The assessee was engaged in providing the following services: It stated that it was providing agricultural extension services to its principal. The Adjudicating Authority held that the assessee was engaged in marketing and promotion of pesticides/insecticide manufactured by its principal, which were taxable services under the category of ‘business auxiliary service’.
Held: The assessee has produced photographs of the services provided by it. In the photographs, nowhere it is coming out that the assessee is doing marketing and promotion of the product of its principal. Moreover, in the impugned order, the Adjudicating Authority has observed that the ‘agricultural extension service’ is of scientific research and knowledge by observing that none of the supporting documents which the assessee has submitted to substantiate its claim that it has been providing agricultural extension service could show that the farmers were being given any training through scientific research and knowledge to agriculture practices through farmer education and training.
As per the definition of ‘agricultural extension’ given under section 65B(4), the assessee was required to provide scientific research and knowledge to agriculture practices through farmer education and training. As per agreement entered into with the principal, the assessee has provided the said service. The finding of the Adjudicating Authority is not appreciable. Accordingly, the same is turned down.
The assessee has provided ample evidence in respect of nature of the services provided by it by way of photographs and agreement of other materials but the revenue has not come with an evidence that the assessee was engaged in the marketing and promoting the product of its principal while providing agricultural extension service. Therefore, the assessee is not providing any taxable service but is providing only agricultural extension service.
Another ground for confirmation of demand is that the assessee is receiving remuneration in terms of sale by the assessee of the product of its principal. In fact, it is only mode of calculation of remuneration of the service provided by the assessee but the same cannot be termed that the assessee received remuneration by way of marketing and promotion or sale of the product of its principal. For that, the assessee is getting separate commission on which it is discharging service tax liability. Therefore, on the basis of remuneration, it cannot be held that the assessee is providing service of marketing and promotion.
The agricultural extension services are not taxable under clause (d) of section 66D of the negative list. As on merits the services rendered by the assessee are ‘agricultural extension services’ and are covered under negative list as per section 66D, the assessee is not liable to pay service tax.
Citation: [2018] 97 taxmann.com 142 (Chandigarh – CESTAT )