Bayer Crop Science Ltd. Vs Commissioner (CESTAT Kolkata)
Summary: The appellant, M/s. Bayer Crop Science Ltd., had been given an order to supply hybrid seeds to West Bengal State Seed Corporation Ltd. (WBSSCL). The appellant’s offer price for the hybrid seeds was Rs.275/- / 271/- per Kg. It appointed commission agent M/s. Gopal Fertilizer to procure the seeds on its behalf and supply them to WBSSCL, for which the commission agent was paid Rs.45/- per Kg. The commission agent raised bills charging Service Tax of Rs.2,41,947/-.
The appellant subsequently came to know that since the commission agent was rendering service under Business Auxiliary Service in respect of agricultural seeds, Service Tax was not payable. It therefore filed a refund claim for Rs.2,41,947/-. The lower authorities agreed that Service Tax was not required to be paid on the Business Auxiliary Service rendered by the commission agent since the service related to procurement of agricultural seeds. However, the refund was rejected on the ground that the appellant had not established that the principle of unjust enrichment was inapplicable.
Before the Tribunal, the appellant relied upon its letter dated 31.07.2013 concerning the pricing arrangement and submitted that it was not rendering any service to WBSSCL. According to the appellant, it was selling hybrid seeds on an outright sale basis at Rs.275/- / 271/- per Kg. and had engaged M/s. Gopal Fertilizers as commission agent by paying commission of Rs.45/- per Kg. The appellant submitted that only the service rendered by the commission agent could be classifiable as Business Auxiliary Service and, even then, Service Tax was not payable because the commission agent was dealing with agricultural produce. Since the appellant’s own activity was a sale, the question of passing on any Service Tax element to the buyer would not arise.
The Department, on the other hand, relied upon a letter dated 21.02.2014 from WBSSCL stating that the rate of hybrid paddy seed supplied by the appellant was “inclusive of all applicable taxes (Service Tax)”. It therefore supported the lower authorities’ conclusion that the price of Rs.275/- / 271/- per Kg. paid by WBSSCL included a Service Tax element and consequently justified rejection of the refund claim.
The Tribunal examined the letter dated 31.07.2013 concerning the pricing of the hybrid seeds and the bill raised by M/s. Gopal Fertilizer. The Tribunal found that the transaction between the appellant and WBSSCL was one of sale of hybrid seeds. It held that even if the price was treated as inclusive of taxes, those taxes would refer to VAT and not Service Tax. The Tribunal further observed that if the appellant’s activity amounted to a service, the appellant would have been eligible to take Cenvat credit of the Service Tax paid to the commission agent.
The Tribunal found it undisputed that no Service Tax was required to be paid when the product being dealt with was an agricultural product. It held that the lower authorities had erred in treating the appellant’s sale transaction as a service transaction. There was also nothing to indicate that the appellant had passed on the Service Tax burden to WBSSCL.
Accordingly, the Tribunal set aside the impugned order and allowed the appeal. It directed the Adjudicating Authority to grant refund of Rs.2,41,947/- along with interest at the applicable rate. Interest was directed to be paid from the 91st day of filing of the refund claim until the entire refund was made available to the appellant along with interest. Since the refund claim had remained pending for more than eight years, the Tribunal directed completion of the process within eight weeks from receipt of the order.
The appeal was accordingly allowed.
FULL TEXT OF THE CESTAT KOLKATA ORDER
The Appellant was given an Order to supply Hybrid Seeds to West Bengal State Seed Corporation Ltd. (WBSSCL). The Appellant has been given the offer price of Rs.275/- / 271/- per Kg. of Hybrid Seeds. The Appellant have appointed Commission Agent M/s. Gopal Fertilizer to procure the seeds on behalf of them and to supply the same to WBSSCL. For this activity, the commission agent was being paid Rs.45/- per Kg. The commission agent has raised bills for such commissions wherein they have charged Service Tax of Rs.2,41,947/-.
Later on, the Appellant came to know that since the commission agent is rendering service under BAS in respect of agricultural seeds, there is no Service Tax to be paid. The Appellant has filed a refund claim for Rs.2,41,947/-. The lower authorities have agreed that there is no need to pay any Service Tax on such BAS Services rendered by the commission agent since the service has been rendered towards procurement of agricultural seeds. However, the refund has been held as not grantable on the ground that the Appellant has not proved the applicability of unjust enrichment clause. Being aggrieved, the Appellant is before the Tribunal.
2. The Ld.Counsel, appearing on behalf of the Appellant takes me through the letter dated 31.07.2013 to show that the Appellant was not rendering any service to the WBSSCL. They were selling the hybrid seeds on outright sale basis @ Rs.275/- / 271/- per Kg. They have engaged the commission agent M/s. Gopal Fertilizers by paying them commission @ Rs.45/- per Kg. Only the service rendered by M/s. Gopal Fertilizer could be classifiable as a service under BAS. However, even under this category, the Service Tax is not payable since the commission agent was dealing with the agricultural produce. He submits that this fact is not disputed by the lower authorities.Since the activity undertaken by the Appellant is that of sale, the question of passing on of the Service Tax element to the buyer would not arise. Accordingly, he prays that the Appeal may be allowed.
3. The Ld.AR for the Department submits that the WBSSCL has submitted a letter on 21.02.2014 stating that the rate of hybrid paddy seed supplied by the Appellant is “inclusive of all applicable taxes (Service Tax)”. Therefore, he submits that the lower authorities are correct in holding that the price of Rs.275/- / 271/- per Kg. paid by the WBSSCL is inclusive of Service Tax element. Accordingly, he justifies the rejection of the refund claim.
4. Heard both sides.
5. The letter dated 31.07.2013 about the pricing of the hybrid seeds is extracted below :-
6. A copy of the Bill raised by M/s. Gopal Fertilizer is extracted below :-
7. From the letter dated 31.07.2013 it is seen that the transaction between the Appellant and the WBSSCL is that of sale of hybrid seeds. Therefore, even if it is taken as inclusive of taxes, the taxes here would refer to VAT and not to Service Tax. If the activity of the Appellant would amount to service, the Appellant would be eligible to take the Cenvat of the Service Tax paid to the commission agent. It is undisputed that no Service Tax is required to be paid when the product being dealt is that of agricultural product. The lower authorities, are in error in treating the sale transaction of the appellant as service transaction. There is nothing to indicate that the Appellant has passed on the Service Tax burden to the buyer WBSSCL. Therefore, I set aside the impugned order and allow the appeal.
8. I direct the Adjudicating authority to grant the refund of Rs.2,41,947/- along with interest at the applicable rate. The interest would be payable from 91st day of filing of this refund claim till the time the entire refund is made available to the Appellant along with interest. As the refund claim has been pending for more than 8 years, I direct this process to be completed within 8 weeks from the date of receipt of this order.
9. The Appeal stands allowed thus.
(Dictated and pronounced in the open Court.)
