Subsidies are negative taxation and there cannot be a positive tax on same under ST: CESTAT
IN this case, the Commissioner (Appeals) held that buffer stock subsidy received by the respondent sugar factories are not liable to service tax under the category of storage and warehousing services.
Aggrieved, Revenue is before the CESTAT and submits that the subsidy has been granted to the respondents by the Government for the expenses incurred towards storage of the goods and, therefore, it is a consideration for the services rendered.
The respondents were probably collecting their subsidies and so did not appear.
The Bench noted that the issue has been settled by the Punjab & High Court decision in the case of CCE, Chandigarh vs. Nahar Industrial Enterprises Ltd. wherein it was held that buffer-stock subsidy cannot be considered as a consideration received for the services rendered and, therefore, service tax would not be leviable on such activity; that the sugar factories are storing the sugar for themselves and, therefore, there cannot be any service to self.
The CESTAT further added - “Even otherwise, subsidies are negative taxation and there cannot be a positive tax on the same under service tax.”
Holding that there is no merit in the appeals of the Revenue, the same were dismissed.