Custom, Excise & Service Tax Tribunal
Cce, Rohtak vs Haryana State Seed Certification ... on 6 June, 2016
SCO 147-148, SECTOR 17-C, CHANDIGARH-160 017 Division Bench COURT NO.1 Service Tax Appeal No. ST/200-201/2011 [Arising out of the Order-in-Appeal No.443-444/BK/GGN/2010 dated 09.02.2011 passed by the Commissioner of Customs (Appeals), New Delhi-III] Date of Hearing/Decision: 06.06.2016 For Approval & signature: Honble Mr. Ashok Jindal, Member (Judicial) 1. Whether Press Reporter may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982? No 2. Whether it would be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not? No 3. Whether their Lordships wish to see the fair copy of the order? Seen 4. Whether order is to be circulated to the Department Authorities? Yes CCE, Rohtak Appellant Vs. Haryana State Seed Certification Agency Respondent
Appearance Shri. G.M.Sharma, A.R for the appellant Mr. Rajeev Kumar, Advocate for the respondent CORAM: Honble Mr.Ashok Jindal, Member (Judicial) Honble Mr. Devender Singh, Member (Technical) FINAL ORDER NO: 60343-60344/2016 Per Ashok Jindal:
The revenue is in appeal against the impugned orders wherein the demand of service tax has been dropped by the Ld. Commissioner (A).
2. The facts of the case are that the respondents are registered society under Society Registration Act, 1860 and authorised certify the seeds produced by the seeds producer in the state of Haryana under the Seeds Act, 1966. An investigation was conducted in the premises of the respondents on 02.05.2008 and it was found that the respondents are engaged in the activity of Technical Inspection and Certification Service of seeds produced by the seeds producer in the state of Haryana and issuing the certificates. It was found that as per the section 65(105)(zzi) of Finance Act, 1994, the respondents are liable to pay service tax on their activity under category of Technical Inspection and Certification Services. Therefore, the show cause notices were issued to the respondents for the period of 2003-04 to 2007-08. The show cause notices were issued by invoking extended period of limitation and the adjudicating authority after giving opportunity to the respondent confirms the demand of service tax and along with interest and imposed penalties under section 78 of the Finance Act, 1994. The said orders were challenged by the respondent before the Ld. Commissioner (A) who drop the demand of service tax against the respondent relying on the decision of CMC Limited 2007 (7) STR 702 (Tri. Bang), holding that the activity undertaken by the respondent is a sovereign function, therefore, they are not liable to pay service tax. Aggrieved from the said orders, the revenue is before us in appeal.
3. Ld. AR submits that the activity undertaken by the respondents is not a sovereign function as per the section 9 of the seeds act, 1966. In facts, services of the respondent can be obtained by any person which is optional, therefore, the activity undertaken by the respondents does not qualify as sovereign function. The Ld. AR also relied on the CEBC circular no. 89/7/2006-S.T dated 18.12.2006. He further submits that the identical issue came up before this tribunal in the case Maharashtra State Seeds Certification Agency 2015 (37) STR 655 (Tri. Mum), wherein it has been held that the activity on Technical Inspections and Certification of seeds under Seeds Act, 1966 as a taxable service. Therefore, the impugned orders be set aside.
4. On the other hand, the Ld. Counsel appearing on behalf of the respondent opposed the contention of the Ld AR and submits that the activity undertaken by the respondent is a sovereign function and they are registered society under the Society Registration Act, 1860 and working under the Seed Act, 1966 as the certifying agency for seeds. It is further submitted that a clarification was sought by the Gujarat State Seed Certification Agency, Ahmadabad and it was clarified vide clarification dated 27.09.2006 that the activity undertaken by the respondent is the sovereign function and they are not liable to pay service tax. Therefore, the impugned orders are to be upheld.
5. Heard the parties and considered the submissions.
6. On careful consideration of submissions made by both the sides, we find that the respondents are registered society under The Societies Act, 1860 and working under the Seeds Act, 1966. As per the section 9 of the Seeds Act, 1966 which is reproduced here as under.
9. Grant of certificate by certification agency. (1) Any person selling, keeping for sale, offering to sell, bartering or otherwise supplying any seed of any notified kind or variety may, if he desires to have such seed certified by the certification agency, apply to the certification agency for the grant of a certificate for the purpose.
(2) Every application under sub-section (1) shall be made in such form, shall contain such particulars and shall be accompanied by such fees as may be prescribed.
(3) On receipt of any such application for the grant of a certificate, the certification agency may, after such enquiry as it thinks fit and after satisfying itself that the seed to which the application relates conforms to the 8 [prescribed standards], grant a certificate in such form and on such conditions as may be prescribed: 9 [Provided that such standards shall not be lower that the minimum limits of germination and purity specified for that seed under clause (a) of section 6.]3[Provided that such standards shall not be lower that the minimum limits of germination and purity specified for that seed under clause (a) of section 6.]"
The persons who desire their seeds to be certified by the respondent can apply for grant of certificate for that purpose. On plane reading of the above provisions, it is clear that the service provided by the respondents are optional not mandatory. Therefore, these activities have lost characteristic of sovereign function.
Further, the similar issue came up before this tribunal in the case of Maharashtra State Seed Certification Agency (Supra) wherein this tribunal has observed as under.
9. We have considered the rival submissions. We have also gone through the seeds Act, 1966 as also the rules made there under. The said seeds 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 the 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 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 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 th relevant law. 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 provisions 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 provisions 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 provisions 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 society 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-S.T. dated 20.06.2003, 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. 01/01/2002 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 cannot be considered as a consulting engineer service. However, the new service included in 2003 budget, namely technical inspection and certification service 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 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 not that the said service became taxable with effect from 01.7.2003 and the appellant started collecting the same with effect from 01.04.2005 and the amount collected by the appellant was initially kept in bank account which along with 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 01.07.2003, 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 of 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 collect during 01.04.2005 to 31.03.2006 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 11D of the Central Excise Act, 1994 are upheld.
Therefore, we hold that the activity undertaken by the respondents are not a sovereign function and the respondents are liable to pay service tax on their activity under category of Technical Inspection Clarification Services.
7. We also observed that the show cause notice have been issued by the invoking extended period of limitation, the demand of extended period of limitation is not sustainable as there was no mala-fide intention of the respondents not to pay service tax in the light of the clarification issue by the Commissioner of Servicer Tax Ahmadabad on 27-09-2006, wherein it has been clarified as under.
Para (2): Office of the Commissioner of service tax, Ahmadabad clarified in that letter under reference that the certification agency has been carrying out the testing the certification of seeds in discharge of the obligations under the Seeds Act, 1966. Since, the function carried out in discharge of any statutory obligation is not considered as a service, the activity of seed testing and clarification carried out by the Agency would not be covered under Service Tax.
Therefore, we hold that the demand of extended period of limitation is not sustainable. We further observed that the respondents have not recovered any amount over and above the charges paid by the service recipient for certification of seeds. In that circumstance, the respondent is entitle for cum tax benefit. In view of the above observations, we hold that the demand for normal period is payable with cum tax benefit. No penalties are warranted in the lack of mala-fide intention to evade payments of service tax.
10. In result, the impugned orders are set aside and the matter is remanded back to the adjudicating authority for quantification of demand of service tax as discussed here in above.
The appeals are disposed off in the above terms.
(Dictated and Pronounced in the open court)
Devender Singh Ashok Jindal
Member (Technical) Member (Judicial)
rt
1