{"id":321989,"date":"2024-05-13T18:00:05","date_gmt":"2024-05-13T12:30:05","guid":{"rendered":"https:\/\/www.scconline.com\/blog\/?p=321989"},"modified":"2024-05-31T09:55:51","modified_gmt":"2024-05-31T04:25:51","slug":"cestat-purchasing-coal-from-coal-companies-for-further-reselling-not-taxable-service-under-finance-act-scctimes","status":"publish","type":"post","link":"https:\/\/www.scconline.com\/blog\/post\/2024\/05\/13\/cestat-purchasing-coal-from-coal-companies-for-further-reselling-not-taxable-service-under-finance-act-scctimes\/","title":{"rendered":"Purchasing coal from coal companies for reselling to consumers is not taxable service under Finance Act,1994: CESTAT"},"content":{"rendered":"
\n

Customs, Excise and Service Tax Appellate Tribunal, New Delhi:<\/span> National Co-operative Consumers’ Federation of India Limited-Appellant was assailing the order dated 22-01-2023 (‘impugned order’), whereby the demand of service tax on the appellant under the category of Business Auxiliary Service was confirmed. The bench of Binu Tamta, Member (Judicial)<\/span> and Hemambika R. Priya, Member (Technical) opined that under Section 65(19)(i)<\/a> of the Finance Act, 1994<\/a> (‘the Act’), promotion, marketing or selling the goods of the client was taxable as business auxiliary service, only if the service provider was acting as the client’s agent. However, appellant was not acting as an agent of the coal companies, rather it was purchasing coal from the coal companies for reselling further to the coal consumers. Therefore, the Tribunal opined that the relationship of appellant with the coal companies was on principle to principal basis and there was no element of service which could be taxed under the category of business auxiliary service. Thus, the Tribunal opined that appellant could not be saddled with the liability of service tax, and accordingly set aside the impugned order.<\/p>\n

Background<\/p>\n

Appellant was a cooperative society, registered under the Multi State Co-operative Societies Act, 2002, where approximately 80% share capital was held by the Government of India. Appellant was allocated coal by Coal India Limited (‘CIL’) for distribution among small\/tiny consumers in the country. An intelligence was received that appellant was allocated the coal for which it was receiving the commission of 5% in lieu of services provided by them to CIL, but they were not discharging their service tax liability under the category of Business Auxiliary Service as defined under section 65(19)<\/a> read with Section 65(105)(zzb)<\/a> of the Act<\/a>.<\/p>\n

Further, appellant appointed Pavan Coal Company, Kanpur as their National Handling and Distribution Agent, for distribution of coal to the tiny consumers of the non-core sector, and accordingly, an agreement dated 05-01-2005 was entered between both the parties. The Ministry of Coal allotted 2 million MTs of Coal per annum to appellant, which was made available through the subsidiaries of CIL. The coal was lifted from the collieries by their authorised coal agent and was supplied to the small\/tiny consumers in the small sector industry.<\/p>\n

In terms of the policy, appellant was not permitted to collect over and above 5% of the basic value and out of the 5% profit available to them, 1.5% was paid to the handling agent and the remaining 3.5% was retained by them. The main role of the handling agent was to lift the coal from the collieries of a coal company and deliver to small\/tiny consumers in the small sector industries and also, collecting the payment for depositing with the appellant from time to time.<\/p>\n

According to the Revenue, appellant was engaged in promotion, marketing and sale of goods belonging to CIL, which was taxable under the category of Business Auxiliary Service, therefore a show cause notice dated 02-12-2004 was issued to appellant. Consequently, the demand of service tax of Rs. 1,07,30,726 was made along with interest and penalty. On adjudication, the impugned order confirming the demand was passed. Thus, being aggrieved by the order, appellant filed the present appeal.<\/p>\n

The issue which arose for the consideration before the Tribunal was whether appellant was engaged in promotion, marketing and sale of goods belonging to CIL and therefore, liable to pay service tax under the category of Business Auxiliary Service or whether the transaction between appellant and CIL was of sale\/purchase.<\/p>\n

Analysis, Law, and Decision<\/p>\n

The Tribunal opined that as per the coal distribution policy, for allocation of coal to the agencies, price was charged from them as per the notified price. Appellant was paying entire price to the coal companies before procuring the coal, and appellant had also placed on record the letter received from the North-Eastern Coalfields and from Bharat Coking Coal Ltd, which showed that the excess amount paid to these companies was refunded to appellant. Therefore, the transaction was of sale\/purchase, and this was further substantiated by the sample invoices placed on record by appellant issued by Western Coalfield Ltd, showing payment of sales tax\/VAT. Similarly, on resale to the small consumers, the sale invoices issued by appellant showed the payment of VAT by them. The Tribunal opined that once the coal companies had charged sales tax\/VAT at the appropriate rate on the sale of coal to appellant and in turn, appellant had charged sales tax\/VAT to the consumers of coal, the transaction was of sale\/purchase and not of rendering service.<\/p>\n

The Tribunal opined that merely because the nomenclature in the coal policy referred to ‘agency’ did not mean that appellant was selling coal to the coal consumers on behalf of the coal companies as agent. Further, the fact that appellant was required to charge specified price and sell the coal to specified category of consumers, was not in the nature of restrictions and did not alter the nature of the transaction. Further, the Tribunal applied the principles laid down in Bhopal Sugar Industry Limited v. STO<\/span>, (1977) 3 SCC 147<\/a>, and opined that for determining the concept of agency, there had to be an element of indemnifying the agent in the event of any loss, by the principal, however, there was no such provision in the Coal Policy. Therefore, the appellant could not be treated as agent of the coal companies. Thus, the Tribunal opined that the arrangement between appellant and the coal companies was one for the purchase of coal for resale to coal consumers.<\/p>\n

The Tribunal opined that under Section 65(19)(i)<\/a> of the Act<\/a>, promotion, marketing or selling the goods of the client was taxable as business auxiliary service, only if the service provider was acting as the client’s agent. However, appellant was not acting as an agent of the coal companies, rather it was purchasing coal from the coal companies for reselling further to the coal consumers. Thus, the Tribunal opined that the relationship of appellant with the coal companies was on principle to principal basis and there was no element of service which could be taxed under the category of business auxiliary service.<\/p>\n

The Tribunal opined that the appellant was selling coal at a price whereby he was getting a profit margin of 5% on the base price, and the resale price was fixed by an agreement between the parties. Further, whatever was charged by the coal companies for coal, the appellant was adding 5% margin money and collecting the sale price from the consumers. Further, appellant was paying the sales tax on the entire amount received from the end consumers, therefore the Revenue could not charge any service tax.<\/p>\n

The Tribunal opined that since the transaction was of sale\/purchase on principal-to-principal basis and the coal companies and appellant was discharging the liability of sales tax\/VAT, therefore, there was no element of service involved. Thus, the Tribunal opined that appellant could not be saddled with the liability of service tax, and accordingly set aside the impugned order.<\/p>\n

[National Co-operative Consumers’ Federation of India Ltd. v. CCE, 2024 SCC OnLine CESTAT 429<\/a>, Order dated 10-05-2024<\/span>]<\/p>\n\n

Advocates who appeared in this case :<\/p>\n

For the Appellant:<\/span> P. K. Sahu, Advocate;<\/p>\n

For the Respondent:<\/span> Manoj Kumar, Authorised Representative.<\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

The Tribunal opined that once the coal companies have charged sales tax\/VAT at the appropriate rate on the sale of coal to appellant and in turn, appellant has charged sales tax\/VAT to the consumers of coal, the transaction is one of sale\/purchase and not of rendering 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service tax can be levied on transfer or assignment of copyright of the film produced under copyright service? 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Tribunal explains","author":"Editor","date":"September 10, 2021","format":false,"excerpt":"Customs, Excise and Services Tax Appellate Tribunal (CESTAT): The Coram of CJ Mathew (Technical Member) and Ajay Sharma (Judicial Member), allowed an appeal which was filed against the impugned order of the Commissioner of Central Excise & Service Tax (Appeals -IV) wherein he had upheld demand of Rs 29,57,199\/-, for\u2026","rel":"","context":"In "Case Briefs"","block_context":{"text":"Case Briefs","link":"https:\/\/www.scconline.com\/blog\/post\/category\/casebriefs\/"},"img":{"alt_text":"","src":"https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2018\/09\/CESTAT-Taxscan.jpg?resize=350%2C200&ssl=1","width":350,"height":200,"srcset":"https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2018\/09\/CESTAT-Taxscan.jpg?resize=350%2C200&ssl=1 1x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2018\/09\/CESTAT-Taxscan.jpg?resize=525%2C300&ssl=1 1.5x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2018\/09\/CESTAT-Taxscan.jpg?resize=700%2C400&ssl=1 2x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2018\/09\/CESTAT-Taxscan.jpg?resize=1050%2C600&ssl=1 3x"},"classes":[]},{"id":361671,"url":"https:\/\/www.scconline.com\/blog\/post\/2025\/09\/25\/service-tax-cannot-be-confirmed-without-evidence-cestat\/","url_meta":{"origin":321989,"position":2},"title":"\u2018Mechanical reliance on income tax data impermissible\u2019: CESTAT sets aside service tax demand confirmed without corroborative evidence","author":"Bharti","date":"September 25, 2025","format":false,"excerpt":"\u201cMere entries in income tax returns or Form 26AS cannot, by themselves, establish liability under the Finance Act, 1994, unless corroborated by evidence demonstrating rendition of taxable service.\u201d","rel":"","context":"In "Case Briefs"","block_context":{"text":"Case Briefs","link":"https:\/\/www.scconline.com\/blog\/post\/category\/casebriefs\/"},"img":{"alt_text":"service tax cannot be confirmed without evidence","src":"https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2025\/09\/service-tax-cannot-be-confirmed-without-evidence.webp?resize=350%2C200&ssl=1","width":350,"height":200,"srcset":"https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2025\/09\/service-tax-cannot-be-confirmed-without-evidence.webp?resize=350%2C200&ssl=1 1x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2025\/09\/service-tax-cannot-be-confirmed-without-evidence.webp?resize=525%2C300&ssl=1 1.5x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2025\/09\/service-tax-cannot-be-confirmed-without-evidence.webp?resize=700%2C400&ssl=1 2x"},"classes":[]},{"id":252898,"url":"https:\/\/www.scconline.com\/blog\/post\/2021\/08\/19\/cestat-tribunal-discusses-distinction-between-mere-provision-of-table-space-and-actual-rendering-of-service-non-discharge-of-tax-liability-as-provider-of-business-auxilia\/","url_meta":{"origin":321989,"position":3},"title":"CESTAT | Tribunal discusses distinction between mere provision of \u2018table space\u2019 and actual rendering of service; Non discharge of tax liability as provider of \u201cbusiness auxiliary service\u201d partly allowed","author":"Editor","date":"August 19, 2021","format":false,"excerpt":"Customs, Excise and Services Tax Appellate Tribunal (CESTAT): The Coram of CJ Mathew (Technical Member) and Ajay Sharma (Judicial Member) partly allowed an appeal which was filed with the issue of non-discharge of tax liability of Rs.17,46,066\/-, as provider of \u2018business auxiliary service\u2019, for the period between April 2007 and\u2026","rel":"","context":"In "Case Briefs"","block_context":{"text":"Case Briefs","link":"https:\/\/www.scconline.com\/blog\/post\/category\/casebriefs\/"},"img":{"alt_text":"","src":"https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2018\/09\/CESTAT-Taxscan.jpg?resize=350%2C200&ssl=1","width":350,"height":200,"srcset":"https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2018\/09\/CESTAT-Taxscan.jpg?resize=350%2C200&ssl=1 1x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2018\/09\/CESTAT-Taxscan.jpg?resize=525%2C300&ssl=1 1.5x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2018\/09\/CESTAT-Taxscan.jpg?resize=700%2C400&ssl=1 2x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2018\/09\/CESTAT-Taxscan.jpg?resize=1050%2C600&ssl=1 3x"},"classes":[]},{"id":363302,"url":"https:\/\/www.scconline.com\/blog\/post\/2025\/10\/10\/transferring-tenancy-rights-not-liable-to-service-tax-cestat\/","url_meta":{"origin":321989,"position":4},"title":"Transferring tenancy and occupancy rights in immovable property not service under S. 65-B(44) of Finance Act; not liable to service tax: CESTAT","author":"Bharti","date":"October 10, 2025","format":false,"excerpt":"\"Consideration out of surrender of tenancy right on account of immovable property cannot be considered as service as per definition under Section 65-B(44) of the Finance Act, 1994 and no service tax is payable.\"","rel":"","context":"In "Case Briefs"","block_context":{"text":"Case Briefs","link":"https:\/\/www.scconline.com\/blog\/post\/category\/casebriefs\/"},"img":{"alt_text":"transferring tenancy rights not liable to service tax","src":"https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2025\/10\/transferring-tenancy-rights-not-liable-to-service-tax.webp?resize=350%2C200&ssl=1","width":350,"height":200,"srcset":"https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2025\/10\/transferring-tenancy-rights-not-liable-to-service-tax.webp?resize=350%2C200&ssl=1 1x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2025\/10\/transferring-tenancy-rights-not-liable-to-service-tax.webp?resize=525%2C300&ssl=1 1.5x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2025\/10\/transferring-tenancy-rights-not-liable-to-service-tax.webp?resize=700%2C400&ssl=1 2x"},"classes":[]},{"id":233581,"url":"https:\/\/www.scconline.com\/blog\/post\/2020\/08\/08\/cestat-company-providing-service-to-member-companies-without-consideration-not-liable-to-service-tax-under-business-auxiliary-service-bas\/","url_meta":{"origin":321989,"position":5},"title":"CESTAT | Company providing service to member companies without consideration not liable to service tax under Business Auxiliary Service (BAS)","author":"Editor","date":"August 8, 2020","format":false,"excerpt":"Suchita Shukla, Editorial Assistant has put this story together","rel":"","context":"In "Case Briefs"","block_context":{"text":"Case Briefs","link":"https:\/\/www.scconline.com\/blog\/post\/category\/casebriefs\/"},"img":{"alt_text":"","src":"https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2018\/09\/CESTAT-Taxscan.jpg?resize=350%2C200&ssl=1","width":350,"height":200,"srcset":"https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2018\/09\/CESTAT-Taxscan.jpg?resize=350%2C200&ssl=1 1x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2018\/09\/CESTAT-Taxscan.jpg?resize=525%2C300&ssl=1 1.5x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2018\/09\/CESTAT-Taxscan.jpg?resize=700%2C400&ssl=1 2x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2018\/09\/CESTAT-Taxscan.jpg?resize=1050%2C600&ssl=1 3x"},"classes":[]}],"amp_enabled":true,"_links":{"self":[{"href":"https:\/\/www.scconline.com\/blog\/wp-json\/wp\/v2\/posts\/321989","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.scconline.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.scconline.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.scconline.com\/blog\/wp-json\/wp\/v2\/users\/67520"}],"replies":[{"embeddable":true,"href":"https:\/\/www.scconline.com\/blog\/wp-json\/wp\/v2\/comments?post=321989"}],"version-history":[{"count":0,"href":"https:\/\/www.scconline.com\/blog\/wp-json\/wp\/v2\/posts\/321989\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.scconline.com\/blog\/wp-json\/wp\/v2\/media\/319582"}],"wp:attachment":[{"href":"https:\/\/www.scconline.com\/blog\/wp-json\/wp\/v2\/media?parent=321989"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.scconline.com\/blog\/wp-json\/wp\/v2\/categories?post=321989"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.scconline.com\/blog\/wp-json\/wp\/v2\/tags?post=321989"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}