Commission agent exemption for agricultural produce upheld at stay stage, supporting waiver of pre-deposit against service tax demand.

Commission agent activity connected with procurement of sugarcane from cane-growing farmers was treated as falling within the exemption for commission agents dealing in agricultural produce, rather than taxable Business Auxiliary Service. The demand alleged procurement inputs for a sugar factory, but the show cause notice itself described the appellant as acting for farmers in relation to harvesting and transportation of sugarcane. On the material available at the stay stage, the activity was found to be covered by the notification exemption under the Finance Act, and a strong prima facie case was established. Waiver of pre-deposit and stay of recovery were therefore granted pending appeal.

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Issues: Whether the appellant was entitled to waiver of pre-deposit and stay of recovery in respect of the service tax demand, on a prima facie showing that the receipts related to commission agent activity in relation to agricultural produce and were exempt under the relevant notification.

Analysis: The demand was founded on the allegation that the appellant provided Business Auxiliary Service by procuring inputs for the sugar factory. The show cause notice itself described the appellant as acting as an agent for cane-growing farmers in relation to procurement activity connected with harvesting and transportation of sugarcane. The notification governing commission agent services in relation to sale or purchase of agricultural produce exempted such activity from service tax under section 66 of the Finance Act. On the material available at the stay stage, the activity was found to fall within the exemption and the appellant was held to have established a strong prima facie case.

Conclusion: The appellant was entitled to waiver of pre-deposit and stay of recovery during pendency of the appeal.

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