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TMI Blog2018 (1) TMI 1052X X X X Extracts X X X X X X X X Extracts X X X X ..... ppellants are providing services of Promotion or Marketing or Sale of Goods produced or provided by or belonging to various clients, i.e. tea factories in the auctions conducted at Coonoor, which fall under taxable service of Business Auxiliary Service (BAS). It further appeared to the department that the BAS so provided were not under the category of Commission Agent but under section 65(19)(i) of the Finance Act, 1994, namely, production or sale or marketing or sale of goods produced or provided by or belonging to the client. 3. Accordingly, show cause notices were issued to these appellants which culminated in adjudication orders confirming the demands of service tax proposed in the show cause notice with interest thereon as also imposition of penalties under various provisions of law. On appeal, the Commissioner (Appeals) confirmed the adjudication orders. Hence these appeals. 4. Today, when the matter came up for hearing ld. counsel Shri R. Parthasarathy assisted by Shri Rabeen Jayaram submitted the details of various appeals filed, period of dispute, impugned order and tax in dispute, which are reproduced below:- Appeal No. Period of Dispute Arising out of Order-in-Appea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s . That being the case, the case of the Appellants fell within the plain meaning of the exemption under Notification. The following judgments will support the stand of the Appellants. a. 2015 (40) STR 986 (Tri-Del) Brindco Sales Ltd., Vs Commissioner of Service Tax, Delhi b. 2016(43) STR 193 Tri-Mumbai) Chahabria Marketing Ltd., Vs. Commissioner of Service Tax. Mumbai 5.3 With effect from 16.6.2005, the Explanation introduced to Section 65(19) which defined Commission Agent contained also an inclusive part. The various activities of the Appellants clearly fell within the plain terms of that inclusive part and in particular sub-clause (iv) of Clause (a) of the Explanation which defined a Commission Agent . 5.4 The manufacture and marketing of Tea is regulated by the Tea (Marketing) Control Order. That Control Order makes a distinction between tea leaf on the one hand (paragraph 2(n) of the Control Order and Manufactured tea (paragraph 2(i)) made from the leaves of the Plant Camellia Sinensis (L) O.Kuntz. The Control Order issued by the Central Government in exercise of its powers under the Tea Act, 1953 thus recognizes that Tea leaf by itself is not marketed. It is only man ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Submissions relating to private sales (1.3.2007 to 30.6.2012):- 5.8 The modus operandi of the Appellants remained the same. The only difference was that instead of causing the sales of Tea in the Auctions, the Appellants had caused private sales of the Tea. In fact, the Order in original No. 25/2014 JC(ST) dated 30.4.2014 passed in the case of M/s. TCPL, the Appellant in ST 42608 of 2014, the Adjudicating authority has found in paragraph 10.7 that the Assessee in that case fell under the definition of Commission Agent . However, the benefit of the Notification was denied on the ground that the Tea caused to be sold by the Appellant was not an agricultural produce . The authorities below could not therefore have denied the benefit of the Exemption Notification. 5.9 The Appellant in Appeal Nos. ST/40350 of 2014 (M/s. TCPL) also claimed the benefit of non-liability in terms of Section 66 D (d) (vii) of the Act (Negative list). That benefit has been denied on the ground that the Tea sold by the Appellant was not agricultural produce . It is submitted that the definition of agricultural produce found in Section 65B(5) of the Act was clearly wide enough to take within its ambit the t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n behalf of the principal under section 2(g) of the Tea and GST Act since sales tax was suffered at the time of auction / sale by the appellants, the impugned tea cannot be considered as an agricultural produce. 6.5 The ld. AR also placed reliance on the decision of the Tribunal in the case of Container Tea and Commodities Vs. Commissioner of Central Excise, Salem 2016 (42) STR 400 (Tri. Chennai). In the said decision, the appellants therein, was acting as an agent for a number of tea estates in the marketing and sale of their tea overseas and are professional tea tasters. The Tribunal held that the appellant s activities were not only restricted to sale but includes host of other activities and hence the activities fell under BAS and not under commission agent service. The AR contends that the ratio of this decision is squarely applicable to the facts of the present appeals also. 7. Heard both sides and have gone into the records. 8.1 To understand the issue better, it would be useful to reproduce the legal provisions concerning BAS. The definition of BAS prior to 16.6.2005 is reproduced as under:- Business auxiliary service means any service in relation to,- (i) promotion ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owing shall be substituted, namely:- "Explanation.- For the purposes of this notification,- (i) commission agent means a person who causes sale or purchase of goods, on behalf of another person for a consideration which is based on the quantum of such sale or purchase. (ii) agricultural produce means any produce resulting from cultivation or plantation, on which either no further processing is done or such processing is done by the cultivator like tending, pruning, cutting, harvesting, drying which does not alter its essential characteristics but makes it only marketable and includes all cereals, pulses, fruits, nuts and vegetables, spices, copra, sugar cane, jaggery, raw vegetable fibres such as cotton, flax, jute, indigo, unmanufactured tobacco, betel leaves, tendu leaves, rice, coffee and tea but does not include manufactured products such as sugar, edible oils, processed food and processed tobacco. 8.4 Vide Notification No. 19/2005-ST dated 7.6.2005, the clause (i) to Explanation to Notification No.13/2003-ST which gave the definition of Commission Agent was omitted. 8.5 Simultaneously, the definition of Commission Agent was amplified as part of amended definition of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as brokers and auctioneers in accordance with the rules of Connoor Tea Trade Association. Appellants are also licensed by the Tea Board and deemed to be a member of the association only as broker . 8.7 As per the investigation by the department, the appellants render the following services for their clients:- (a) They are not appointed as Commission Agents by their clients but licensed by the Tea Board and governed by the Rules framed by the Coonoor Tea Trade Association. Hence there is no principal agent relationship between the service provider and their clients. (b) They are engaged in the promotion, marketing and sale of goods provided by various clients i.e. tea factories as defined in clause 19(i) of Section 65. (c) They are engaged in the activity of tea tasting and valuation of the tea. (d) They are engaged in auxiliary services like billing, collection of sale proceeds on behalf of their clients. (e) For the services rendered, consideration such as brokerage, lot money and service charges are collected at the rates fixed by the Coonoor Tea Trade Association. (f) Lot money is received not only from their clients but also from the buyers. (g) The sale proceeds ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the sellers but by the appellants. Thereafter, the appellant themselves issue delivery orders which enables the buyers to take delivery of the tea from the warehouse. They do the billing work and collection of sale proceeds on behalf of their clients. The appellants also collect lot money not only from their clients but also from the buyers. Appellants also make advances to their clients in anticipation of receipt of goods for sale. They are also engaged in activity of collection and payment of tax namely sales tax on behalf of their clients. The appellants promote the sale of the tea produced by their clients by sending out samples to their prospective buyers advertising by way of printing and distribution of catalogues. It therefore appears to reason that this wide gamut of activities of the appellant would go far beyond the scope of a commission agent since the services rendered by them are not restricted only to sale of goods on behalf of the sellers for consideration, which is the main edifice of the definition of commission agent. We find that the activities of the appellant go much beyond even the amended definition of commission agent which was brought into the Explanation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... doubts, it is hereby declared that for the purposes of this sub-clause, auction by the Government means the Government property being auctioned by any person acting as auctioneer] . A close reading of the above definitions, it emerges that the auction of property services is a category of services which is limited to calling an auction or providing a facility for conduct of the auctions; advertising or illustrating services, providing pre-auction price estimates, short term storage services etc. However, the activities of the appellants herein go much beyond only the conduct of an auction. On the other hand, as discussed above, they are also engaged in a number of other activities which promote the sale of goods of the tea of their clients. It is not as if the appellants are only auctioneers who conduct auctions in the sense generally understood and more importantly, as per definition of section 65(7a) of the Act. This being so, we are afraid that this alternative plea of the appellant also will not succeed. 9. In the result, we are of the considered opinion that the services provided by the appellant will not fall either in the category of commission agent under section 65(19) o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... doubt in the mind of the assessee that they are exempted as they are dealing in tea which is an agricultural produce. Accordingly, we waive the penalty under Sections 76 and 78, by invoking Section 80 of the Finance Act. Accordingly, the Revenue appeal is rejected and assessee s appeals are partly allowed in the above terms." 11. In light of the discussions above, we do not find any merit in the appeals filed by the appellants for which reason their plea to set aside demand of service tax and interest thereon fails. 12. However, on the issue of penalty, we do find that the appellants from the beginning have been making a contention, albeit misconceived, that their activities are of a commission agent for sale of agricultural produce and hence they are covered by exemption from tax liability. They also have taken a stand that since they conduct auction, their activity would come within the ambit of auction service with effect from 1.5.2006. Thus, the whole dispute has been based on interpretation as to classification of their services. This being so, we find that there is a strong case for setting aside the penalties. Accordingly, penalties imposed on the appellant in these cases ..... X X X X Extracts X X X X X X X X Extracts X X X X
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