Sale of Goods Which is already Covered under BAS cannot be shifted to Auctioneer’s Service by any Mischief of Interpretation: CESTAT sets aside Demand

In a recent judgement, the Chennai bench of Customs, Excise and Service Tax Appellate Tribunal ( CESTAT ) set aside the demand of service tax under Auctioneer’s Service. The Bench viewed that the sale of goods which is already covered under Business Auxiliary Service ( BAS ) cannot be shifted to auctioneer's service by any mischief of interpretation. The Rasipuram Agricultural Producers Co-op. Marketing Society Ltd. ( the Appellant ) was established in 1929 to provide service for the benefit of the agriculturists who are members of the society. As an agent of the members, to ensure that the agriculturists get a fair price for their products, appellants are providing marketing assistance such as in the nature of secret tender service and marketing the agricultural produce on behalf of the members. The appellants include such of those traders who are interested to buy the agricultural produce and who have got the sales tax Registration Number. For the services rendered by the society for marketing the agricultural produce brought by the members, a commission as service charge is being received as a percentage of the sale proceeds. Similarly a commission as service charge is obtained from the traders for the services offered by the society. Among other activities, the appellants also arrange jewel loans to the members and also undertaking the work of lifting and delivering the goods to the ration shops under the Public Distribution System. It was alleged by the Department that the services rendered by the appellants are in the nature of the "Auctioneer's Service", "Business Support Service" and "Good Transport Agency Service". As such, a Statement of Demand No. 8/2013 dated 05.04.2013 was issued demanding Service Tax of Rs.5,31,325/- for the period from 01.10.2011 to 30.06.2012 under Section 73(1) of the Finance Act, 1994, besides demand of interest and imposing penalties under Section 76, 77 and 78 of the Finance Act, 1994. The appellant submitted a detailed reply to the Adjudicating Authority and additional submissions at the time of personal hearing. On adjudication, the Original Adjudicating Authority confirmed the proposals made in the Statement of Demand notice. The appellants are also extending jewel loans to the members. On sanctioning of the jewel loan, an appraising charge @3/- per thousand on the amount of loan sanctioned subject to the maximum of Rs.10 and Rs.100/- per loan is collected from the members. The appellants are not arranging any transport facilities to bring the goods on behalf of farmer/sellers to the Society. However, the appellants had paid freight in respect of movement of ration goods ( Public Distribution system ) for fair price shops and also for purchase of goods to the society. The Original Adjudicating Authority has confirmed the Service Tax of Rs.5,31,325/- under the categories of Auctioneer’s Service, Business Support Service and Goods and Transport Agency Service. The appellant has submitted that their Auctioneer’s Service is exempted in terms of Notification No. 13/2003ST dated 20.06.2003 as even if they are treated as a commission agent under BAS, Sale or Purchase of Agricultural Produce is exempted from Service Tax leviable under Section 66 of the Finance Act, 1994. A two member bench of Mr P Dinesha, Member ( Judicial ) and Mr Vasa Seshagiri Rao, Member ( Technical ) observed that simply because a new service viz. “Auctioneer's Service” was introduced from 01.05.2006 the marketing / sale of goods which is already covered under the service of "Business Auxiliary Service" cannot be shifted to the new entry by any mischief of interpretation unless it is carved out of the existing entry and shifted to the new entry statutorily. Shri Aurobindo Kumar appeared for the appellant and Shri Harendra Singh Pal appeared for the respondent. Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates