[ORDER PER: ANGAD PRASAD]

Appeal No. ST/251 & 642/2012: M/s Tobacco Board, Vijayanagar, Mysore (hereinafter called as appellant) has filed this appeal against Order-in-Original dated 24.03.2009/ 26.03.2009 (Denovo No. 14/2001) dated 31.10.2011 passed by the Commissioner (Appeals), Guntur where the demand re-quantified amounting to Rs. 2,62,22,286/- under the provision of Section 73(1) of the Finance Act 1994 along with interest under Section 75 of the Act and against penalty imposed under Section 76 and 77 of the Act. Whereas, Department filed an appeal against the same Order-in-Original for non-imposition of penalty under Section 78 of the Finance Act 1994.

2. The facts in brief are that the appellants are engaged in the auctioning of tobacco leaves through their 10 auction platforms situated in Mysore & Hassan Districts of Karnataka for which the appellants are collecting service charges from the growers as well as buyers of the tobacco. During the period 01.05.2006 to 31.03.2008 in terms of Section 65(105)(zzzr) of the Finance Act under the category of ‘auction of property’ service as defined under Section 65(7a) the demand was made.

3. A Show Cause Notice dated 19.12.2008 was issued against the appellant and they had filed a reply and contested. After due process of law, Learned Commissioner of Service Tax, Mysore vide Order-in-Original dated 24.03.2009/26.03.2009 rejected the contentions of the appellant and confirmed the proposal issued by the Department except to impose penalty under Section 76 of the Act.

4. The Appellant filed an appeal (Appeal No. ST/369 of 2009) against the Order-in-Original before the CESTAT, Bangalore on various grounds, which was disposed of vide Final Order No. 874/2010 set aside the impugned order and remanded the case for fresh adjudication.

5. The denovo proceedings were taken up by the Commissioner of Customs, Central Excise & Service Tax, Guntur, as by that time, the Appellant has obtained Centralised Registration. After considering the various submissions Learned Commissioner passed Order-in-Original (Denovo dated 31.10.2011) and confirmed the levy of Service tax at a re-quantified amount of Rs. 2,62,22,286/- under provisions of Section 73(1) of the Finance Act, 1994 along with interest under Section 75 of the Act and also imposed penalties under Section 76 and 77 of the Act and dropped the penalty proposed under Section 78 by invoking Section 80 of the Act.

6. Being aggrieved by the above order, appellant has filed this appeal before the Tribunal.

7. Learned Counsel for the appellant submits that the appellant is a Statutory body established to regulate the production of Virginia tobacco and to operate an agricultural market yard to provide for the sale of tobacco by arranging auctions, in addition to making the best efforts to promote exports. The Commodity Board under the overall control of the Ministry of Commerce and Industry of Government of India. Learned Counsel for the appellant submits that the Tobacco Board is wholly on par with a regulated Agricultural Produce Market Committee, exclusively permitted to deal with Virginia tobacco. The principal function of the Appellant is to ensure that the growers are not exploited by intermediaries or money lenders and is also required to provide several facilities like providing the market infrastructure for the purchase and sale of tobacco by auction, unloading tobacco bales, arranging tobacco bales in auction hall for classification and grading, selling tobacco bales through e-auction and shifting tobacco bales from the auction hall to the godowns after completion of auction. Add-on facilities are providing rest houses to the growers and buyers, drinking water, parking of vehicles, etc. Therefore, the appellant was not engaged in any business activity except as a market facilitator. For providing all such infrastructure, the Board is collecting 2% fees (1% each from the buyer and the seller) and nothing else in terms of Section 14-A of the