Commission Earned On Sale Of Agricultural Produce Attracts Service Tax Under 'Business Auxiliary Service': CESTAT Ahmedabad
The Ahmedabad Bench of Customs, Excise and Service Tax Appellate Tribunal (CESTAT) confirmed demand of service tax on commission earned on account of sale of agricultural produce, Indian Raw Cotton under the head 'Business Auxiliary Service'. The CESTAT upheld order by the lower authority fastening service tax liability of ₹71.75 lakhs and ₹90.56 lakhs for the periods 2010-11...
The Ahmedabad Bench of Customs, Excise and Service Tax Appellate Tribunal (CESTAT) confirmed demand of service tax on commission earned on account of sale of agricultural produce, Indian Raw Cotton under the head 'Business Auxiliary Service'.
The CESTAT upheld order by the lower authority fastening service tax liability of ₹71.75 lakhs and ₹90.56 lakhs for the periods 2010-11 and 2011-12, respectively.
In a recent ruling, Mr. Somesh Arora (Judicial Member) and Mr. Satendra Vikram Singh (Technical Member), disallowed exemption to 'Commission' received for export of agricultural produce under Notification No.13/2003-ST.
As for service tax on transfer of Right in land deal created by way of an 'Agreement to Sale', in absence of documents for receipt of such permission by the seller and execution of agreement, the CESTAT remanded for re-examination with reference to Gujarat Land Regulations.
Pursuant to an Audit, the Department found differential amount of about Rs.4 crores on account of mismatch in values declared in ST-3 vis-à-vis Form No. 3CD under Section 44AB of the Income Tax Act,1961 and sales ledger for the year 2010-11. Out of the entire Commission amount, the Appellant paid certain amounts. For the remaining amount, a Show Cause Notice was issued by the Department demanding service tax on commission amount towards Business Auxiliary Service along with interest and penalty under Section 77, 77(l)(a), Section 78 of the Finance Act, 1994.
Appellant submitted that premium received for relinquishing the rights in immovable property acquired under agreement to sale was neither promotion or marketing of sale of goods nor any service. Therefore, the Appellant would not qualify as Commission Agent. Further, it was contended that Transfer of land rights in immovable property, was not a service as per Section 65B (44) of the Finance Act, 2012.
The CESTAT Ahmedabad examined if Commission and Premium arising out of transfer of Right in Land created by 'Agreement to Sale' was liable to service tax. For Commission aspect, the CESTAT rejected reliance placed by Appellant for evidencing eligibility to claim exemption under Service Tax Notification No. 13/2002. From the text of the letter, the CESTAT inferred that these were 'one sided debit letters' without any confirmation/ approval from the other end.
For Premium received towards Banakhat or Agreement to Sale, a precursor to the sale deed in Gujarat amounting to Rs. 252.53 Lakhs,the CESTAT perused the factual matrix. It was noted that whether amounts were received before execution of Sale Deed or after was unclear, therefore, the CESTAT remanded the matter back to the lower authorities for ascertaining It is also to be ascertained if right on land can be created before execution of sale agreement. In this respect, the CESTAT directed the lower authorities to examine validity of 'Agreement to Sale'.
Accordingly, the CESTAT partly allowed the twin appeals by way of remand for deciding if premium income arising out of transfer of right in land sale was liable to service tax.
Case Detail: Ashutosh Metal Private Limited vs. Principal Commissioner CGST & Central Excise
For Appellant: Advocates S.C. Vaidyanathan, Shivam Batra
For Respondent: Mr. Aejaz Ahmad (Authorized Representative)