Madhya Pradesh High Court
Commissioner vs The State Of Madhya Pradesh on 20 January, 2015
Author: S.K. Gangele
Bench: S.K. Gangele
HIGH COURT OF MADHYA PRADESH : AT JABALPUR
MACE No : 16 of 2006
Commissioner, Customs & Central Excise
- V/s -
State of Madhya Pradesh
CEA No : 17 of 2009
Commissioner, Customs & Central Excise
- V/s -
State of Madhya Pradesh
Present : Hon'ble Shri Justice Rajendra Menon.
Hon'ble Shri Justice S.K. Gangele.
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In both cases:
Shri Sushrut Dharmadhikari for the appellant.
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Whether approved for reporting: Yes / No.
ORDER
20/01/2015 These appeals by the Revenue under section 35-G of the Central Excise Act, 1944 call in question tenability of orders passed by the Customs, Excise and Service Tax Appellate Tribunal, Principal Bench, New Delhi, and the only question of law proposed for consideration in both these appeals are as under:-
"Whether the Hon‟ble Tribunal‟s finding that the charges levied at 5% were levied under Section 28-A of Madhya Pradesh Excise Act, 1915 and such 2 MACE No : 16/2006 CEA No : 17/2009 charges are not liable to Service Taxd as defined under Section 65(105)(zza) of the Finance Act, 1994, which include „Storage & Warehouse Services‟, is Legal and proper or otherwise, in the facts and circumstances of the case."
2- Facts in brief go to show that the Excise Officer of the District concerned had engaged certain staff to supervise the storage of Foreign Liquor undertaken by the Liquor Contractor in the warehouse in question. For the purpose of ensuring that the Contractor is carrying out various statutory functions as are contemplated under the MP Excise Act, 1915 and the MP State Excise Act, 1950 in the matter of preparation of inventory of goods i.e... Foreign Liquor; security of the goods, supervision and insurance of the stock and carrying out various other statutory functions, staff of the department were deputed to oversee the work in the warehouse.
3- For the purpose of deputing staff for supervision of the work, section 28-A of the Excise Act enables the Government to recover supervision charges from the Contractor, holding that this charge i.e... supervision charges collected @ 5% under section 28-A is not a „service‟ rendered by the Department to the Contractor, „service tax‟ chargeable under the category/classification „storage and warehouse services‟ as provided in the Notification No.08/2002/ST dated 1.8.2002, has been imposed, these appeals have been filed by the Revenue after the Tribunal by the impugned order held that the service rendered for providing supervisory staff is not a service but a statutory duty discharged for conducting supervision of the godown as contemplated under the Excise Act and not liable for payment of „service tax‟. 4- It is the case of the Revenue that as the State Government is employing the staff for inspecting and ensuring that storage of liquor in the ware house is undertaken in a proper manner and as the same is subjected to payment of 5% by the Contractor, the collection of this 5% by the Government, according to the Revenue is nothing but a service 3 MACE No : 16/2006 CEA No : 17/2009 provided by the State Government for the purpose of storage and ware housing services and, therefore, taxable. Learned Tribunal has taken note of the provisions of section 28-A of the Excise Act and has held that the amount of 5% collected under section 28-A is not for any service rendered, but is only collected as supervision charges for supervising the activities of the Contractor in the warehouse.
5- Heard Shri S. Dharmadhikari, learned counsel for the appellants, on the question raised by the Revenue. 6- Before dealing with the question involved in the matter, it would be appropriate to consider as to what is the meaning of „service‟ as contemplated under section 65(12)(a)(i) of the Finance Act, 1994 as amended from time to time. The question was considered by the Supreme Court in the case of Association of Leasing and Financial Service Companies Vs. Union of India and others, (2011) 2 SCC 352, and the concept of „service‟ as provided under the Service Tax Act has been explained in the aforesaid judgment. In paragraph 38, while dealing with the question of nature and character of „service tax‟, the Hon‟ble Supreme Court deals with the import and meaning of the word „service‟ in the following manner:
"38. ... That, service tax is a value added tax. The value addition is on account of the activity which provides value addition, for example, an activity undertaken by a chartered accountant or a broker is an activity undertaken by him based on his performance and skill. This is from the point of view of the professional. However, from the point of view of his client, the chartered accountant/broker is his service provider. The value addition comes in on account of the activity undertaken by the professional like tax planning, advising, consultation, etc. It gives value addition to the goods manufactured or produced or sold. Thus, service tax is imposed every time service 4 MACE No : 16/2006 CEA No : 17/2009 is rendered to the customer/client. This is clear from the provisions of Section 65(105)(zm) of the Finance Act, 1994 (as amended). Thus, the taxable event is each exercise/activity undertaken by the service provider and each time service tax gets attracted."
(Emphasis supplied) 7- From the aforesaid, it is clear that „service tax‟ is a value added tax and the service provided for which the duty is payable is nothing but an activity undertaken by a person based on his performance and skill and is certain service provided by the service provider to his client. According to the aforesaid principle laid down by the Supreme Court, „service tax‟ is imposed every time when service is rendered to a customer or a client by the assessee. If the act of the State Government in appointing a person for supervision and for discharging the statutory function under section 28-A of the MP Excise Act, 1950 is taken note of, it would be seen that the supervisory staff appointed by the State Government or the Excise Department does not provide any service on behalf of the Government to the Liquor Contractor or the person who is storing the liquor in the warehouse or the storage. On the contrary, the supervisor only keeps a watch on the material stored in the warehouse and ensures that the person manufacturing, exporting, importing or storing the material in the warehouse carries out the activities strictly in accordance to the MP Excise Act, 1950; all the requirements with regard to preparation of inventory, transportation, movement, storage and even insurance of the property is undertaken as per the statutory provision and the excise policy. What is done by the supervisor/supervisory staff so appointed by the State Government is not to provide any service on behalf of the State Government to the Liquor Contractor, but to ensure that all the activities in the warehouse where the liquor is stored is carried out in a proper manner without there being any contravention to the rules or regulation governing distribution, manufacturing of liquor, no evasion of duty etc. 5 MACE No : 16/2006 CEA No : 17/2009 8- That being so, the activities of the staff appointed to supervise the work of the warehouse and the act of the State Government in appointing the supervisor does not fall within the purview of providing service by a service provider to a client. In view of the above, we see no error in the order passed by the Tribunal holding that the supervision in the warehouse undertaken by the State Government does not amount to „service‟ and is not taxable under the head „Storage and Warehouse Services‟.
9- Accordingly, the Tribunal has not committed any error in deciding the question against the Revenue and we also hold that the supervisory charge levied by the Excise Department under section 28-A of the MP Excise Act, 1950 is not liable for „service tax‟, as it does not fulfil the requirement of service as provided under section 65(105)(zza) of the Finance Act, 1994 and is not included in the purview of the words „Storage and Warehouse Services‟. On the contrary, it is only a fees levied for the supervision undertaken by the State Government to ensure proper functioning of the warehouse and storage in accordance to the statutory requirement.
10- Accordingly, answering the question against the Revenue, both these appeals are dismissed.
( RAJENDRA MENON ) ( S.K. GANGELE )
JUDGE JUDGE
Aks/-