2008 (10) TMI 172 - AT - Service Tax

CESTAT rules storage of sugar for buffer stock compensated by Government not taxable

The Appellate Tribunal CESTAT, New Delhi ruled that storage of sugar by sugar mills for maintaining buffer stock, compensated by the Government, does not ... Warehousing service - storage of buffer stock - service tax liability - compensation by Government for storage - pre-deposit waiver and stay of recoveryWarehousing service - storage of buffer stock - service tax liability - compensation by Government for storage - Whether storage of sugar by sugar mills at the Government's instructions, for which the mills are compensated, amounts to providing a warehousing service and attracts service tax under the Finance Act provisions relied upon by the Department - HELD THAT: - The Tribunal examined whether the activity of storing sugar as buffer stock on Government instructions, with compensation paid to the sugar mills, falls within the scope of the warehousing service and thereby attracts service tax. Relying on the Tribunal's earlier decision in Nawanshahr Cooperative Sugar Mills Ltd. v. CCE, Jalandhar [Order No. 113-119/08-Cus., dated 20th June 2008] [2008 (12) S.T.R. 176 (T)], the Bench held that the activity is not covered by the warehousing service. The Tribunal found that the present case is squarely covered by that precedent and, on the material before it, the appellant has a prima facie strong case in its favour. Consequently, the activity of storing sugar as buffer stock for the Government, with compensation received by the mills, does not attract the service tax head contended by the Department.Storage of sugar by the mills as buffer stock for the Government, for which they are compensated, does not amount to providing a warehousing service and does not attract service tax; the appellant has a prima facie strong case.Pre-deposit waiver and stay of recovery - Whether the pre-deposit of duty and penalty should be waived and recovery stayed pending adjudication of the appeal - HELD THAT: - Having found that the appellant has a prima facie strong case based on existing Tribunal precedent, the Bench exercised its discretion to waive the pre-deposit of duty and penalty and to stay recovery proceedings pending resolution of the appeal. The Tribunal also directed that the appeal may be listed along with other appeals raising the common issue.Pre-deposit of duty and penalty waived and recovery stayed; appeal to be listed with other appeals on the common question.Final Conclusion: The Tribunal held that storage of sugar by the mills as Government-directed buffer stock, with compensation, is not a warehousing service and does not attract service tax; accordingly, the pre-deposit was waived and recovery stayed pending disposal of the appeal. The Appellate Tribunal CESTAT, New Delhi ruled that storage of sugar by sugar mills for maintaining buffer stock, compensated by the Government, does not attract service tax. The case was similar to a previous judgment and the duty and penalty were waived with recovery stayed.