Applicability of service tax on Tobacco Board under the category of auctioneer service – CBEC clarifies to MOC
The CBEC has clarified to the Department of Commerce that auctioning service provided by the Tobacco Board is liable to Service Tax. The request for exempting the service provided by Tobacco Board had been examined by the Finance Ministry and as usual with all recommendations of the Commerce Ministry, this too was not agreed to.
The Board's Logic: Service tax is applicable on any service provided by any person, in relation to auction of property, movable or immovable, tangible or intangible, in any manner. However, such service provided to government is not taxable. The Tobacco Board undertakes auctioning of tobacco and levies a fee from growers and buyers of such tobacco. The service provided by the tobacco Board falls within the scope of auctioneer service. As regards the argument that Tobacco Board undertake statutory function and is performing purely on public interest, the circular No.89/7/2006-ST, dated 18.12.2006 (and subsequent circular No.96/7/2008-ST, dated 23.8.2007) explains that only such statutory/sovereign duties, the fee collected for which is compulsory/statutory and the same is deposited in the government account, would alone be not liable to service tax. In all other cases, service provided by a body created under a statute is liable to service tax. In case of Tobacco Board, the fee levied by it is discretionary within the ceiling limit prescribed under the statute; the fee is not deposited in the consolidated fund of India but retained by the Board; the Tobacco Board is a body corporate and prepare financial statement including income/expenditure, balance sheet etc. Hence the service provided by the Tobacco Board is not covered under the aforementioned circulars. Accordingly, the Tobacco Board is liable to pay service tax on auctioneer service provided by it for auction of tobacco.
Board has asked the Department of Commerce to issue directions to the Tobacco Board to pay up Service Tax- and of course copies of the letter had been sent to the field.
Now field officers can book the Tobacco Board, created by a Statute, headed by an IAS officer, for fraud, collusion, suppression and impose mandatory penalty.
CBEC's F.No.137/87/2008- CX.4 , Dated: the 14th August, 08