Custom, Excise & Service Tax Tribunal
M/S Monsanto Manufacturer Pvt. Ltd vs Cce, Ghaziabad on 28 May, 2013
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL West Block No. 2, R.K. Puram, New Delhi 110 066. Date of Hearing : 28.5.2013 Date of Pronouncement : For Approval & Signature : Honble Mr. Justice G. Raghuram, President Honble Mr. Sahab Singh, Member (Technical) 1. Whether Press Reporter may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982? 2. Whether it would be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not? 3. Whether their Whether their Lordships wish to see the fair copy of the order? 4. Whether order is to be circulated to the Department Authorities? Service Tax Appeal No. 849 of 2008 (Arising out of Order-in-Appeal No. 185/CE/GZB/2008 dated 24.9.2008 passed by the Commissioner (Appeals), Customs, Central Excise & Service Tax, Meerut-I) M/s Monsanto Manufacturer Pvt. Ltd. Appellant Vs. CCE, Ghaziabad Respondent
Appearance:
Shri Ajay Agarwal, Advocate - for the appellant
Shri Amresh Jain, D.R. - for the respondent
Service Tax Appeal No. 857 of 2008
[Arising out of Order-in-Appeal No. 408/CE/CHD/2008 dated 6.8.2008 passed by the Commissioner of Central Excise, Chandigarh] CCE, Ghaziabad Appellant Vs. M/s Monsanto Manufacturers Pvt. Ltd. Respondent Appearance:
Shri Amresh Jain, D.R. - for the appellant
Shri Ajay Agarwal, Advocate - for the respondent
Coram : Honble Mr. Justice G. Raghuram, President
Honble Mr. Sahab Singh, Member (Technical)
F. Order No. 56553-56554/2013 dated 7.6.2013
Per Sahab Singh :
These are two appeals one filed by M/s Monsanto Manufacturer (P) Ltd. (hereinafter referred to as assessee) and second by Revenue against the same Order-in-Appeal No. 185-CE/GZB/2008 dated 24.9.2008 passed by Commissioner (Appeals), Central Excise, Meerut-I.
2. Brief facts of the case are that on examination of records of the assessee for the period 2001-02 to 2004-05 it was pointed out that assessee received an amount of Rs.1,46,05,000/- from M/s Hindustan Lever Ltd. (HLL) for carrying out services of cold storage/clearing and forwarding operations of frozen products. According to department, the said service is chargeable to service tax. A Show Cause Notice dated 21.7.2006 was issued to the assessee demanding service tax amounting to Rs.9,46,766/- along with interest and also proposing penalties on the assessee. The notice, after due process was adjudicated by Additional Commissioner vide Order-in-Original No. 06/GZB/2007 dated 31.7.207 confirming service tax, interest and imposing penalties of Rs.500/- under Section 75A, Rs.1000/- under Section 77 and Rs.200/- per day till time of deposit of service tax subject to maximum of Rs.9,46,766/- under Section 76 of the Act. Assessee challenged the Order-in-Original before Commissioner (Appeals) who vide impugned order confirmed the service tax amount but reduced the penalty to Rs.2.00 lakhs under Section 76 of the Act from Rs.500/- to Rs.200/- under Section 75A and from Rs.1000/- to Rs.500/- under Section 77 of the Act. Assessee has challenged the impugned order in this appeal against tax, interest and penalties. Revenue has challenged the impugned order on the ground of reduction in penalties.
3. Shri Ajay Aggarwal, ld. Advocate for the assessee submits that cold storage facility is distinct and different from holding of the goods which may take place during clearing and forwarding operation. Charges towards cold storage are in nature of rental for providing cold storage facility and incidental storage should not be confused with independent facility of providing cold storage. Ld. Advocate further states that storage and warehousing service was brought under service tax net with effect from 16.8.2002 and cold storage service has been excluded from tax net. Therefore tax on the same service cannot be levied under different taxable service. He relies on decision of Kearala High Court in case of Kerala State Industrial Enterprises Ltd. Vs. CCE reported in 2011 (28) STR 574 (Ker.) and CCE Vs. Federal Bank Ltd. reported in (2010) 34 VST 27 (Ker.). He further points out, that assessee is not engaged in any clearing corporation and as such in view of decision of Punjab & Haryana High Court in case of CCE Vs. Kulcip Medicines (P) Ltd. - 2009 (14) STR 608 assessees activity does not fall under C&F service also. He submits demand is also hit by time limitation as assessee has replied vide their letter dated 8.11.2002 and 9.12.2002, departments letter dated 27.9.2002 and 20.11.2002, which shows the facts were in the knowledge of the department since 2002. Therefore extended period of limitation cannot be invoked in this case.
4. Ld. Additional Commissioner (A.R.) for Revenue submits that assessee is a consignee for goods received from HLL and is consignor for goods despatched for further sale. Consignment agent is an intermediary between seller and purchaser and these agents performs all the functions before actual sale. These functions include receiving the goods from seller, storing them, despatching then to actual purchaser. He submits thus activity of storage becomes an integral part of the operation. Therefore, cold storage charges are squarely covered under C&F operation particularly when these are part of same agreement. On limitation, he submits that assessee has not declared these charges in ST-3 return in neither gross amount nor exempted service. He submits extended period is applicable in view of decision in the case of CCE Vs. Mehta & Co. - 2011 (264) ELT 481 (SC) and CCE Vs. Kalvert Foods India Pvt. Ltd. 2011 (270) ETT 643 (SC).
5. Ld. Advocate in his written submission has disputed contention of department that storage charges were required to be declared in ST-3 Returns. He submits that in ST-3 Return format prevailing during the relevant time, there was no such requirement. ST-3 Return as amended with effect from 20.10.2005 made it mandatory to show the amount towards exempted service also.
6. After hearing both sides and seeing the case records, we find that dispute in this appeal is whether assessees activity of storing of goods in cold storage can be covered under Clearing and Forwarding Agent Service and whether demand is hit by time limitation.
7. Clearing & Forwarding Service is defined under Section 65(25) of the Finance Act which provides that Clearing and forwarding agent means any person who is engaged in providing any service, either directly or indirectly, connected with the clearing and forwarding operations in any manner to any other person and includes a consignment agent.
8. We find that assessee is receiving frozen food from HLL, storing the goods in cold storage and thereafter despatches the goods as per directions of principal. They have entered into an agreement in which M/s Monsanto Manufacturers Pvt. Ltd. is shown as Clearing and Forwarding Agent (in short, C&FA). Also clause 5 of Article 1, C&SA is defined which operates as principals agent for receiving and forwarding goods and for undertaking other functions. Assessee is paying service tax under C&FA service except on the cold storage charges.
9. Assessees contention is that cold storage facility is distinct and different for C&F operation and therefore these charges are not liable to be included in taxable value of C&FA services. We note that in para 2.1 of the agreement, assessee has agreed to provide cold storage for the purpose of storing and forwarding the frozen products belonging to HLL. In Article 2.13 to 2.29 of the Agreement in view of perishable nature of the goods, assessee is required to maintain specific temperature for storage of frozen goods before despatching the same as per direction of HLL. Therefore, we find the storage of the goods in cold storage is an inseparable part of Clearing & Forwarding activity undertaken by the assessee.
10. We also find that assessee has entered into one single agreement with HLL in which cold storage charges and C&FA charges have been mentioned separately. Since storage of the goods in cold storage is essential part of assessees C&F operations, cold storage charges are required to be added in taxable value of C&FA services. We order accordingly,.
11. It is one of the contention of the assessee that with effect from 16.8.2002 storage and warehousing service was enacted from which cold storage was excluded. To decide the issue of classifiability of services under C&FA or under storage and warehouse, one has to apply Section 65A(2)(b) of the Finance Act under what services is to be classified under service which gives essential character of the service. We have already held that storage of frozen goods in cold storage is an inseparable part of assessees activity of clearing & Forwarding operation. We are therefore of the view that essential character of service is C&FA service and therefore service is classifiable under C&FA service.
12. Ld. Advocate has contended that assessee is not involved in clearing operation and therefore not covered under C&FA service in view of the decision of High Court of Punjab & Haryaba in case of Kulcip Medicines (P) Ltd. case. We find that the issue was never raised by the assessee before lower authorities. Being the question of fact, we cannot go into this issue at this stage and do not accept this contention of the assessee at this stage.
13. Coming to issue of limitation, we find that for the first time the Revenue wrote a letter dated 27.9.2002 asking assessee to pay tax for the period Sept. 2001 to July 2002. Assessee replied this letter vide their letter dated 8.11.2002 thereafter there was correspondence on 20.11.2002 from the department and replied by assessee on 9.12.2002. we find that fact that assessee is not paying duty on cold storage charges was known to department in 2002. Quantum of Cold Storage Charges is already part of agreement and is fixed on monthly basis. We are therefore of the view extended period based on suppression of fact cannot be invoked in the present case and therefore demand beyond period of one year is time-barred in the present case. Decisions relied on by ld. D.R. do not support the case of the department as those decisions are in respect of clandestine removal of goods where one cannot ascertain the relevant dates defined under Section 11A of the Act.
14. Since appeal succeeds on the ground of time-bar, Revenues appeal fails.
15. Appeals are disposed of in above terms.
(Pronounced on................................) (Justice G. Raghuram) President (Sahab Singh) Member (Technical) RM 2