Custom, Excise & Service Tax Tribunal
Mayur Ply Industries Pvt Ltd vs Service Tax - Kolkata on 10 May, 2024
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
EASTERN ZONAL BENCH : KOLKATA
REGIONAL BENCH - COURT NO. 1
Service Tax Appeal No. 76334 of 2014
(Arising out of Order-in-Original No. 34/Comm/ST/KOL/2014-15 dated 19.06.2014
passed by the Commissioner of Service Tax, Kolkata, Kendriya Utpad Shulk Bhawan,
3rd Floor, 180, Shantipally, Rajdanga Main Road, Kolkata - 700 107)
M/s. Mayur Ply Industries Private Limited : Appellant
(Formerly: 'M/s. Timtech India Private Limited')
NH-2, Delhi Road, P.O. - Belumukhi,
Hooghly - 712 223
VERSUS
Commissioner of Service Tax : Respondent
Kendriya Utpad Shulk Bhawan, 3rd Floor,
180, Shantipally, Rajdanga Main Road, Kolkata - 700 107
APPEARANCE:
Smt. Payal Agarwal,Chartered Accountant for the Appellant
Assisted by Shri Rajkumar Banarjee, Advocate
Shri S. Mukhopadhyay, Authorized Representative for the Respondent
CORAM:
HON'BLE SHRI ASHOK JINDAL, MEMBER (JUDICIAL)
HON'BLE SHRI K. ANPAZHAKAN, MEMBER (TECHNICAL)
FINAL ORDER NO. 75900 / 2024
DATE OF HEARING: 02.05.2024
DATE OF DECISION: 10.05.2024
ORDER:[PER SHRI K. ANPAZHAKAN] The appellant viz. M/s. Mayur Ply Industries Limited, Belumukhi, Hooghly, is engaged in the manufacture of plywood, veneers, flush doors, block boards and allied products. They also act as a consignment agent for stocking and selling products of their principals, namely, M/s. Diamond Timber Industries and M/s. Bhawani Plyboard Pvt. Ltd.
Page 2 of 7Appeal No.: ST/76334/2014-DB
2. A Show Cause Notice dated 16.04.2013 was issued to the appellant demanding Service Tax of Rs.1,69,45,149/- (including cess) under the category of "clearing and forwarding agent service" (C&F agent service). The Notice alleged that the appellant had received commission from their principals on account of sale of their products as a 'Commission agent', but had not paid Service Tax under the category of C&F agent service.
3. The Notice was adjudicated vide the impugned order and the demand of Service Tax of Rs.1,69,45,149/-, was confirmed along with interest. An amount of Rs.39,15,442/- already paid by the appellant was ordered to be appropriated against the confirmed demand. Penalty equal to Service Tax confirmed was imposed under Section 78 of the Finance Act, 1994.
4. Aggrieved against the impugned order, the appellant has filed the present appeal.
5. The appellant submits that the demand of Rs.1,69,45,149/- has been confirmed under two heads, which are furnished below: -
5.1. With regard to the demand of Service Tax of Rs.1,37,44,605/- under the category of C&F agent Page 3 of 7 Appeal No.: ST/76334/2014-DB service, the appellant submits that the demand raised by invoking the extended period of limitation is not sustainable. They submit that they have paid Service Tax for the same service for the period 2007-08 under the category of "business auxiliary service" on the basis of the observation made by the Headquarters Internal Audit, Kolkata-IV Commissionerate;
however, subsequently the department has changed their stand and demand has been raised for the entire period from March 2008 to 2011-12 under the category of C&F agent service. They contended that the Department was aware that the appellant had paid Service Tax under the category of "business auxiliary service" and hence, no Show Cause Notice can again be issued on the same issue by invoking the extended period of limitation. They placed reliance on the decision of the Hon'ble Apex Court in the case of Nizam Sugar Factory v. Collector of C.Ex., A.P. [2006 (197) E.L.T. 465 (S.C.)]. They also relied on the decision of the Hon'ble High Court in the case of Gujrat Ambuja Exports Ltd. v. Union of India [2011 (269) E.L.T. 159 (Guj.)] wherein it has been held that the extended period cannot be invoked when all the facts are already known to the Department. In the present case, the demand for the period from March 2008 to 2011-12 has been issued on 16.04.2013 and accordingly, they submit that the demand for the period up to September 2011 is barred by limitation.
5.1.1.They also requested for adjusting the Service Tax already paid by them under the category of business auxiliary service against the Service Tax liability, if any, confirmed for the normal period under the category of C&F agent service.
Page 4 of 7Appeal No.: ST/76334/2014-DB 5.2. Regarding the demand of Service Tax of Rs.32,00,544/-, the appellant submits that they sold the goods on high-sea sales basis to their Indian customers, before arrival in India; the Indian customers filed bills-of-entry for the imported goods upon arrival in India. The appellant submits that the commission of 2% received by them has been included in the value declared by the importers in the Bills of Entry for the purpose of assessment of customs duty. The appellant submits that the transaction undertaken by them is a trading transaction involving sale of goods. They purchased the goods from the foreign suppliers based on the orders placed on them by their Indian customers and they sell these goods to such customers. They are purchasing the goods from the overseas suppliers on their own account and thereafter, they sell these goods to the customers by adding a mark-up. It is their contention that since the commission/mark-up received by them has already been included in the assessable value for the purpose of payment of Customs duty, no Service Tax can be demanded on this amount. Accordingly, they submit that the demand confirmed in the impugned order on the commission received on high sea sales of the goods is not sustainable.
6. The Ld. Authorized Representative appearing for the Revenue reiterated the findings in the impugned order.
7. Heard both sides and perused the appeal documents.
8. Regarding the demand of Service Tax of Rs.1,37,44,605/- under the category of C&F agent Page 5 of 7 Appeal No.: ST/76334/2014-DB service, we observe that the appellant has considered this service as a taxable service under the category of 'business auxiliary service' and paid Service Tax for the period 2008-09. No objection has been raised by the department when they paid service tax for the said service under the category of 'Business Auxiliary Service'. Having accepted service tax under the category of 'Business Auxiliary Service', the department cannot raise the demand for the period 2008 to 2011-12, by invoking extended period of limitation.
8.1. We observe that in the case of Nizam Sugar Factory v. Collector of C.Ex., A.P. [2006 (197) E.L.T. 465 (S.C.), the Hon'ble Apex Court has held that extended period of limitation cannot be invoked when all the facts are already known to the Department. The same view has been taken by the Hon'ble Gujarat High Court in the case of Gujrat Ambuja Exports Ltd. v. Union of India [2011 (269) E.L.T. 159 (Guj.).
8.2. Thus, by relying on the decisions cited above, we hold that the demand confirmed in the impugned order by invoking extended period of limitation is not sustainable.
8.3. We observe that the Show Cause Notice in this case has been issued on 16.04.2013, for the period from March 2008 to 2011-12. Thus, the demand for the period up to September 2011 is barred by limitation. The appellant submits that they have been paying service tax for the period from October 2011 to March 2012, under the category of 'Business Auxiliary Service'. If according to the Department the said service is liable to service tax under the category of 'Clearing and Forwarding Agency Service', then the Page 6 of 7 Appeal No.: ST/76334/2014-DB service tax paid by them under the category of 'Business Auxiliary Service' may be appropriated/adjusted against the demand of service tax under the category of 'Clearing and Forwarding Agency Service' for the same period. We find that the rate of service tax under both the categories are the same. Accordingly, we order that the service tax paid by the appellant under 'Business Auxiliary Service' for the period October 2011 to March 2012 may be appropriated against the liability of service tax on the appellant for the same period under the category of 'Clearing and Forwarding Agency Service'. On appropriation, there would be no further liability of service tax on the appellant during the normal period of limitation from October 2011 to March 2012. Accordingly, we hold that the demand of service tax further for the normal period of limitation is not sustainable.
9. Regarding the demand of Service Tax of Rs.32,00,544/-, we observe that this demand has been confirmed on the commission of 2% received by the appellant on the goods sold on High Sea Sales basis. We observe that the appellant purchases the goods from the overseas suppliers on their own account and thereafter, they sell these goods to the Indian customers by adding a mark-up. The commission/mark-up received by them has been included by the importers in the assessable value for the purpose of payment of Customs duty. Since the commission has already been included for the purpose of demanding customs duty, Service Tax cannot be demanded on the amount under the category of 'Business Auxiliary Service'.
Page 7 of 7Appeal No.: ST/76334/2014-DB 9.1. The appellant relied on the decision of the Hon'ble Apex Court in the case of Hyderabad Industries Ltd. v. Union of India [2000 (115) E.L.T. 593 (S.C.)], wherein it has been held that high sea sales commission are includable in the CIF value for the purpose of payment of customs duty. We observe that when the 2% commission has been included in the value for the purpose of demanding customs duty, service tax cannot be charged on the same amount. We observe that CESTAT, Mumbai in the case of State Trading Corporation of India Ltd. Vs Commissioner of Service Tax, Mumbai [2013 (32) S.T.R. 702 (Tri. - Mum.)] has granted stay on the demand of service tax on High Sea Sales commission.
9.2. Thus, in view of the discussions and by relying on the decisions cited above, we hold that the demand confirmed in the impugned order on the commission received on high sea sales of the goods is not sustainable and accordingly, we set aside the same.
10. Since the demand of service tax has not sustained in both the cases, the question of demanding interest and imposing penalty on the appellant does not arise.
11. In view of the above discussions, we set aside the impugned order and allow the appeal filed by the appellant.
(Order pronounced in the open court on 10.05.2024) Sd/-
(ASHOK JINDAL) MEMBER (JUDICIAL) Sd/-
(K. ANPAZHAKAN) MEMBER (TECHNICAL) Sdd