Bombay High Court Adjudicates Central Excise Appeal on Service Tax Liability for Veterinary and Testing Services. Assessee Claims Exemption Under Notification No. 13/2003-ST for Commission Agent Services, While Revenue Alleges Taxable Business Auxiliary Services.

Central Excise Appeal under Section 83 of Finance Act, 1994 read with Section 35G of Central Excise Act, 1944 challenging orders of CESTAT confirming service tax demand on veterinary and laboratory testing services under Business Auxiliary Services.

Appellant sought setting aside of Order-in-Original dated 31 October 2011 and CESTAT orders dated 21 October 2016 and 5 May 2017, and quashing of service tax demand of Rs.89,38,978/- with interest and penalty.

Aggrieved by confirmation of service tax demand under Business Auxiliary Services for period 1 July 2003 to September 2004, despite appellant's claim of exemption under Notification No. 13/2003-ST for commission agent services.

Commissioner of Central Excise, Pune-III by Order-in-Original dated 31 October 2011 confirmed demand with interest but no penalty under Section 80. CESTAT by order dated 21 October 2016 confirmed demand, imposed penalty under Section 78, no penalty under Section 76. ROM application disposed on 5 May 2017 confirming demand and penalty.

Whether the Tribunal was right in passing the impugned order beyond the allegations made in the show cause notice both on merits and limitations? Whether the Tribunal was right in dismissing the Rectification of Mistake Application in cursory manner without discussing various judgments cited by the Appellant which are squarely applicable to the facts of the present case and without considering written submission filed post hearing? Whether the Tribunal was correct in not considering the decision of the coordinate bench in the case of Chahabria Marketing Ltd. V. Commissioner of Service Tax, Mumbai reported as 2016(43) STR 93 which holds that exemption under Notification No. 13/2003-ST dated 20.06.2003 is available to all services provided under Business Auxiliary Service? Whether the Tribunal was correct in restricting the scope of exemption under Notification No. 13/2003-ST dated 20.06.2003 to the sub-category of promotion and marketing of 'Business Auxiliary Services' and not the entirety of 'Business Auxiliary Services'? Whether the Tribunal was correct in holding that services in the nature of 'veterinary services' and 'Technical Testing services' will fall under the taxable category of 'Business Auxiliary Services' when at the relevant point of time the testing services on animals were specifically excluded from the definition of 'Technical Testing services'.

Appellant submitted that it was engaged in promoting sales for clients and received payments on commission basis on fixed percentage of sales volume; veterinary and pathological laboratory testing services were subsidiary and fully tied with main service of promoting sales; no separate payments were charged. Appellant contended that prior to 9 July 2004, services of commission agent were exempted from service tax, and from 9 July 2004 it took registration and paid service tax regularly under Business Auxiliary Services, showing no intent to evade tax; extended period and penalty under Section 78 were unjustified. Appellant relied on authorities including Padmini Products, Chahabria Marketing, N.P. Earth Movers, Electropneumatics, Mahindra & Mahindra, Fujifilm, and Dr. La Path Lab to support that Notification No. 13/2003-ST exemption applies to all Business Auxiliary Services provided by a commission agent. Respondent submitted that appellant wrongly claimed exemption under Notification No. 13/2003-ST for the period from July 2003 to September 2004 in relation to Veterinary Services and Testing and Analysis Services. Respondent argued that authorities cited on behalf of the appellant would not assist the appellant, and that concurrent findings recorded in Order-in-Original, CESTAT, and ROM rejection did not give rise to any substantial questions of law; appeal should be dismissed.

This Appeal is filed under Section 83 of the Finance Act, 1994 read with Section 35G of the Central Excise Act, 1944, challenging the concurrent findings recorded by Order No. A/93256-93257/16/STB dated 21 October, 2016 and Order No. M/87288/17/STB dated 5 May, 2017. Appellant is engaged in business of production and marketing of chicks and other related activities on behalf of its clients/group companies. The Excise Department directed Appellant to pay service tax on commission received for testing and veterinary services, under the taxing entry of 'Business auxiliary services' rendered since 1 July, 2003. Appellant relied upon the Judgment of Supreme Court in the case of Padmini Products (Supra), which held that mere failure or negligence on the part of the producer or manufacturer either not to take out a licence or not to pay duty in case where there was scope for doubt as to whether licence was required to be taken out or where there was scope for doubt whether goods were dutiable or not, would not attract the extended period.

15 April 2009: Show Cause Notice issued demanding Service Tax of Rs.89,38,978/- with interest and penalty for period 1 July 2003 to September 2004. 10 June 2009: Appellant replied to Show Cause Notice. 23 August 2011: Commissioner of Central Excise, Pune-III heard parties. 31 October 2011: Order-in-Original confirmed demand with interest, no penalty under Section 80. Appellant filed Appeal No. ST/75/12 before CESTAT; Revenue filed Appeal No. ST/45/12 against non-imposition of penalty. 21 October 2016: CESTAT passed Main Order confirming demand, imposing penalty under Section 78, no penalty under Section 76. Appellant filed ROM Application ST/ROM/92261/17 under Section 74 of Finance Act 1994. 20 April 2017: Hearing on ROM. 5 May 2017: CESTAT disposed ROM confirming demand and penalty. Present appeal filed before Bombay High Court under Section 83 of Finance Act 1994 read with Section 35G of Central Excise Act 1944. 15 June 2023: Reserved for judgment. 28 August 2023: Pronounced.

• Finance Act, 1994: 73(1), 74, 76, 78, 80, 83, 86
• Central Excise Act, 1944: 35G