Regional Manager Vs Commissioner of Central Excise And Service Tax (CESTAT Hyderabad)
The CESTAT Hyderabad considered appeals arising from a demand of ₹2.62 crore in service tax, along with interest and penalties, against a statutory authority engaged in auctioning tobacco. The authority conducted auctions of Virginia tobacco through designated platforms and collected fees from buyers and sellers. The Department classified these activities under “auction of property” services and raised a demand for the period 01.05.2006 to 31.03.2008. The matter had earlier been remanded for fresh adjudication, after which the demand was confirmed along with penalties, leading to the present appeals.
The Tribunal examined whether the auction fee collected constituted consideration for taxable service. It noted that the authority was a statutory body created under law to regulate production, marketing, and export of tobacco. The auction fee, fixed at 2% under statutory provisions, was a compulsory levy collected in discharge of statutory functions. Relying on judicial precedents and CBEC Circular No. 89/7/2006, the Tribunal held that statutory levies collected by sovereign or public authorities in performance of mandatory duties do not constitute consideration for service and are not liable to service tax. Accordingly, the auction fee was held non-taxable.
On the issue of storage and warehousing, the Tribunal observed that the goods involved were unmanufactured tobacco, which falls within the definition of “agricultural produce.” As per the statutory definition, storage of agricultural produce is excluded from the scope of taxable service. Therefore, rental income and warehousing charges for such storage were held not liable to service tax.
