AI Drafter 
TaxTMI 
TaxTMI 
2025 (4) TMI 246
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.... (Rupees One Lakh Ninety Two Thousand Five Hundred and Fifty One only) proposed vide said SCN against M/s UP Cooperative Cane Unions Federation Ltd. 12, Rana Pratap Marg, Lucknow-226001 under the provisions of Section 73(2) of the Finance Act, 1994, for the reasons discussed hereinabove. (c) I order to recover interest at applicable rates from M/s UP Cooperative Cane Unions Federation Ltd. 12, Rana Pratap Marg, Lucknow-226001 under Section 75 of the Finance Act 1994, on the amount confirmed in Point (a) above, for the reasons discussed hereinabove; (d) I also impose penalty of Rs 2,09,92,444/- (Rupees Two Crore, Nine Lakh, Ninety Two Thousand, Four Hundred and Forty Four only) upon M/s UP Cooperative Cane Unions Federation Ltd, 12, Rana Pratap Marg, Lucknow-226001, under Section 78(1) of the Finance Act, 1994, for the reasons discussed hereinabove, (e) I order to recover interest to the tune of Rs 15,850/- (Rupees Fifteen Thousand Eight Hundred and Fifty only) from M/s UP Cooperative Cane Unions Federation Ltd, 12, Rana Pratap Marg, Lucknow-226001 under Section 75 of the Finance Act, 1994, for the reasons discussed hereinabove, (f) I also impose ....
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....gal Expenses Service Tax Rate (%) Service Tax payable (incl. all Cess) 2013-14 58179 12.36% 7191 2014-15 1750760 12.36% 216394 2015-16 837560 14.5% 121446 2016-17 193000 15% 28950 Total 2839499 373981 2.5 During the period April 16 to September 16, appellant had deposited the service tax after the due date The interest due in respect of late payment is detailed in table below:- (in Rs.) Month ST Liability Challan Value Due date Payment Date number of days. Interest due @24 % Apr 269783 161871 06-05-2016 06-07-2016 61 6494 107912 06-05-2016 06-07-2016 61 4328 May 215825 215825 06-06-2016 06-07-2016 30 4257 Jun 223268 167454 06-07-2016 06-07-2016 0 0 55814 06-07-2016 27-07-2016 21 771 Total 15850 2.6 All the observations would communicated to the appellant vide letter dated 12.04.2019 and they were requested to attend the Pre-SCN consultation in the matter, appellant denied the same. 2.7 The following material fac....
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....ble Governor of Uttar Pradesh appointed appellant as Co-operative federation authority of all co-operative cane societies for supervision. • They are implementing state government policies by complying government orders from time to time. Registrar of cane is government employee, whose instruction and directions are binding upon appellant's federation. • Appellant's federation runs its day to day management under controls and supervision of its managing director and secretary, who are UP Government employees. • Appellant is a government authority as defined by Notification No.25/2012-ST dated 20.06.2012. They are performing functions entrusted to a municipality under Article 243W of the Constitution. • As the appellant is government authority, the services are exempt. • Appellant cooperated with the department at the time of audit, filing of reply alongwith required documents as called by the audit. • As the activities of appellants falls under the definition of agricultural extension service, which falls under clause (d) of Section 66D of Finance Act, 1994. In view of the objectives of appellant-federati....
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..............................................or (c) ...............................................................................or (d) ..................................................................................or (e) affect any investigation, inquiry, verification (including scrutiny and audit), assessment proceedings, adjudication and any other legal proceedings or recovery of arrears or remedy in respect of any such duty, tax, surcharge, penalty, fine, interest, right, privilege, obligation, liability, forfeiture or punishment, as aforesaid, and any such investigation, inquiry, verification (including scrutiny and audit), assessment proceedings, adjudication and other legal proceedings or recovery of arrears or remedy may be instituted, continued or enforced, and any such tax, surcharge, penalty, fine, interest, forfeiture or punishment may be levied or imposed as if these Acts had not been so amended or repealed." On going through the plain language of Clause (e) of Section 174(2) ibid (reproduced above), it is unambiguous/clear that repeal of Chapter V of the Finance Act, 1994, will not have any effect on any proceeding such as investi....
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....any merit & is a mere after-thought and hence is liable to be set-aside. 14 After perusing the case records, I find that there are 6 issues which are to be decided in the present case:- Issue No.1:- Whether the Demand of Service Tax to the tune of Rs.2,11,84,995/-proposed vide the SCN is sustainable on merits under the provisions of the Finance Act, 1994 (and rules made thereunder) or otherwise. Issue No.2:- Whether the demand of applicable Interest proposed under Section 75 of the Finance Act, 1994 on the Noticee for non-payment of Service Tax to the tune of Rs 2,11,84,995/- is proper or otherwise. Issue No.3:- Whether the extended period of limitation provided for recovery of Service Tax to the tune of Rs.2,11,84,995/- under proviso to Section 73(1) of the Finance Act. 1994, is invokable in the present case or otherwise. Issue No.4:- Whether the penalty proposed under Section 78(1) of the Finance Act 1994 on the Noticee is proper or otherwise Issue No.5:- Whether the demand of Interest to the tune of Rs. 15,850/- proposed vide said SCN under Section 75 of the Finance Act, 1994 is sustainable on merits or otherwise. Is....
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....ty, by way of sale, gift or in any other manner; or (ii) such transfer, delivery or supply of any goods which is deemed to be a sale within the meaning of clause (294) of article 366 of the Constitution; or (iii) a transaction in money or actionable claim. (b) a provision of service by an employee to the employer in the course of or in relation to his employment; (c) fees taken in any Court or tribunal established under any law for the time being in force Explanation-1 For the removal of doubts, it is hereby declared that nothing contained in this chance shall apply to- (A) the functions performed by the Members of Parliament. Members of State Legislative Members of Panchayats. Members of Municipalities and Members of other local authorities whe receive any consideration in performing the functions of that office as such member, or (B) the duties performed by any person who holds any post in pursuance of the provisions of the Constitution in that capacity, or (C) the duties performed by any person as a Chairperson or a Member or a Director in a body established by the Central Government or State Governments or ....
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....lected in their books of accounts. Hence, I hold that the activities undertaken by the noticee are squarely covered under the definition of 'Service' provided vide Section 65B(44) of the Finance Act, 1994 (as amended). 15.1.6 Vide written submission dated 13.05.2019, the noticee has contended that the activities carried out by them (or impugned services provided by them), are exempted from purview of Service Tax, in as much as, they are covered under 'agricultural extension services' specified in sub-clause (vi) of Clause (d) of Negative List of Services provided vide Section 66D of Finance Act 1994. For the sake of discussion. I hereby reproduce the said Clause (d) of Section 660 ibid below:- 66D(d) services relating to agriculture or agricultural produce by way of- (i) agricultural operations directly related to production of any agricultural produce including cultivation harvesting, threshing plant protection or testing: (ii) supply of farm labour, (iii) processes carried out at an agricultural farm including tending, pruning, cutting, harvesting drying, cleaning, trimming, sun drying, fumigating, curing sorting gradin....
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....:- • the noticee, by virtue of being apex body of all CCDS's of state of Uttar Pradesh, was primarily engaged is performing various activities for their members (i.e., CCDS's) only. In other words, the noticee was primarily engaged in providing services to their member CCDS's only not to any farmer. For performing the said activities, the noticee was:- • charging supervision fees from various CCDS's (which was shown as contribution income in books of accounts). • receiving Commission/Margin Money on the sale of Insecticides/Fertilizers/Agricultural Equipments by CCDS's to Cane farmers (which was shown as Commission/Margin Money Fertilizers/insecticides/Agricultural Equipments in books of accounts) from • the noticee was also co-ordinating with the manufacturers of Fertilizers / Insecticides /Agricultural Equipments (such as IFFCO/KRIBHCO) regarding dispatching of goods to CCDS's and regarding receipt of payments from respective CCDS's and was receiving Service Charges from IFFCO/KRIBHCO, in lieu of the same Accordingly, it can be deduced that, in the present case, the noticee was the Service Pr....
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.... latitude can be shown, if there is a failure to comply with some requirements which are directory in nature, the non-compliance of which would not affect the essence o substance of the notification granting exemption." (ii) MERIDIAN INDUSTRIES LTD. Versus COMMISSIONER OF CENTRAL EXCISE reported in 2015 (325) E.L.T. 417 (S.C.), wherein it was observed that:- 13. The appellant is seeking the benefit of exemption Notification No. 8/97-C.E. Since it is an exemption notification, onu lies upon the appellant to show that its case falls within the four corners of this notification and is unambiguously covered by the provisions thereof. It is also to be borne in mind that such exemption notifications are to be given strict interpretation and, therefore, unless the assessee is able to make out a clear case in its favour, it is not entitled to claim the benefit thereof. 15.1.8 In view of my discussions in Para 15.1.1 to 15.1.7 above, I hold that the demand of Service Tax to the tune of Rs. Rs.2,08,11,014/- which has been raised on the income accrued from various CCDS's and KRIBHCO/IFFCO is liable to be confirmed." 4.3 The claim of the appellant that they ar....
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.... to be noted that the respective Market Committees are claiming exemption under the 2006 circular. The exemption circular issued by the Board reads as under :- Circular No. 89/7/2006, dated 18-12-2006 :- "A number of sovereign/public authorities (i.e., an agency constituted/set up by Government) perform certain functions/duties, which are statutory in nature. These functions are performed in terms of specific responsibility assigned to them under the law in force. For examples, the Regional Reference Standards Laboratories (RRSL) undertake verification, approval and calibration of weighing and measuring instruments; the Regional Transport Officer (RTO) issues fitness certificate to the vehicles; the Directorate of Boilers inspects and issues certificate for boilers; or Explosive Department inspects and issues certificate for petroleum storage tank, LPG/CNG tank in terms of provisions of the relevant lows. Fee as prescribed is charged and the same is ultimately deposited into the Government Treasury. A doubt has arisen whether such activities provided by a sovereign/public authority required to be provided under a statute can be considered as 'provision of....
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....tification has to be read as a whole. If any of the conditions laid down in the notification is not fulfilled, the party is not entitled to the benefit of that notification. An exception and/or an exempting provision in a taxing statute should be construed strictly and it is not open to the Court to ignore the conditions prescribed in the relevant policy and the exemption notifications issued in that regard. 8.2 The exemption notification should be strictly construed and given a meaning according to legislative intendment. The Statutory provisions providing for exemption have to be interpreted in light of the words employed in them and there cannot be any addition or subtraction from the statutory provisions. 8.3 As per the law laid down by this Court in a catena of decisions, in a taxing statute, it is the plain language of the provision that has to be preferred, where language is plain and is capable of determining a defined meaning. Strict interpretation of the provision is to be accorded to each case on hand. Purposive interpretation can be given only when there is an ambiguity in the statutory provision or it results in absurdity, which is so not found in the....
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..../land/platform on rent/lease. If the statute mandates that the Market Committees have to provide the land/shop/platform/space on rent/lease then and then only it can be said to be a mandatory statutory obligation otherwise it is only a discretionary function under the statute. If it is discretionary function, then, it cannot be said to be a mandatory statutory obligation/statutory activity. Hence, no exemption to pay service tax can be claimed. 10. The next provision relied upon by the appellants - respective Market Committees is Rule 45 of the Rajasthan Agricultural Produce Markets Rules, 1963 (hereinafter referred to as "Rules, 1963"), which reads as under :- "45. The Market Committee fund. - All money received by the Market Committee shall be credited to the fund called the Market Committee fund. Except where Government on application by the Market Committee or otherwise shall direct, all money paid into the Market Committee fund shall be credited at least once a week in full into Government treasury or sub-treasury, or a bank duly approved for this purpose by the Director. All balance from the fund shall be kept in such treasury or sub-treasury or bank and it ....
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....cannot be said to be service. However, their only submission is that the Market Committees are exempted from levy of service tax on such service/activity as provided under the 2006 circular, which as observed hereinabove has no substance." 4.4 This decision has been followed by the Hon'ble Apex Court subsequently in following cases: • Agriculture Produce Marketing Committee Gazipur [(2023) 2 Centax 293 (S.C.)] • Gujarat Industrial Development Corporation [(2023) 5 Centax 171 (S.C.)] Thus the submission made by the appellant that they are not liable to pay service tax being government authority in respect of the services in dispute, is thus devoid of merits, in view of the above referred decisions. 4.5 We also do not find any merits in the submissions that the services provided by the appellant under the category of agricultural extension services. The term 'agricultural extension services' has been defined under Section 65B(4) of the Finance Act. It means 'application of scientific research and knowledge to agricultural practices through farmer education or training'. Impugned order has concluded that appellant is not providing any such services w....
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....xii) Agriculture Extension Services, which cover all operations in relation to farmer training & application of knowledge for better performance of agriculture operations." 9. We find that the services provided by the appellant in the nature of following:- "General Farmer training; Empirical training; Training for the harvest; and Stewardship. The detail of each activities is as under:- General Farmer Training Under farmer training, the appellant trains farmers in the best agricultural practices resulting in higher yields. Various factors affected the yields of a crop, such as (i) Soil type and conditions (ii) Time of sowing; (iii) Availability of water; (iv) Availability of nutrients; (v) Weather conditions; (vi) Weed management of water; (vii) Pest management; (viii) Disease control; (ix) Timely harvesting. The appellant trains the farmers in ways to bring the vital yield-affecting factors in its favour. The appellant also lays emphasis on agronomy, nutrition, water management etc. Further, the farmers are made aware of yield parameters. These trainings are conducted in the following formats: ....
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....ure practices through farmer education and training." We have gone through the definition of agricultural extension under Section 65B (4) of the Finance Act, 1994 which is as under:- "Agricultural Extension means application of scientific research and knowledge to agriculture practices through farmer education and training." 11. As per said definition, the appellant was required to provide scientific research and knowledge to agriculture practices through farmer education and training. As per agreement, the appellant has provided the said service. The finding of the Ld. Commissioner is not appreciable. Accordingly, the same is turned down. 10. We take note of the fact that the appellant has provided ample evidence in respect of nature of the services provided by them by way of photographs and agreement of other materials but the Revenue has not come with an evidence that the appellant was engaged in the marketing and promoting the product of their principal while providing Agricultural Extension Service. Therefore, we hold that the appellant is not providing any taxable service but is providing only Agricultural Extension Service. 11. Another gro....
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.... CUF. The primary objective of creating such apex body is to improve sugar cane industry including the betterment of sugar cane farmers. To achieve their goal, the CUF has to perform some specified duties Basically, the CUF works as a coordinator among the cane farmers, CDF, Chini Mills and suppliers of Fertilizer/ insecticide and other agricultural equipments They ensure timely supply of Cane to Sugar Mills, timely payment to Cane Farmers facilitating in distribution of fertilizers & insecticides alongwith ensuring timely payment to suppliers of fertilizers etc. 5) Whereas, during the course of Audit, it has been learnt from the Balance Sheets and P&L Account of the party, bills/invoices issued by them including ledger accounts that their main source of income is from the following activities- a) Margin Money/Commission on Fertilizers: The Cane Unions Federation as an . apex body of the Cane Development Societies works as a coordinator and facilitator in purchasing and distribution of Fertilizers manufactured by M/s IFFCO 8 Ms KRIBHCO. Each Cane Development Society sends report/data to the Cane Unions Federation informing them the quantity of Fertilizer purchased....
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....es as per delivery order. For providing such type of services by the CUF, both fertilizers suppliers will pay Rs.20/- per MT as service charge' to the CUF on purchasing of Indigenous Urea. Accordingly Invoices were issued by the CUF to M/s IFFCO and M/s KRIBHCO on annual basis attracting Service Charges @ Rs.20/- per MT on purchasing of Indigenous Urea, e) Contribution Income: It appears from the P&L Account of the party along with its ledger account that they have received huge amount under the head contribution for state cane service authority'. Such income is prescribed contribution income received from the different Cane Development Societies and as per rule 391 (a) of Utar Pradesh Co-operative Societies Rules, 1968 the CUF is collecting supervision fee In this regard, the relevant paras of the Acts and Rules are produced below: Section 123 of Uttar Pradesh Co-operative Societies Act, 1965 provides that- Constitution or recognition of co-operative federal authority to supervise working of co-operative societies. - (1) The State Government may constitute or recognise one or more co-operative federal authorities, in such manner as may b....
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....facts as noted above we find that none of the services provided by the appellant would fall under the category of agriculture extension services we uphold the entire demand made. 4.9 In respect of the legal expenses we find that impugned order extended the benefit by reducing the taxable value to the extent as claimed by the appellant. In their appeal or during the argument no infirmity has been pointed out by the appellant in respect of the demand confirmed under this head. We also note that appellant do not dispute there liability to pay interest in case of delay in payment of service tax. 4.10 Appellant has claimed that benefit of cum tax benefit should be allowed to them. We are in agreement with the submissions made by the appellant in this respect as we find that the appellant has not collected any service tax separately from their service recipients and thus the inevitable conclusion is that the gross consideration received by the appellant and reflected in their balance sheet was inclusive of service tax. In case of Balaji Manpower Services [2019 (31) G.S.T.L. 418 (P&H)] Hon'ble Punjab and Haryana High Court has held as follows: "6. The conceded position emer....