TMI Blog2014 (8) TMI 821X X X X Extracts X X X X X X X X Extracts X X X X ..... s imported are endorsed in the name of the appellant herein and the appellant herein files Bill of Entry as an importer and discharges the Customs duty as is assessed. Undoubtedly the tender document indicates that Govt. of India is desirous of handling and distribution of imported bulk urea. Though, the wordings of the said tender indicate that Govt. of India wants to appoint a handling and distribution agent, we find that actually entire transaction is of sale and purchase of urea from the following documents. It is seen from the records available that the Govt. of India has imported 27,500 MTs of imported urea for which the appellant herein was required to open a letter of credit (LOC). In the case of ration shop, the authorized ration shops purchases the food grains from the Govt. of India and stores in his godown. Subsequently, the said food grains are distributed to various ration card holders at a price predetermined by the Government. The authorized ration shops pays in advance to the Govt. of India for the food grains which is allotted for public distribution system. The authorized ration shops also engaged in an similar activity Govt. of India which though not iden ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment was of the view that the appellant is required to pay the Service Tax on the amount received by them from MOCF against handling charges of High Sea Sales imported urea on an understanding that the amount received by the appellant were reimbursement for providing taxable services by handling imported urea which involves handling of vessels, unloading, loading, unpacking and repacking of the cargo which tantamount to handling and distribution of urea; show cause notice was issued to the appellant directing them to show cause as to why Service Tax liability for the period 2007-2008 to 2009-2010 (upto May 2010) and January 2012 be not demanded from them with interest and penalties be not imposed on them. The appellant contested the show cause notice on merit and on limitation also. The adjudicating authority, after following the due process of law, did not agree with the contentions raised by the appellant. He held that the activity of tendering for handling of imported fertilizers would amount to services rendered by the appellant which would fall under the category of cargo handling services or Business Auxiliary Service. To come to such conclusion, the adjudicating authority re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... speak with one voice would be the ratio applicable in these cases as the Govt. of India wants the appellant to distribute imported urea at a fixed price considered by Govt. of India and amount reimbursed to the appellant for bagging, distribution etc at fixed amount as quoted by the appellant. (g) Appellant paid VAT on the sale of urea after repacking and turnover of such transactions is shown as sale by them to the VAT authorities. It is his submission that the VAT authorities have accepted the said transaction of distribution by the appellant as a sales transaction and such sale transaction cannot be done by the appellant unless there is a purchase of urea. It is his submission that undoubtedly the demands have been raised on urea which is imported and distributed. (h) The contention of the Revenue that urea is not transferred to the appellant and the activity undertaken by the appellant including sale thereof is on behalf of the MOCF is incorrect in the facts of this case as the transit risk after unloading the cargo till it is delivered after to various buyers, nominated by MOCF is on the appellant; any loss of urea in the transit is at the appellants ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtilizer under specific rate, any amount received as subsidy from the Government to the manufacturer of urea for the difference between the MRP price and the cost of production is never added to the transaction value and no demand is made as per the clarification issued by TRU on 10.07.2014. (n) In the present case, the transaction is not of providing the service but a clear transaction of purchase and sale of urea between MOCF and the appellant and the cargo i.e. imported urea was not handled by the appellant on behalf of the Govt. of India. (o) The appellant is demonstrating the transaction between them and the Govt. of India and of sale and purchase of 27,500 MTs of urea imported vide MV KEE LUNG. (p) It is the submission that in any event, the appellant would not have rendered Business Auxiliary Service to MOCF as MOCF is not in business and the appellant do not provide any auxiliary services to the main business carried on by MOCF. (q) It is his submission that in case of C.S.S. Software Enterprises Ltd 2008 (10) STR 367 (Tri-Bang), Bajrang Infotech Systems Pvt.Ltd. CMC Ltd - 2007 (7) STR 702 (T), the Tribunal has held that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n agent as per the elaborate clauses made out in the contract. iv) MOCF does not have an administrative and commercial infrastructure to import and sell urea by itself, hence MOCF designed its mechanism of appointing and hiring services of handling and distribution agency. v) On reading 2 articles of the contract between the appellant and MOCF, it is very clear that the appellant is appointed as an handling agent and the contract itself is named as handling contract; the entire gamut of contractual terms in the said contract nowhere gives an impression that the contract is specifically for sale of urea by MOCF to the appellant; opening paragraph of the tender document inviting bids from various marketing fertilizer entities also indicate that the tenders are invited for handling of vessels at the port, bagging, standardization and distribution of the imported urea; the payment terms also clearly reveal that MOCF pays appellant only for the amount bid by them for bagging and handling contract for which a letter of credit is required to be opened by the appellant; reimbursement of port dues, freight, Customs duty etc as mentioned specifically in the contract ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Food Control Act and Essential Commodities Act read with the fertilizer policy of Govt. of India. It is not disputed that Govt. of India imports urea from Saudi Arabia. Govt. of India floats tender for unloading, bagging, standardization and distribution of this imported urea for which bid is made by various fertilizers marketing companies. It is also undisputed that the Bill of Lading of goods imported are endorsed in the name of the appellant herein and the appellant herein files Bill of Entry as an importer and discharges the Customs duty as is assessed. 10. In order to ascertain the actual transaction between the appellant and the Govt. of India, we take up a random example of import of urea by Govt. of India through MV KEE LUNG. Govt. of India invited tenders for the distribution of imported bulk urea for the period 2007-2008 from the port of Mundra. Undoubtedly the said tender document indicates that Govt. of India is desirous of handling and distribution of imported bulk urea. Though, the wordings of the said tender indicate that Govt. of India wants to appoint a handling and distribution agent, we find that actually entire transaction is of sale and purchase of urea from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of discharge .. 20.07.2009 4. Due date of encashment of LC .. 18.08.2009 5. Quantity as per Bill of Lading .. 27500 Mtrs 6. Total cost of PIP value @ ₹ 4650/- PMT .. 127875000/- 7. Less: 90% Inland freight handling Charges + 95% Customs duty. .. 5,50,98,108/- 8. Net amount payable. .. 7,27,76,892/- (Rupees Seven Crore Twenty Seven Lakh, Seventy Six Thousand, Eight Hundred Ninety Two only) CERTIFIED THAT 1. The above particulars are correct and the amount claimed represents the dues payable to Govt. 2. Fertilizer vessel MV KEE LUNG completed final discharge of Cargo on 20.07.2009 at ROZY port. Sd/- (N.S. MALHOTRA) Dy.Director of Accounts Tel.no.23063771 12. It can be seen from above reproduced invoice No.1 dt.11.08.2009, that Govt. of India has sold the prilled urea to the appellant at the total cost minus the freight and handing charges and collected the net amount by way of LOC as is reproduced hereinabove. This entire transaction talks about the sale of prilled urea by Govt. of India to the appellant. 13. Subsequent to such transaction, the appellant unloaded the urea and after bagging and standardizing the sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ax Additional VAT 340 17,000 4,830.00 -180.00 4,650.00 4.00 % 1.00 % 82,110.00 -3,060.00 79,050.00 3,162.00 790.50 Eighty Three Thousand Two Hundred Fifty Paise only 83,002.50 Gujarat The supply of Urea, NP20:20:0, CAN, SSP, MOP, DAP and other fertilizers covered by this invoice, is FOR USE AS MANURE for Fertilization of soils and increasing productivity of crops. This diversion of this material for any other purpose is an offence under the Fertilizer (Control) Order, 1985, the Customs Act, 1962 and other relevant statues and orders as in force from time to time. The buyer undertakes that the fertilizer supplied to him as manure will be used as manure and if re-sold, the re-sale will be for use as manure, and accepts full liability without demur for all costs, damages, losses that may be sustained by Government of India and/or GNFC Ltd., in the event of diversion of the fertilizers for any other purpose by the buyer, their agents and/or sub dealers. 24210100259 - 01.07.2002 24710100259 - 10.01.1980 VAT TIN No: 24210100259/01.07.02 FOR AGRICULTURE USE ONLY Invoicing Office: M/s GNFC Limited E/7 / HIG-4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rea has been purchased by them from Govt. of India and after bagging and standardising and giving their own name to the said urea, sold the same in the market, would amount to nothing but a transaction of sale and purchase of urea. 16. On his factual matrix as reproduced hereinabove, it has to be held that the activity of the appellant of unloading the fertilizers from the ship, standardizing, bagging and subsequently distributing the same cannot be construed as an activity of cargo handling services or Business Auxiliary Service. Further, we also find strong force in the contentions raised by ld.Counsel that the activity performed by the appellant is nothing but a sovereign function of Govt. of India. If the appellant is performing a sovereign function, which has to be done by Govt. of India, it is not service rendered by the appellant to Govt. of India, is the law which has been laid down by the Tribunal in the case of C.S.S. Software Enterprises Ltd, Bajrang Infotech Systems Pvt.Ltd. CMC Ltd (supra). In these cases, the assessees therein were assisting and implementing the project of Govt. of India to issue voter identification cards by arranging to take photographs of citi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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