Hessian cloth from jute not agricultural produce under N/N. 13/2003-ST, service tax demands partially confirmed

CESTAT Kolkata held that hessian cloth manufactured from jute does not qualify as agricultural produce under N/N. 13/2003-ST, distinguishing it from raw jute traded in commodity exchanges. Service tax demand on business auxiliary services was confirmed for normal period but extended period demand was set aside due to regular filing of returns showing no suppression. For renting of immovable property services, demand for residential accommodation was fully set aside as service tax became leviable only from 20.06.2010. Matter remanded to quantify demands for normal period regarding business auxiliary services and commercial property rentals only.

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Issues involved:
The issues involved in this case are whether the Appellant is required to pay Service Tax on commission paid to agents for export transactions and on renting of immovable property services.

Commission Paid for Export Transactions:
The Appellant, engaged in manufacturing jute products, was paying commission to agents for exporting Hessian Cloth. The Central Excise Audit contended that the Appellant should pay Service Tax on a reverse charge basis for such commission. The Appellant argued that the commission paid falls under an exemption for agricultural produce as per Notification No. 13/2003-ST. They cited a case law to support their claim. The Tribunal held that Hessian Cloth is not agricultural produce and upheld the demand for Business Auxiliary Services.

Renting of Immovable Property Services:
The Audit demanded Service Tax on renting of immovable property services, including rent received from employees and commercial properties. The Appellant argued that prior to the amendment on 20/06/2010, only services "in relation to Renting of immovable property" were taxable. They cited relevant case laws to support their argument. The Tribunal found that Service Tax is not leviable for the period before the amendment and set aside the demand for the extended period. The matter was remanded to quantify the demand for the normal period in respect of renting of immovable property services for commercial purposes.

Conclusion:
The Tribunal upheld the demand for Business Auxiliary Services but set aside the demand for the extended period due to lack of suppression of facts. For renting of immovable property services, the demand for the extended period was deemed legally not sustainable. The case was remanded to quantify the demand for the normal period. The penalties were set aside, and the Adjudicating Authority was directed to complete the proceedings within four months from the date of the Final Order.

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