Order Date – 04 October 2023

Parties: M/s Export Inspection Agency, Delhi Vs Commissioner of Service Tax, Delhi-I

Facts –

• The Appellant, M/s Export Inspection Agency, Delhi, a field organisation of Export Council under Free Trade Agreement executed between India and foreign nation’s products, has been recognised as certificating authority for different food products.
• Two show cause notices were issued to the appellant for the period 2008-09 to November 2013 alleging that the service provided by the appellant were exigible to service tax and tax and penalties were imposed.

Issue –

• Whether the services provided by the appellant are not exigible to service tax as they are sovereign functions?

Order –

• The Tribunal observed that though the quantum of fee charged by the appellant is fixed by the Central Government, however the same is not deposited in the Government Treasury. Consequently, this clearly takes the functions of the appellant out of the ambit of the Circular No. 89/7/2006- ST Dated: 18th December, 2006. Consequently, it cannot be said that the appellant is discharging mandatory/statutory obligation.
• As this issue was dealt in great detail by the Supreme Court in its decision in Krishi Upaj Mandi Samiti there cannot be any other varying interpretation taken subsequent to this judgment. Accordingly, it was held that the appellant is providing service any undertakes Technical, Inspection and Certification service and the same cannot take the garb of sovereign/statutory function.
• As the money is not deposited in the  Government Treasury, and is available with the appellant, the same is the consideration received by the appellant for providing the Consultancy Service which admittedly is not transferred to the Government treasury. Hence this money cannot be equated with fee collected for discharging sovereign function.
• Hence the Tribunal upheld the demand and the interest confirmed in the impugned order. However, in respect of the penalty under Section 78, held that the penalty for the period prior to 08.04.2011, shall be equal to the service tax not paid by the appellant. For the period post 08.04.2011, the benefit of the amended penal provision is extended to the appellant.
• Appeal filed by the appellant is dismissed and appeal filed by the department is allowed.