2020 (6) TMI 279 - AT - Service Tax

Appellant wins service tax dispute; exemption threshold upheld for agricultural services.

M/s. Krishi Utpadan Mandi Samiti Versus The Commissioner Central Goods and Service Tax, Dehradun (Uttarakhand)

M/s. Krishi Utpadan Mandi Samiti Versus The Commissioner Central Goods and Service Tax, Dehradun (Uttarakhand) - TMI Issues Involved:1. Whether M/s KUMS, Haridwar crossed the threshold limit of Rs. 10 lakhs for service tax exemption.2. Applicability of service tax on renting of immovable property used for storage of agricultural produce.3. Clubbing of incomes from various Mandi Parishads for determining service tax liability.4. Invocation of the extended period of limitation under Section 73(1) of the Finance Act, 1994.Detailed Analysis:1. Threshold Limit of Rs. 10 Lakhs:The primary issue was whether M/s KUMS, Haridwar crossed the exemption threshold limit of Rs. 10 lakhs for service tax during the period from April 2009 to March 2014. The gross rent received by the appellant during these years was Rs. 1,52,53,485, with a service tax payable of Rs. 17,48,702. The adjudicating authority was tasked with determining if the appellant exceeded the exemption limit after considering the documentary evidence.2. Service Tax on Renting of Immovable Property:The appellant argued that the services related to agricultural produce, such as renting sheds/shops/godowns for agricultural purposes, should be excluded from the service tax liability. The judgment referenced Section 66D of the Finance Act, which introduced the Negative List Regime effective from 1.7.2012, exempting services related to agriculture or agricultural produce from tax. The Tribunal held that the appellants, being an Agricultural Produce Marketing Committee, were excluded from tax liability for services related to agricultural produce, such as storage or warehousing, under the Negative List.3. Clubbing of Incomes from Various Mandi Parishads:The adjudicating authority had clubbed the incomes of various Mandi Parishads with the appellant's rent receipts, which the appellant contested. The judgment emphasized that each Mandi Samiti is a separate legal entity with its own PAN number, statutory dues, and financial assessments. The Tribunal supported this view, citing precedents like CCE, Ahmedabad Vs. S.C. Patel and CCE, Surat-II Vs. Catalco Chemical (P) Ltd., which held that clearances of different units with separate identities should not be clubbed. Consequently, the Tribunal ruled that the clubbing of receipts was unjustified and that the appellant should be given the benefit of exemption limits.4. Extended Period of Limitation Under Section 73(1):The Tribunal examined whether the extended period of limitation could be invoked under Section 73(1) of the Finance Act, 1994. This provision allows for an extended period if there is evidence of fraud, collusion, willful misstatement, suppression of facts, or contravention of provisions with intent to evade payment of service tax. The Tribunal noted that the appellants, being a government organization regulated by statutory enactments and rules, did not exhibit any of these ingredients. There was no evidence of malafide intent to evade service tax. Therefore, the demand for the extended period was not justified.Conclusion:In conclusion, the Tribunal held that the demand confirmed against the appellant was liable to be set aside. The value of rent falling within the tax net and within the normal period of limitations remained less than the threshold value of Rs. 10 lakhs. The question of whether M/s KUMS, Haridwar crossed the threshold limit was decided in the negative, in favor of the appellant and against the department. Consequently, the order under challenge was set aside, and the appeal was allowed.