TMI Blog2023 (10) TMI 230X X X X Extracts X X X X X X X X Extracts X X X X ..... to be exported to other countries as per the Free Trade Agreements executed between India and other nations. The appellant collects a fee for the purpose of examination, quality control or inspection - Though the appellant s function is essential for inspection of export goods, but the usage of the term may in Section 3 of the Export (Quality Control and Inspection) Act, 1963, for the establishment of the Export Inspection Council, thus making it NOT a mandatory statutory duty activity of the Government. Consequently, it cannot be said that the appellant is discharging mandatory/statutory obligation. The contention of the appellant that the functions of Technical Inspection and Certification services rendered by them is a statutory function, cannot be accepted - As this issue was dealt in great detail by the Supreme Court in its decision in KRISHI UPAJ MANDI SAMITI, NEW MANDI YARD, ALWAR VERSUS COMMISSIONER OF CENTRAL EXCISE AND SERVICE TAX, ALWAR [ 2022 (2) TMI 1113 - SUPREME COURT] there cannot be any other varying interpretation taken subsequent to this judgment. Accordingly, the appellant is providing service any undertakes Technical, Inspection and Certification service ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the impugned order upheld - the penalty u/s 78 for the period prior to 08.04.2011, shall be equal to the service tax not paid by the appellant. For the period post 08.04.2011, the benefit of the amended penal provision is extended to the appellant. Appeal of Revenue allowed. - DR. RACHNA GUPTA, MEMBER (JUDICIAL) AND MS. HEMAMBIKA R. PRIYA, MEMBER (TECHNICAL) Shri Alok Yadav and Shri Nilotpal Shyam, Advocates for the Appellant Shri Harshvardhan, Authorized Representative for the Respondent ORDER The Department/appellant and the respondent have filed cross appeals against the order-in-original dated 04.04.2016 passed by the Commissioner of Service Tax, wherein the demand of Rs. 11,01,17,328/- + Rs. 4,40,00,00/- was confirmed and penalties of Rs. 21,00,000/- under Section 76 and Rs. 20,000/- under Section 77 was imposed. The period of dispute is between 2008-09 to 2012-13 and April 2013 to November 2013. Present in the common order for both the said appeals. 2. The brief facts of the case are that the appellant is a body created under Section 7 of Export (Quality Control and Inspection) Act, 1963 and works under the administrative and technical cont ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pection Council. Therefore, the appellant is nothing but a part of a statutory body i.e. EIC. 4. The learned counsel stated that Section 7 of the 1963 Act, makes it clear that Central Government may, by notification in the Official Gazette, establish or recognize, subject to such conditions, as it may deem fit, agencies for quality control or inspection or both. As per Section 10 of the 1963 Act, for discharging the function the Central Government may after the due appropriation made by the Parliament or law in this behalf, pay to the Council such sums of money as that Government considers necessary by way of grants, loan or otherwise. Section 17 empowers the Central Government to prescribe Fees chargeable for the purpose of examination and also the manner in which the account of the Council shall be maintained and audited. He further submitted that any rule made under the Act shall be laid before the Parliament. The Rules made under the Act clearly defines an agency, which according to the definition in Rule 2(b) means any agency for quality control or Inspection or both established or recognized by Central Government under Section 7 of the Act. It is submitted that all Export ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... function. He submitted that CBEC had clarified that exporters are already exempted from service tax in testing and analysis service availed by them, through the Refund Route . Any exporter who pays service tax on fee collected by EIC/EIA can claim refund of such service tax paid following the procedure prescribed in Notification No. 17/2009. Effectively, mean that if the recipient of a service is eligible to get refund of the service tax charged by the service provider, then there was no need to examine whether the provider was liable to pay service tax. The CBEC abdicated its responsibility to clarify whether service tax was indeed payable by the appellant in this case and whether the appellant were performing a sovereign function. 5. The learned Counsel further submitted that the amount demanded for the period 2008-09 to 2011-12 was barred by limitation as the show cause notice was issued on 17.04.2014, much beyond the normal period of limitation. The sequence of events clearly shows that prior to the issue of clarification dated 19.03.2011 by the TRU holding the appellant liable to pay tax on test charges, indicates that there was no clarity on this issue prior to that da ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y of rent/lease/allotment of shop/land/platform/space is a statutory activity and the Market Committees are performing their statutory duties cast upon them under Section 9 of the Act, 1961 and therefore they are exempted from payment of service tax on such activities. The aforesaid submission seems to be attractive but has no substance. Section 9(2) is an enabling provision and the words used is market committee may . It is to be noted that in so far as sub-section (1) of Section 9 is concerned, the word used is shall . Therefore, wherever the legislature intended that the particular activity is a mandatory statutory, the legislature has used the word shall . Therefore, when under sub-section (2) of Section 9, the word used is may , the activities mentioned in Section 9(2)(xvii) cannot be said to be mandatory statutory duty and/or activity. Under Section 9(2), it is not a mandatory statutory duty cast upon the Market Committees to allot/lease/rent the shop/platform/land/space to the traders. Hence, such an activity cannot be said to be a mandatory statutory activity as contended on behalf of the appellants. Even the fees which is collected is not deposited into the Governme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the Finance Act, 1994 makes no distinction between a statutory body i.e. a juristic person and an individual. 31 . As far as the circular dated 23rd August, 2007 issued by the Government of India, which has been so heavily relied upon by the appellant is concerned, we may record that under Clause 032.01, it has been provided that the Prasar Bharati Corporation (Doordarshan and All India Radio), which has been constituted under the Prasar Bharati (Broadcasting Corporation of India) Act, 1990 is liable to pay Service Tax for broadcasting services. 32 . Similarly under Clause 999.01 with regard to the sovereign/public duties/functions, it has been clarified that activities assigned to and performed by the sovereign/public authorities under the provisions of any law are statutory duties. The fee or amount collected as per the provisions of the relevant statute for performing such functions is in the nature of a compulsory levy and are deposited into the Government account. Such activities are purely in public interest and are undertaken as mandatory and statutory functions. These are not to be treated as services provided for a consideration. Therefore, such activities as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... government) perform certain functions/ duties, which are statutory in nature. These functions are performed in terms of specific responsibility assigned to them under the law in force. For examples, the Regional Reference Standards Laboratories (RRSL) undertake verification, approval and calibration of weighing and measuring instruments; the Regional Transport Officer (RTO) issues fitness certificate to the vehicles; the Directorate of Boilers inspects and issues certificate for boilers; or Explosive Department inspects and issues certificate for petroleum storage tank, LPG/CNG tank in terms of provisions of the relevant laws. Fee as prescribed is charged and the same is ultimately deposited into the Government Treasury. A doubt has arisen whether such activities provided by a sovereign/public authority required to be provided under a statute can be considered as provision of service for the purpose of levy of service tax. 2. The issue has been examined. The Board is of the view that the activities performed by the sovereign/public authorities under the provision of law are in the nature of statutory obligations which are to be fulfilled in accordance with law. The fee collec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 3 of the Export (Quality Control and Inspection) Act, 1963, for the establishment of the Export Inspection Council, thus making it NOT a mandatory statutory duty activity of the Government. Consequently, it cannot be said that the appellant is discharging mandatory/statutory obligation. We find that our conclusion is buttressed by the judgement of the Supreme Court in the case of Krishi Upaj Mandi Samiti, Alwar, Vs Commissioner of Central Excise and Service Tax, Alwar [2022 (2) TMI-1113- Supreme Court]. The relevant paras are reproduced hereinafter: 9. In the present case, it is the case on behalf of the appellants that the activity of rent/lease/allotment of shop/land/platform/space is a statutory activity and the market committees are performing their statutory duties cast upon them under section 9 of the act, 1961 and therefore their exempted from payment of service tax on such activities. The aforesaid submissions seems to be attractive but has no substance. Section 9(2) is an enabling provision in the words used is market committee may . It is to be noted that in so far as subsection (1) of Section 9 is concerned, the word used is shall . Therefore, wherever ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rasar Bharti (Broadcasting Corporation of India) Act, 1990 is liable to pay service tax for broadcasting services. 32. Similarly under clause 999.01 with regard to sovereign/public duties/functions, it has been clarified that activities assigned to performed by the sovereign/public authorities under the provisions of any law or statutory duties. The fee or amount collected as per the provisions of the relevant statute for performing such functions is a nature of a compulsory levy and a deposited into the government account. Such activities are purely in public interest and undertaken is mandatory and statutory functions. These are not to be treated as services provided for a consideration. Therefore, such activities to be performed by a sovereign/public authority under the provisions of law does not constitute taxable services. Any amount/fee collected in such cases are not to be treated as consideration for the purposes of levy of service tax. 33. However, if a sovereign/public authority provides a service, which is not in the nature of statutory activity and the same is undertaken for a consideration (not a statutory levy), then in such cases, service tax would be leviable, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... drawn upon except in accordance with these rules. 10.1 Now, so far as the submission on behalf of the appellants relying upon Rule 45 of the Rules, 1963 that the fees, which is collected shall be deposited with the Government treasury and therefore also the Market Committees are exempted from payment of service tax is concerned, it is to be noted that on fair reading of Rule 45, the amount of fee so collected on such activities when/lease shall not go to the Government. Rule 45 provides how the money received by the Market Committees shall be invested and/or deposited. It provides that all money received by the market committee shall be credited to the fund called the Market Committee fund. It further provides that all the money paid into the market committee fund shall be credited once a week in full into Government treasury or sub treasury, or a bank duly approved for this purpose by the Director and all balance from the fund shall be kept in such treasury or subtreasury or bank and it shall not be withdrawn except in accordance with the Rules. Therefore, it does not provide that on deposit of the money received by the market committees into the Government treasury/subtreas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d notification, which was issued in July, 2009. Consequently, the claim of the appellant that there was confusion with the regard to the applicability of service tax on test charges till the issuance of the clarification dated 19/03/2011 cannot be accepted. 19. It is brought on record that the appellant was apprised about the service tax liability on the impugned services through an office memorandum dated 19.03.2011. However, despite receiving the clarification, the appellant failed to get themselves registered and deposit their service tax liability to the government exchequer. To our minds, this establishes their intention to avoid payment of duty. We note that a plain reading of the provisions of Section 78 of the Finance Act, 1994, before the amendment makes it clear that the quantum of penalty to be imposed shall be equal 100% of the amount of such service tax. We note that the present demand covers the period from 2008 09 to 2013 14 (up to November, 2013) Therefore, the penalty for the period prior to 08.04.2011 should have been equal to 100% of the service tax not paid for this period. In view of the legal position prior to 08.04.2011, we hold that the Commissioner had e ..... X X X X Extracts X X X X X X X X Extracts X X X X
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