Commr. of Cus. and C. Ex. vs M.P. State Co-op. Dairy Federation

Shri S.A. Dharmadhikari, learned counsel for the appellant. Shri Mukesh Agrawal, learned counsel for the respondent.

This is an appeal by the Revenue u/s 35C of the Central Excise Act, 1944 calling in question the concurrent orders passed by the Appellate Authority and the Appellate Tribunal in the matter of recovery of Service Tax from the respondent, a Cooperative Society.

Respondent M.P. State Cooperative Dairy Federation is a Cooperative Society registered under the M.P. Cooperative Societies Act, 1960. Apart from carrying out various activities, it is also involved in consultancy service which is given to various Cooperative Societies in the state of M.P. being the Apex Cooperative Federation for ensuring milk production in the State of M.P. Holding that for this consultancy service, Service Tax is liable to be paid, a show cause notice was issued and thereafter Service Tax was assessed by the Additional Commissioner, Central Excise Department. On the appeal being filed the Commissioner (Appeals) and the Tribunal have held that the respondents are not liable to pay Service Tax (2009) 19 STJ 45 this appeal has been filed by the Revenue.

Even though by taking us through the bylaws of the Society, Shri Dharmadhikari, learned counsel for the appellant tried to emphasize that the society is indulging in commercial activities and a Full Bench of this court in W.A. No. 212/2007 (Annexure E) decided on 9-8-2007 and affirmed by the Supreme Court has already held that this society is engaged for commercial activities, the fact remains that the respondent/society is a Cooperative Society established by the M.P. Cooperative Societies Act and in the matter of consultancy being undertaken, it has been appointed as a nodal agency by the State Government the learned Commissioner for Appeals in his order Annexure-C, dated 19-7-2007 after examining the matter in detailed has recorded the following findings:

"As has been discussed above in detail, the Appellant is playing a very crucial role in the proper running and management of the Milk Unions and is also providing legal and technical advice/assistance. Hence, all these activities will fall in the category of the "Management Consultant''s Service" in terms of Section 65(65) ibid. However, before any service tax is levied, it is to be determined as to who are the service provider and the service recipient. There is no doubt that the Appellant, to great extent, has been supervising and monitoring the activities of various Milk Unions, in the exercise of its statutory responsibilities under the M.P. State Co-operative Federation Act as well as the Bye-laws framed thereunder. The Appellant has been carrying out its functions of supervision and management of the Milk Unions, for their efficient operation; by issuing them various instructions and orders; responding to the Vidhan Sabha questions, in regard to the activities of the Milk Unions; and taking disciplinary action, whenever necessary, against the employees of the Milk Union. By administrating and managing the Milk Unions, the Appellant is only fulfilling its statutory responsibility and obligations towards its constituted members. If any service is rendered in connection with the promotion and furtherance of its objects by the Appellant, the same would amount to rendering service to itself Therefore, the Appellant cannot be held to be a service provider and the Milk Unions service recipients. This view also finds support from the Ministry''s Circular No. 1/1/2001-S.T. (Section 37B), dated 27-1-2001, wherein following clarification is given.

"However, these agencies providing services as per the requirement of any statue or regulation such as Take over Regulations of SEBI and, if their role is limited to the compliance of such act or regulations and not governed by any contract with the advisee company, (hen such services will not be covered under the scope of "Management Consultant".

In the circumstances, no service tax can be imposed on the charges recovered from the Milk Unions (including the cattle feed factories under them) by the Appellant for the purposes of meeting its expenses in the form of ''Management Consultancy Expenses''."

This finding was reconsidered by the Appellate Tribunal and the Appellate Tribunal has also affirmed the same mainly on the ground that the society is not conducting any commercial activities in the matter of consultancy service but only rendering consultancy service to various Milk Unions, i.e. the member societies which are functioning under its guidelines being apex society and a nodal agency. The concurrent findings recorded by the Commissioner (Appeals) and the Tribunal is in accordance with law and we find no error in the matter warranting reconsideration. The appeal is therefore, dismissed.