellant are not covered by the said Circular dated 8.12.2006 and are chargeable to Service Tax under the Technical Inspection and Certification Service as enumerated in para 2 above.
12. We have also gone through the three case laws submitted by the appellant and we do not consider it necessary to discuss the same as the facts, nature of service, implementation authorities in those cases are entirely different.
13. We however note that the said service became taxable with effect from 1.7.2003 and the appellant started collecting the same with effect from 1.4.2005 and the amount collected by the appellant was initially kept in bank account which alongwith interest have already been deposited with the revenue. Keeping in view the fact that the service became chargeable to service tax only with effect from 1.7.2003, the fact that appellant is an organization controlled by the Government of Maharashtra, the certification of the seed is done by the appellant as per the provisions of the Seeds Act, 1966 read with Seeds Rules, 1968, the said Act provides for regulating the quality of certain seeds for sale, we do not find that ingredients of proviso to Section 73 of the Finance Act, 1994 are present in the facts and circumstances of the case. Therefore, the demand within the normal period of limitation is only upheld and that beyond the same is set aside.
14. Keeping in view the facts and circumstances of the case, as enumerated in earlier para, we set aside the penalty under Sections 76,77 and 78 under Section 80 of the Finance Act, 1994. We also observe that part of the demand of tax under Section 11D (3) would be overlapping with the demand under Section 73. We therefore confirm the demand which is within the normal period of limitation under Section 73 and the remaining amount collected during 1.4.2005 to 31.3.2006 under Section 11D (3) of the Central Excise Act, 1944 is upheld. The interest payable both under Section 75 of the Finance Act, 1994 and Section 11DD of the Central Excise Act, 1944 are upheld.
15. The appeal is disposed of in above terms.
(Pronounced in Court on 04.04.2014.) (S.S. Kang) Vice President (P.K. Jain) Member (Technical) rk 9