7 Aug 2023 2:30 PM GMT
The Chandigarh Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has held that undertaking the weighment of goods by the Food Corporation Of India (FCI) is not covered under "business auxiliary service".The bench of S. S. Garg (Judicial Member) And P. Anjani Kumar (Technical Member) has observed that weighment by the FCI is done to ensure that the declared quantity...
The Chandigarh Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has held that undertaking the weighment of goods by the Food Corporation Of India (FCI) is not covered under "business auxiliary service".
The bench of S. S. Garg (Judicial Member) And P. Anjani Kumar (Technical Member) has observed that weighment by the FCI is done to ensure that the declared quantity of grains is supplied by the agencies. Therefore, it cannot be said that the weighment is a service, let alone a business auxiliary service. The deduction of weighment charges is not a consideration for any service rendered.
The appellant, FCI, has procured grain through State Government Agencies like HALFD, CONFED, HAIC, HWC, etc. and also directly from the millers. At the time of unloading the grains in the godowns of FCI, the appellant FCI causes the weighment of the trucks, irrespective of whether or not the trucks were weighed earlier by their suppliers or not. FCI deducts charges for weighment from the payments made to the agencies supplying grain.
The department opined that the weighment charges, collected by the appellants from their customers, constitute the consideration for the "Business Auxiliary Service" alleged to have been rendered by the FCI.
The department issued a show cause notice seeking to recover service tax for the period 2004-05 to 2006-07. The lower authority confirmed the demand along with an equal penalty under Section 78 of the Finance Act, 1994, and also by imposing a penalty under Section 77.
The commissioner appealed, on an appeal filed by FCI, and upheld the order of the lower authority.
FCI contended that the show cause notice does not specify under which clause of "Business Auxiliary Service" Clauses (i) to (vii) the activity undertaken by the appellants falls. FCI did not render any service to their customers. It did not receive any consideration for any service. The deduction was on account of the recovery of weighment charges, and as such, it cannot be called remuneration for any service.
The CESTAT, while setting aside the order of the commissioner appeal, noted the department did not produce any evidence to show that there is an agreement or an understanding between the appellant and their customers for the rendering of any service. There is no agreement on any consideration. The nature of service should emanate from the terms of the contract, agreement, or understanding mutually agreed upon by the parties.
Case Title: The Food Corporation of India Versus The Commissioner of Central Excise and Service Tax, Panchkula
Case No.: Service Tax Appeal No.2624 Of 2012
Counsel For Appellant: Sunil Kumar Mukh
Counsel For Respondent: Ravinder Jangu
Click Here To Read The Order