The Delhi Bench of Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that business entities are liable to pay service tax on legal services under reverse charge mechanism (RCM).
The bench of Justice Dilip Gupta (President) and Hemambika R. Priya (Technical Member) has observed that as per Notification No.30/2012-ST dated 20.06.2012 legal service provided by any person as represented to any business entity the service tax is liable to be paid by the Recipient of the Service.
The appellants/assessees are engaged in providing ‘Storage & Warehousing’ services for “agricultural produce” and had been additionally charging for ‘cleaning & grading’ as well as ‘handling’ of consignment in the warehouse, which was required in a few special cases. The consideration received against storage, cleaning & grading and handling were accounted for as ‘warehouse rent’; ‘cleaning & grading and ‘handling & transportation’, respectively.
The department, based on intelligence, sought information from the appellants regarding the nature of their activities. Based on the said information, the Department formed an opinion that the appellants were renting godowns/warehouse for commercial purposes and furtherance of business. In addition, the appellants were also providing handling and transportation services, cleaning and grading services to their clients. The Department also noted that the appellants were making payment for receiving legal services.
The Department has held that the cleaning and grading of agricultural produce is covered under production and processing of goods.
The tribunal held that the production and processing of goods for, or on behalf of, the client if provided in relation to agricultural is exempted from whole amount of tax vide Notification No. 19/2005 dated 07.06.2005 which amended the previous Notification No. 14/2004 dated 10.09.2004 with respect to exemption to specified services in relation to Business Auxiliary Service.
The CESTAT set aside the demand on “cleaning and grading‟ services and Cargo Handling Services. However, the demand of service tax on legal fees is upheld for the normal period only. The penalties are also set aside.
Case Details
Case Title: M/s. Shree Balaji Agro Services Versus Commissioner of CGST, Jodhpur
Case No.: Service Tax Appeal No. 50031 Of 2019
Date: 05.05.2025
Counsel For Appellant: Ajay K. Mishra
Counsel For Respondent: Anand Narayan
Read More: No GST Payable On These 9 Activities Of Municipality: AAR
