Custom, Excise & Service Tax Tribunal
The Erode Agricultural Producers Co ... vs Salem on 5 September, 2023
1
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
CHENNAI
REGIONAL BENCH - COURT NO. III
Service Tax Appeal No. 40100 of 2014
(Arising out of Order-in-Original C.No.:V/AUC/15/34/2012-ST ADJ Order Sl.No.:10/2013 dated
07.10.2013 passed by Commissioner of Customs, Central Excise and Service Tax, No. 1, Foulk's
Compound, Anai Medu, Salem - 636 001)
M/s. The Erode Agricultural Producers Cooperative
Marketing Society Ltd. ...Appellant
No. AA268, Door No. 293,
Cauvery Road,
Erode - 638 003.
Versus
Commissioner of GST and Central Excise ...Respondent
Salem Comissionerate, No. 1, Foulk's Compound, Anai Medu, Salem - 636 001 APPEARANCE:
For the Appellant : Shri V. Ravindran, Consultant For the Respondent : Smt. O.M. Reena, Additional Commissioner / A.R. CORAM:
HON'BLE MS. SULEKHA BEEVI C.S., MEMBER (JUDICIAL) HON'BLE MR. VASA SESHAGIRI RAO, MEMBER (TECHNICAL) DATE OF HEARING / DECISION: 05.09.2023 FINAL ORDER No.40761/ 2023 Order : Per Ms. SULEKHA BEEVI C.S. Brief facts are that the appellant is engaged in conducting sale of goods by tender which according to the Department was Auctioneer services. Show Cause Notice was issued proposing to demand the Service Tax for the period from 2 01.10.2006 to 13.09.2011 along with interest and for imposing penalties. After due process of law, the original authority confirmed the demand along with interest and imposed penalty.
Aggrieved by such order, the appellant is now before the Tribunal.
2. The Ld. Consultant Shri V. Ravindran submitted that the Department has erroneously confirmed the demand on the allegation that their activity falls within the definition of Auctioneering services. The definition in Section 65(105)(zzzr) of the Finance Act, 1994 was adverted to by the Ld. Consultant which reads as under:-
"As per Section 65(105)(zzzr) of Finance Act, 1994 taxable service means:"any service provided or to be provided to any person, by any other person, in relation to auction of property, movable or immovable, tangible or intangible, in any manner, but does not include auction of property under the directions or orders of a court of law of auctin by the Government."
3. The activity of the appellant does not fall within the above definition and the Ld. Consultant explained the activity carried out by the appellant as under:-
"9. Here the society wishes to place the following methods followed during rendering its services to the Agriculturist to sell the Agricultural Produce (turmeric) a. The Society is carrying out its objects and transactions only between members, whether they are agriculturists or buyers or traders and not with public.
b. The Society is acting as an intermediary in relation to sale of agricultural produce with particular reference to Turmeric between the Agriculturists and traders/buyers who are the members of the Society c. The Agriculturists/members display their Agricultural produce ie Turmeric at Society Premises in a Tray on the Notified days. The quantity available for sale will also be noted on the Card which is kept on the sample tray. Numbers are allotted to each tray. After examining the samples, every trader/member will quote the price on their own based on the market conditions. The list of prices so quoted by various traders/members on various samples are put in a separate box till 12 Noon. After the appointed time, the prices so quoted by the Traders are read out in the open hall by the Society's Appointed Officer. If the price quoted for sample is agreeable to the Agriculturist, he will intimate the society for sale/delivery of goods. This means the society has to effect the sales/delivery only after getting the agriculturists permission. If the price quoted is not acceptable to the agriculturists, the sale process will not be completed and the Turmeric (agricultural produce) is returned to the Original owner le Agriculturist by the society.
d. The process of Price quoting by the buyers of Agricultural produce is in the form of "Tender" and not Auction.3
e. The Society is not the owner of the Turmeric nor the ownership is transferred to the society for the activities mentioned in Para 9(c) above.
f. For the activities and transactions carried out in Para 9(c) the society charges a fixed commission of 1.5% from the Agriculturists/members on the sale value of turmeric on completion of sale. This means the society is acting as Commission agent of Agricultural produce on behalf of agriculturists/members who are selling the Turmeric.
g. Commission will be charged by the Society only on Completion of sale of turmeric and not merely by displaying the samples of turmeric by Agriculturists/members.
h. The society's Business Activities are covered only by the definition of "Tender" and not "Auction".
i. Hon'ble CESTAT, Chennai in various cases have decided that "Tender" activities are not covered by the definition of "Auction".
j. The Society's Business Activities are covered by the following Decided cases of CESTAT Chennai in support of its claim of not treating under "Auctioneer Services" The nature of Business activities are one and the same mentioned in the following Decided cases"
4. It is asserted by the Ld. Consultant that the price is not fixed by the appellant and the goods are not sold without the consent of the farmer. In ordinary service of auction, the price gets fixed by the auctioneer as per bid. Further, there will be a live process wherein the public is called upon to take part in the auction. In the present case only members who are part of the society participate in the sale of the products by way of method which is more akin to tender process.
5. The Ld. Consultant submitted that the issue stands covered by the decision of the Tribunal in the case of M/s. Starch Starch and Sago Manufacturing Service Industrial Cooperative Society Ltd. Vs. Commissioner of Central Excise and Service Tax, Salem [2018 (3) TMI 192-CESTAT Chennai]. The Tribunal in the case of M/s. Attur Agricultural Producers Cooperative Marketing Society Ltd. Vs. Commissioner of Central Excise [2019 (8) TMI 262-CESTAT Chennai] and in the case of M/s. Trichengode Agricultural Producers Cooperative Marketing Society Ltd. Vs. Commissioner of Central Excise and Service Tax vide Final Order No. 41731-41732/2019 dated 13.12.2019 also have taken similar view. The Ld. Consultant prayed that the appeal may by allowed.
46. The Ld. Authorised Representative Smt. O.M. Reena supported the findings of the impugned order.
7. Heard both sides.
8. The main contention put forward by the Ld. Consultant appearing for the appellant is that the activity does not fall within the auctioneering services. The nature of the actvity engaged by the appellant for sale of the farmers produce has been explained as above. The issue stands covered by the decision of the Tribunal in the cases relied by the Ld. Consultant. In the case M/s. Starch Starch and Sago Manufacturing Service Industrial Cooperative Society Ltd.(supra), the Tribunal observed as under:-
"5.1 For better appreciation of the issue in dispute, the definition of "Auction of Property Service" under Section 65(7a) is reproduced as under :-
" "auction of property" includes calling the auction or providing a facility, advertising or illustrating services, pre-auction price estimates, short term storage services, repair or restoration services in relation to auction of property".
Taxable service in relation to this service under Section 65(105)(zzzr) read as under :-
'any service provided or to be provided to any person, by any other person, in relation to auction of property, movable or immovable, tangible or intangible, in any manner, but does not include auction or property under the directions or orders of a court of law or auction by the Government' 5.2 The issue that poses for consideration is whether the activities of the appellant would fall within the definition of auction of property service for the period from 1-5-2006 to 31-3-2007. The activity which is the subject matter of dispute is governed by the following terms and conditions between the appellant and the members of the society :
"Without prejudice to any of the foregoing provisions or any other clause in these tender terms and conditions, sago serve will also conduct an alternate daily secret tender for sale of sago and starch in the following manner :
The samples of the lots put up for tender each day will also display the minimum price indicated in writing by the concerned member.
Merchants will bid for these lots as before subject to the conditions that any bid lower than the price will summarily be rejected.
The lot or a portion thereof (as the case may be) shall be automatically confirmed in favour of the merchant who has quoted the higher price. Any member who wishes his samples to be displayed in this alternate tender system is deemed to have given his concurrence for such automatic confirmation of the sale in favour of the highest bidder.5
Samples of lots will be displayed either under the regular tender system or under the alternate tender system on a given day. In other words, no sample will be displayed simultaneously under both the systems during any day.
The member shall be at liberty to vary his minimum price from day to day and to request that his samples be displayed under either of the two tenders according to his convenience.
The regular tender system hereafter shall be designated as "Type I tender" and alternate tender system be designated as "Type II tender."
5.3 The department is of the view that such tendering process would fall within the ambit of auctioneer's service.
5.4 The lower appellate authority has, in para 5.4 of the impugned order, compared the definitions of "tender" and "auction" put forth by the appellants; inter alia that advertisements or other invitations calling for tender for purchase of goods is not normally an offer but an invitation to treat and that there is no obligation to accept the highest or lowest tender or indeed any tender; on the other hand an auction is sale by competitive bidding, normally held in public, at which prospective purchasers are invited to make successively increasing bids for the property, which is then usually sold to the highest bidder. The bidding process is conducted in such a manner with all intending bidders are aware, immediately, and on real time basis and the bids made by others. That an auction sale is to be distinguished from a sale by fixed bidding when each bidder must specify a fixed amount and has no opportunity to adjust his bid by reference to rival bids.
5.5 We find merits in these contentions of the appellant. An auction is a live process where all prospective bidders are present at the same time and where the system is transparent enough for each bidder to be aware of the bids put forth by others. Per contra, the "tendering process" does not allow all prospective bidders to know of the bids made by others. In sale by auction, a bidder can make any number of bids by upping the ante vis-a-vis a rival bid. Auction signifies generally an increasing, an enhancement, and hence is applied to a public sale of property usually conducted by biddings, which enhances the price. (Smith's Diet. of Antiq). The auction process will normally get culminated only when there are no more bids made for the goods auctioned. Whereas, in respect of tenders, there is only one bid that each bidder can make, the tendering process will be completed at the end of the appointed time and date and, only bids received till that cut off point will be considered for evaluation. However, in the traditional method of auctioneering, apart from the auction process per se the auctioneer also provides a gamut of other related services like providing a facility, advertising or illustrating the goods in auction, engage in pre-auction estimates, short term storage services, et al. In our view, this is precisely why the Legislature has specifically brought all such activities under a separate "Auction of Property Service" w.e.f. 1-5-2006. Thus, while both sale by tender and sale by auction may have a common intendment of selling the goods, the modalities and the processes involved in each are very different.
5.6 Viewed in this light, we are unable to appreciate how the lower appellate authority in Para 5.4 of the impugned order, has concluded that the definitions of "tender" and "auction" are similar. Further, although the authority has reasons that the appellants have performed the services of providing facility for easy interaction between the manufacturers and the merchants, provided short term services and have also been involved in the pre-auction price estimation, however, no evidence is forthcoming to substantiate such a finding."
69. After appreciating the facts and following the decisions relied as above, we are of the considered opinion that the demand cannot sustain and requires to be set aside which we hereby do. In the result, the impugned order is set aside. The appeal is allowed with consequential relief.
(Order dictated in open court)
(VASA SESHAGIRI RAO) (SULEKHA BEEVI C.S.)
MEMBER (TECHNICAL) MEMBER (JUDICIAL)
MK