The Mumbai bench of the Customs Excise and Service Tax Appellate Tribunal ( CESTAT ) has held that Tyre Bullock Carts without bullocks and driver, provided by the appellant on rent for the purposes relating to agriculture/agricultural produce without having any right of possession or effective will not fall under Supply of Tangible Goods Service.
The appellants are engaged in the manufacture of sugar and molasses. They are also providing bullock carts on rent basis to the farmers for transportation of sugar cane to its sugar factory. The period involved is 21.1.2015 to 31.3.2016 i.e. post negative list.
According to the department, during the disputed period the appellants have received a gross billed amount of Rs.31,74,620/- towards rent of Tyre Bullock carts and are liable to pay service tax of Rs.4,30,383/- which the Appellants failed to pay. Accordingly, a show-cause notice dated 13.7.2017 was issued u/s. 73(1) of the Finance Act, 1994 demanding the duty along with interest and penalty.
The said show cause notice culminated into the Order-in-Original by which the Adjudicating Authority confirmed the demand along with interest and penalty. Commissioner (Appeals), vide order impugned order affirmed the aforesaid order by rejecting the appeal filed by the Appellants.
The Judicial Member, Ajay Sharma pronounced the order based on an appeal filed by M/s Bhaurao Chavan SSK Ltd.
The CESTAT observed that the appellant has supplied the Tyre Bullock Carts without bullocks or driver to the recipient of service i.e. farmers. The farmers have to engage their own bullocks and drivers for utilising the bullock carts. If the bullocks are of the farms and the drivers are also appointed by them then the right of possession and effective control cannot be said to be rest with the Appellants.
The bench also observed that merely because in the agreement some route has been suggested by the Appellants which the farmers have to follow or that if during the temporary stoppage of work in the sugar factory, the employee or the labourer of the contractor/farmer are not permitted to engage in any other work or are not paid remuneration for that day, does not make them under the effective control of the Appellants.
Section 66D (d)(iv) ibid would make it clear that the services relating to agricultural or agricultural produce by way of renting or leasing of agro machinery are outside the purview of Service Tax and also sugarcane is an agricultural produce and as per various dictionary meanings, tyre bullock cart very well falls within the definition of agro or agricultural machinery.
While allowing the appeal, the bench also said that the remuneration to them has to be paid by their contractor/farmer only and they cannot claim it from the appellants. Therefore from the facts on record, it is clear that the appellant has delivered the effective possession and control of the Tyre Bullock carts to the farmers/contractors.
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