2018 (5) TMI 1211 - AT - Service Tax

Exemption Upheld: Services for Fresh Flowers Deemed Agricultural Produce

The Tribunal upheld the order allowing exemption under notification No.14/2004 ST for services related to flowers, not dried flowers, as they are ... Liability of service tax - service of picking and choosing flowers supplied by the customers, for enabling further production of dried flowers - N/N. 14/2004 ST dt.10.9.2004 - Held that: - the Revenue did not advert any sustainable ground in the appeal. As selecting suitable flowers is post-cultivation activity the exemption is sought to be denied. Such submission will not even stand preliminary scrutiny - appeal dismissed - decided against Revenue. Issues:1. Dispute over service tax liability related to picking and choosing flowers for further production of dried flowers.2. Denial of exemption under notification No.14/2004 ST.3. Determination of services in relation to agriculture.4. Appeal by Revenue against the order of Commissioner (Appeals).Analysis:1. The dispute in this case revolves around the service tax liability of the respondent, who is involved in picking and choosing flowers supplied by customers for the production of dried flowers. The original authority denied the exemption under notification No.14/2004 ST, stating that these services are not related to agriculture. However, the impugned order allowed the exemption, emphasizing that the services rendered are related to flowers, not dried flowers. The Tribunal noted that the flowers are agricultural produce resulting from cultivation without further processing changing their essential characteristics, except making them fit for the market. This distinction was crucial in determining the tax liability.2. The Tribunal observed that the Revenue failed to provide any sustainable grounds in the appeal against the categorical finding of the impugned order. The Revenue's argument that selecting suitable flowers is a post-cultivation activity, thus denying the exemption, was deemed unsustainable upon preliminary scrutiny. The Tribunal upheld the reasoning and finding of the impugned order as factually and legally correct. Consequently, the appeal by the Revenue was dismissed for lacking merit.3. The crux of the matter lay in determining whether the services provided by the respondent were in relation to agriculture, thereby qualifying for the exemption under the relevant notification. The Tribunal clarified that the services were directly linked to flowers as agricultural produce, maintaining their essential characteristics without significant processing. This distinction played a pivotal role in establishing the eligibility for the exemption and resolving the service tax liability issue.4. The appeal by the Revenue against the order of the Commissioner (Appeals) was based on the denial of the exemption under notification No.14/2004 ST. However, the Tribunal found no valid grounds presented by the Revenue to overturn the impugned order's findings. As a result, the Tribunal upheld the original decision, emphasizing the correctness of the reasoning and factual analysis, ultimately dismissing the appeal for lacking merit.