2007 (3) TMI 34 - AT - Service Tax

Valuation (Service tax) Appellant contended that the charges reimbursed by the companies towards freight were not to form part of the value of taxable services Original authority rejected the appellant contention and directed to re-quantify amount of differential tax

Summary

Issues:
1. Demand of service tax, interest, and penalties for the period September 1999 to March 2000.
2. Demand of service tax, interest, and penalties for the subsequent period of April to September 2000.
3. Inclusion of certain expenses in the value of taxable service for the purpose of service tax payment.

Analysis:

Issue 1:
The original authority demanded service tax, interest, and penalties from the appellants for the period September 1999 to March 2000 under Sections 73, 75, 76, and 77 of the Finance Act, 1994. The Commissioner (Appeals) upheld this decision, leading to Appeal No. S/1/2002 challenging the same.

Issue 2:
For the subsequent period of April to September 2000, the original authority confirmed a differential demand of service tax, interest, and imposed a penalty against the appellants. The Commissioner (Appeals) sustained this decision, resulting in Appeal No. S/4/2004.

Issue 3:
The appellants rendered "Clearing and Forwarding Service" to clients under agreements that provided for reimbursement of expenses incurred towards freight and remuneration for services. The original authority demanded differential service tax for certain expenses not included in the gross value for tax payment. The Deputy Commissioner excluded freight charges from the taxable service value for the period September 1999 to March 2000, a decision upheld by the Commissioner (Appeals). However, for the period of April to September 2000, similar freight charges were included in the taxable service value, which was not permissible as per the earlier valid exclusion. Other expenses incurred by the Clearing and Forwarding Agent were rightly included in the taxable service value for both periods based on the agreement and Section 67(i) of the Finance Act, 1994.

In conclusion, Appeal No. S/1/2002 was dismissed, while Appeal No. S/4/2004 was allowed to the extent of excluding certain expenses from the taxable service value. The original authority was directed to re-quantify the differential tax amount and reconsider the imposition of penalties.