Gujarat Green Revolution Co. Ltd. VERSUS  C.C.E. & S.T.-Vadodara-i

Service Tax Appeal No. 318 of 2010-DB

 

(Arising out of OIA-COMMR-A-/304/VDR-I/2009 Dated-31/12/2009 passed by Commissioner of Central Excise, CUSTOMS (Adjudication)-VADODARA-I)

 

Gujarat Green Revolution Co. Ltd.

VERSUS 

C.C.E. & S.T.-Vadodara-i

 

APPEARANCE:

Shri. Tapas Ruparelia, Chartered Accountant for the Appellant

Shri. G. Kirupanandan, Assistant Commissioner (AR) for the Respondent

CORAM: HON’BLE MR. RAJU, MEMBER (TECHNICAL)

HON’BLE MR. SOMESH ARORA MEMBER (JUDICIAL)

 

Final Order No. A/ 10502 /2023

 

DATE OF HEARING: 06.03.2023 DATE OF DECISION:21.03.2023

 

 

SOMESH ARORA

 

The facts of the case, in brief, are that the Appellant company GGRCL was set up by the Govt. of Gujarat Resolution dated 9.05.05 for smooth and uniform implementation of the Scheme for Modern Micro Irrigation Systems (MIS) like Drip/Sprinkler, etc, amongst farmers in the state. The integrated scheme have estimated cost of Rs.1500/- crores. Under the scheme, a subsidy of Rs. 50000/- per hectare or 50% of MIS cost, whichever is less was provided to the farmers for adopting the scheme. In terms of the scheme, the GGRCL was providing services like preparing of ready reckoner (jantri) for unit cost towards agriculture in consultation with experts, carrying out survey for laying MIS Set on farm through the approved agencies, analysis of soil and water, provide seeds, bio-fertilizer, anti-fungus medicines, manure of micro elements, gypsum etc. as per demand of the farmers and also assisting the farmers as per the State Government Scheme. The services provided by the Appellant to the farmers fall under the category of “Management or (Business) Consultant”. The Appellants obtained service tax registration bearing no. MGC/D-II/VAD- 1/08/GGRCL/05-06 under the category of “Management Consultant Service” and was paying service tax and filing ST-3 Returns.

 

2. On 06.05.08, the Appellants filed a refund claim for Rs.2,83,96,397/- for the period 1.4.05. to 31.03.08 on the ground that they had paid service tax through oversight because as per Service Tax Rules, tax should be collected and paid, whereas they paid the said service tax without collecting anytax amount from the customers (beneficiary farmers); that the nature of their activity was administrative in nature and that they do not provide any input in the form of Consultancy to any person or Organization and thus are not covered under the net of the Service Tax; that they had paid the service tax due to lack of knowledge.

 

3. Show Cause notice dated 16.6.08 was issued to the appellants for rejection of the refund claim on the ground that (i) the service tax has been correctly paid under the “Management Consultancy Service” in accordance with law and there is no excess payment, so no refund is due. (il) As the refund claim for the period 1.4.05. to 05.05.07 was submitted only on 06.05.08, Refund claim of Rs.1,51,37,508/- for the period 1.4.05 to 31.3.07 is time barred as it was submitted more than I year after the date of payment of service tax, and (iii) No documentary evidence is produced by the Appellant showing that tax burden is not passed on to any other person in terms of Section 11B of the Central Excise Act, 1944, which is applicable to service tax matter in terms of Section 83 of the finance Act, 1994,

 

4. Aggrieved by the aforesaid Order-In-Appeal the appellant filed the appeal before the Commissioner (Appeals) who after considering various submissions upheld the order of Adjudicating authority and rejected the appellant’s appeal. Aggrieved by the order of the Commissioner (Appeals) the appellants have filed present appeal mainly on the ground that the rejection of the refund claim for the period for which the duty was wrongly paid by them and refund subsequently sought by them should have been accepted by the Commissioner (Appeals) as the same was within a period of limitation and that services provided by them were not Management Consultant Services and therefore not liable to tax. Essentially, the appellants were engaged in promoting agricultural activity in state of Gujarat and to help identified farmers, financially Through subsidy of the State Government. The appellants were assigned the task to disburse Government subsidy to various farmers of identified targeted group and that the appellants were neither providing any advice to the State Government or any consultancy for technical assistance etc andwere simply handling agricultural subsidy sanctioned by the State Government to the qualified farmers. The period involved is 06.05.2007 to 31.03.2008, the definition of the Management Consultant at the relevant time are as follows:-

 

• ‘Management consultant’ means any person who is engagedin providing any service, either directly or indirectly, in

 

connection with the management of any organization in any manner and includes any person who renders any advice, consultancy or technical assistance, in relation to financial management, human resources management, marketing management, production management, logistics management, procurement and management of information technology resources or other similar areas of management.

• ‘Management or business consultant’ means any person who is engaged in providing any service, either directly orindirectly, in connection with the management of any organization or business in any manner and includes any person who renders any advice, consultancy or technical assistance, in relation to financial management, human resources management, marketing management, production management, logistics management, procurement and management of information technology resources or other similar areas of management.”

 

 

5. We find that the appellants are a limited company created by a resolution passed by three State Government undertakings, which are its joint promoters and therefore are implementing as a nodal agency a Micro Irrigation Scheme of Government of Gujarat

 

• We also find that the arguments advanced by the appellant were consideredby the Commissioner (Appeals) in para  9.1  to para No.

10.4 reproduced below:-

 

“9.1 A plain reading of the aforesaid definitions of Management Consultancy Service (upto 31.05.07) and Management or Business Consultancy Service (w.e.f. 01.06.07 onwards) shows that apart from renaming the service as Management or Business Consultancy Service [section 65(105)(r) ], the only change in the definition of the service

w.e.f. 01.06.07 is that while earlier any services provided, either directly or indirectly, in connection with the “Management of any Organization” in different specified areas and other similar areas of Management were included in the definition, w.e.f. 01.06.07 onwards such services provided in connection with the “Management of any Organization of Business” are included in the definition. The different areas in connection with which the services provided are covered under the said taxable service in the period prior to 31.05.07 and post 01.06.07 as specified in the said definitions have remained unchanged. It is pertinent to note that services specified in the definition are not exhaustive but only illustrative, as both the definitions besides, mentioning the specified services also referred to services in other similar areas of management.

 

 

10. With regard to issue (i) of para 8 above, on going through the Appeal Memorandum and the submissions made by/ on behalf of the appellant during personal hearing, it is observed that the coverage ofthe services provided by the Appellant under management consultancy services in the impugned order has been challenged by the appellants primarily on the following grounds:

 

• the activities of the appellant were primarily to disburse the Government subsidy to the farmers which was administrative in nature and could not be covered under Management Consultancy Service;

 

 

 

 

• the State Government not being an organization ora business house, the service of disbursing the subsidy sanctioned by the State Government could not be called Management or Business Consultant Service. They had also not provided any advice or consultancy to the State Government in different fields, viz. financial management, human resource management, etc. or other similar areas of

 

• The Appellant being a joint venture created by the Government of Gujarat, such services provided by them were not taxable as per the decision of the Tribunal in the case of Electrical Inspectorate, Government of Karnataka Vs Commissioner of Service Tax, Bangalore, 2008 (85) RLT 234 (Trib.- Ban).

 

 

• In this regard, I find that the impugned order, on a detailed analysis of the Resolution passed by the Government of Gujarat appointing the appellants as the Nodal Agency for implementing the Integrated Scheme for providing assistance to farmers of the state for adopting micro irrigation/ drip/ sprinkler etc. and the tripartite agreement dated 01.09.2005 amongst the appellants, the micro irrigation supplier (MIS supplier) and farmers, it was held by the lower authority that the appellants, besides providing technical assistance to farmers regard to the entire operation from the time of obtaining loantill the installation of irrigation system and its insurance, had also rendered advice relating to financial Management in respect of the loan amount granted by the banks through the appellant, Having rendered the above services, it was held in impugned order that the appellants had provided Management Consultancy Services/Management or Business Consultancy Services and correctly paid the service tax.
• On scrutiny of the resolution dated 09.05.05 and the tripartite agreement between the farmers, GGRCL and the MIS supplier, it is observed that the Appellants are providing services like preparing of ready reckoner (jantri) for unit cost towards agriculture in consultation with experts (para 6 of resolution)-the unit cost would include the costs towards agriculture related services, administrative service, repairing of instrument, insurance etc.. getting survey conducted by the approved agencies for laying MIS Set on farm (para 8.2 of resolution), MIS management, analysis of soil and water cost (Para 8.3 of resolution), provide seeds, bio-fertilizer, anti-fungus medicines, manure of micro elements, gypsum etc. as per the specific demand of the farmers (para 8.3 of resolution) and also assist them in financial management in relation to installation of the MIS system in the farmers land by way of arranging loan from the banks, disbursal of govt. subsidy to thefarmers, making complete payment to MIS Agencies through bank on behalf of the farmers, insurance of the MIS etc. For providing the said services, the appellants charged 5% of the subsidy from the farmers of the subsidy as (management) fee. The services as above are provided to individuals farmers or to a group of farmers, as case may be.

 

• On consideration, I am in agreement with the finding of the lower authority that the above services are in different areas which enable the farmers to efficiently manage their operations with regard to using the Micro Irrigation System (MIS) which are essential for their efficient working. The Appellant provide services to the individual farmers or group of farmers, as the case may be. Taking into the account the definitionof Management Consultancy Service/ Management or Business Consultancy Service as mentioned in para 9 above, and the services provided by the Appellant as discussed in the forgoing paras, the Appellants services come within the scope of Management or Business Consultancy Service. Thus, the Appellant contention that their services are primarily administrative in and they do not come within the scope of Management or Business Consultancy Service is not acceptable.

 

 

• The Appellant have also argued that the State Government not being an organization or a business house, the service of disbursing the subsidy sanctioned by the State Government could not be called Management or Business Consultancy Service. In this regard, the discussion in the forgoing paras shows that the appellant service are covered within Management or Business Consultancy Service by virtueof their nature of their services provided to the individual farmers or group of farmers, as the case may be. Accordingly, the subject argument of the appellants does not carry any substance.

 

 

10.3.2. The Appellants’ reliance on the decision in case of Electrical Inspectorate, Govt. Of Karnataka vs C.S.T., Bangalore-2008(85) RLT234 is not relevant for the present case as the issue in the cited case relates to taxable service under the category of” Technical Inspection and Certification Service” provided by a Chief Electrical Inspector to Govt. of Karnataka in relation to inspection and certification of electrical installations in terms of statutory requirements. The Hon’ble Tribunal held that the State Govt. Department is not liable for levy of service tax, as sovereign function cannot be subject matter of service tax. However, the present case is with reference to ‘Management or Business Consultancy Service’ as defined in section 65(65) of the Finance Act, 1994 and not relating to Technical Inspection and Certification Services. Though the Appellants are a joint venture set up by three state public sector units and function as nodal agency for implementation of uniform scheme for Micro Irrigation System in the state on behalf of Government of Gujarat, they cannot be equated to a Government department carrying out any statutory function as was the position in the cited case. Therefore, the decision cited by the appellants is not applicable to the present case.

10.4. In view of the discussion and findings above, the services proved by the Appellants are rightly covered under the definition of “Management Consultancy Service (upto 31.05.2007) and Management or Business Consultancy Service” (Post 01.06.2007) as defined in section 65 (65) of the Finance Act, 1994 and have correctly paid the service tax under the said category. Accordingly, the order of the Adjudicating Authority rejecting the refund claim on merits as correct and is sustainable in law.

 

 

 

 

• We find no reason to differ with the findings of the Commissioner (Appeals). In the facts and circumstances of the matter the case law quoted by the appellant in the case of Electrical Inspectorate, Government of

 

Karnataka Vs Commissioner of Service Tax, Bangalore-2008 (85) RLT 234 (Trib.-Ban). was properly considered and rejected by the Commissioner (Appeals).

• We also find definition of Management Consultancy Service is comprehensive enough to cover any technical advice, assistance in relation to financial management which in this instance they were doing by identifying qualified farmers for disbursal of subsidy and were getting paid for these services to the State Government. That the amount for their services was being deducted and paid for eventually out of subsidy amount of farmers, as per the Government Scheme, is of no consequence and does not change the character ofservice or the service recipient.

6. In view of the foregoing, we find no merit in the appeal and accordingly rejected the same. Appeal is dismissed.

 

 

(Pronounced in the open court on 21.03.2023)

 

 

(RAJU) MEMBER (TECHNICAL)

 

 

 

PRACHI

(SOMESH ARORA) MEMBER (JUDICIAL)