C M Sapkal vs Nagpur

[Arising out of Order-in-Appeal No: SR/217/NGP/2011 dated 24th January 2011 passed by the Commissioner of Central Excise & Customs (Appeals), Nagpur.]

For approval and signature:

Honble Shri M V Ravindran, Member (Judicial) Honble Shri C J Mathew, Member (Technical)

1. Whether Press Reporters may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982? : No 2. Whether it should be released under Rule 27 of CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not? : No 3. Whether Their Lordships wish to see the fair copy of the Order? : Seen 4. Whether Order is to be circulated to the Departmental authorities? : Yes

C M Sapkal

Appellant Vs

Commissioner of Central Excise

Nagpur

Respondent

Appearance:

Shri D.H. Nadkarni, Advocate for the appellant

Shri B. Kumar, Superintendent (AR) for the respondent

CORAM:

Honble Shri M V Ravindran, Member (Judicial) Honble Shri C J Mathew, Member (Technical)

Date of hearing: 15/09/2015 Date of decision: 07/03/2016

ORDER NO: ____________________________

Per: C J Mathew:

M/s C M Sakpal, the appellant, is before us seeking to quash the order-in-appeal no. SR/217/NGP/2011 dated 24th January 2011 of Commissioner of Central Excise & Customs (Appeals), Nagpur which has sustained the order of the original authority demanding service tax of ` 2,77,200/- for rendering business auxiliary service and interest thereon besides imposing penalty under section 77 and 78 of Finance Act, 1994.

2. The appellant has been held liable to tax for the period from February 2004 to April 2006 on amounts allegedly received as commission agent which falls within the definition of business auxiliary service in section 65 (19) of Finance Act, 1994. The appellant entered into an agreement of retail agency with M/s Style Spa in January 2004 in accordance with which the appellant provided its space in a commercial building for exhibiting the products of M/s Style Spa which were to be delivered by the appellants to customers on instructions. The appellants were responsible for collecting and remitting the sale price to M/s Style Spa and were to receive 1% of sale value as commission subject to a minimum of ` 1,10,000/- per month.

3. The appellant claims that, notwithstanding the title of the agreement, it had merely rented out space to M/s Style Spa and that the building space was owned by the kartha and co-parceners of the Hindu Undivided Family (HUF) as an asset which could not be considered as a commercial activity.

4. Learned Counsel for appellant placed reliance on section 65 (105) (zzb) of Finance Act, 1994 which restricted tax on business auxiliary service to that rendered by commercial concern till the amendment therein on 1st June 2006. Citing decisions of the Tribunal in Infinity Credit v Commissioner of Central Excise, Jaipur [2009 (16) STR 61(Tri-Del)] and Mangal Singh v Commissioner of Central Excise, Jaipur-I [2008 (11) STR 17 (Tri-Del)], it was contented that an HUF is a group of individuals and hence its assets cannot be considered to have been used in the course of commerce. That individuals includes HUF was sought to be supported by the decision of the Honble Supreme Court in Banarasi Das v Wealth Tax Officer [(1965) 56 ITR (SC)]. A number of decisions under the Income Tax Act, 1961were also submitted to sustain this claim.

5. Learned Authorized Representative drew attention to the definition of business auxiliary service in section 65 (19) of Finance Act, 1994 and the contents of the retail agency agreement to support the case of Revenue.

6. We find that the definition of business auxiliary service includes that rendered by a commission agent since the introduction of the taxable entry but commission agents were exempted from the purview of tax by notification no. 13/2003-ST dated 20th June 2003. However, the said exemption was restricted to sale and purchase of agricultural produce vide notification no. 8/2004-ST dated 9th July 2004. Commission agent was defined in the said exemption notifications as a person who causes sale or purchase of goods, on behalf of another person for a consideration which is based on the quantum of such sale or purchase

7. We take notice of section 65 (105) (zzb) of Finance Act, 1994 which till 30th April 2006 taxed business auxiliary service rendered by a commercial concern. The issue, therefore, hinges on whether the appellant is a commercial concern.

8. Appellant contends that members of HUF are individuals and that the decisions cited supra exclude individuals from being taxed as commercial concern. We find that the decisions were rendered in the limited context of imposition of penalties. Indeed, in re Infinity Credit, the Tribunal observed:

4. Learned Company Secretary fairly concedes that the issue whether a proprietary firm can be considered as a commercial concern has been decided by the Tribunal against the assessee in the case of C.C.E, Jaipur v R.S. Financial Services reported in  2008 (9) STR 231 (Tri-Del) and, therefore, does not contest the demand of service tax. Consequently, that HUFs can also be commercial concerns is no longer res integra and claim of the appellant for immunity from taxability under section 65 (105) (zzb) is not tenable.

9. The appellant claims that the transaction with M/s Style Spa is one of rental of immoveable property. A perusal of the agency agreement does not sustain this contention. Undoubtedly, the arrangement with M/s Style Spa is predicated upon the possession of space available for display and storage of goods of M/s Style Spa. Nevertheless, the arrangement is one in which the appellant is the custodian of the goods intended for sale. The remuneration that was to be made over to the appellant is based on quantum of sale. Guarantee of minimum payment of ` 1,10,000/- per mensem does not detract from the connection with sale. This is squarely within the ambit of commission agency which became taxable for non-agricultural produce in the hands of provider of business auxiliary service vide notification of 9th July 2004. Appellant is eligible for exemption from February to July 2004. It is observed that, during the period of dispute, appellant was in receipt of only the minimum guaranteed amount of ` 1,10,000/-. The agreement also makes it clear that M/s Style Spa is responsible for discharge of tax liability. In view of these facts, the plea of the appellant for cum-tax computation is justified.

10. The impugned order is modified by recomputing the tax liability as ` 2,03,634/- along with appropriate interest. In view of the decisions of the Tribunal (supra) and the reasonableness of doubt that individuals may not be commercial concerns, we invoke section 80 of Finance Act, 1994 to set aside the penalty imposed under section 78.

11. Appeal is so disposed off.

(Pronounced in Court on 07/03/2016) (M V Ravindran) Member (Judicial) (C J Mathew) Member (Technical) */as

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