1. The present appeal is filed against order-in-Original No. 3/COMMR/ST/IND/2011 dated 13/09/2011.
2. The appellant is engaged in the activity of blending and packaging of tea for M/s. TATA Tea Ltd. The dispute covers the period from 13/06/2005 to 13/09/2009. During the period under dispute, the appellant entered into two separate agreements with M/s. TATA Tea Ltd. namely i.e. (1) lease/rent agreement dated 12/12/2000 and (2) manufacturing agreement dated 20/11/2006. As per the lease agreement, the appellant made the factory premises available on lease to M/s. TATA Tea Ltd. and as per the manufacturing agreement, the appellant received charges for carrying out the activity
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of blending and packing of tea on behalf of M/s. TATA Tea Ltd. The Department, after investigation, came to the conclusion that the activity of packing undertaken by the appellant for M/s. TATA Tea Ltd. was liable to service tax under the category of Packaging Service falling under Section 65(105)(zzzf). Further, they were of the opinion that the lease agreement by which the appellant made premises available on lease to M/s. TATA Tea Ltd. was nothing but a camouflage for receiving additional consideration for the activity of packing. Accordingly, by issue of show cause notice, the Department proceeded to demand service tax for the entire period under the category of packaging service. During the course of investigation, the appellant admitted their liability for payment of service tax on the activity of packing and towards this, they paid service tax amounting to Rs. 76,23,558/- after calculation with cum duty benefit.
3. In the present appeal filed by the appellant, while admitting their liability for payment of service tax on the packaging service, they have vehemently opposed the stand taken by the Department that the lease agreement was not genuine but only a device for receiving additional consideration for the activity of packing. They have argued that the renting of immovable property service was included as a separate service only from 01/06/2007 under Section 96(105)(zzzz) and hence they are liable to pay service tax only from that date. They also claimed that they will be entitled to cum duty benefit for consideration received for packaging service.
4. With the above background, we heard Shri A.K. Batra, learned C.A. for the appellant and Shri P. Juneja, learned DR for Revenue. The learned Consultant specifically argued that they are entitled to not only cum duty benefit but also the relief from payment of service tax on the consideration received by way of lease agreement upto 31/05/2007.
5. The learned DR justified the impugned order.
6. After hearing both the sides and on perusal of record, we find that the appellant has carried out the activity of blending and packing tea on behalf of M/s. TATA Tea Ltd. It stands admitted by the appellant that the activity carried out was covered within the definition of the service of packaging and hence they have admitted their liability to pay service tax on such activity. In this connection, their only request is that the cum duty benefit should be extended to them. In this regard, he relied on the following case laws:-
(i) CCE & CUS, Patna vs. Advantage Media Consultant : 2008 (10) S.T.R. 449 (Tri. - Kolkata);
(ii) Tuticorin Port Trust vs. CCE, Tirunelveli : 2016 (42) S.T.R. 512 (Tri. - Chennai); and
(iii) Polaris Software Lab Ltd. vs. CCE, Chennai - III vide final order No. 41418 of 2015 dated 29 September 2015.
7. After perusal of the decision of the Tribunal in the case of Advantage Media Consultant (supra), the Tribunal observed as under:-
"3. Service tax is an indirect tax. As per this system of taxation, tax borne by the consumer of goods/services is collected by the assessee (manufacturer/service provider) and remitted to the Government. When the amount is collected for the provision of services, the total compensation received should be treated as inclusive of service tax due to be paid by the ultimate customer of the services unless service tax is also paid by the customer separately. So considered, when no tax is collected separately, the gross amount has to be adopted to quantify the tax liability treating it as value of taxable service plus service tax payable. We find that this principle has been legislated in the following terms with effect from 18-4-2006 in Section 67(2) of the Finance Act, 1994 as amended:
"67(2). Where the gross amount charged by a service provider, for the service provided or to be provided is inclusive of service tax payable, the value of such taxable service shall be such amount as with the addition of tax payable, is equal to the gross amount charged."
8. By following the above decision of the Tribunal, we allow the cum tax benefit and uphold the reduced demand.
9. Next we turn to the lease agreement as per which the appellant has received consideration towards lease rent. The stand of the Revenue is that even though there is a separate lease agreement dated 12/12/2000, it is nothing but a means of getting additional consideration for the packaging activity carried out on behalf of M/s. TATA Tea Ltd. After going through the record of the case, we find no justification for Revenue to take such a stand. It is not disputed that a separate lease agreement has been formally executed by the appellant with M/s. TATA Tea Ltd. for giving their premises on lease. We note that the separate service of renting of immovable property has been included in the statute only w.e.f. 01/06/2007. We also note that the appellant w.e.f. that date has already started discharging the service tax liability under the above service and under the lease agreement. In the result, we are of the view that the service tax liability arises on the consideration received under the lease agreement only w.e.f. 01/06/2007 and the demand prior to this date is set aside. During the course of argument, learned Consultant submitted that the service tax under rent of immovable property has already been paid alongwith interest prior to issue of show cause notice. Accordingly, he submitted that the penalty may be waived.
10. We find that as per the ratio of the following case laws, the liability for payment of service tax, after discharging of service tax prior to issue of show cause notice, merits consideration for waiver of penalty. By following these case laws, we set aside the demand for penalty:-
(i) CCE vs. Rashtriya Ispat Nigam - 2004 (163) E.L.T. A53 (S.C.);
(ii) CCE vs. Gaurav Mercantiles Ltd. : 2005 (190) E.L.T. 11 (Bom.).
11. In the result, the impugned order is modified and the service tax demand is upheld to the extent of that payable on the packaging service after extending the cum duty benefit. In the result, the appeal is partly allowed