2007 (3) TMI 752 - AT - Service Tax

Levy of Service Tax - Services of C F agents - instructions contained in the Service Tax Trade Notice No. 20/2002 - HELD THAT - The Explanation II to section 67 only clarifies the general principle that when no tax is separately collected from the client, the gross amount collected is inclusive of the tax. This principle is applied in the Central Excise cases also in the light of the CCE v. Maruti Udyog Ltd. 2002 (2) TMI 101 - SUPREME COURT case decided by the Supreme Court. Even in respect of removal without payment of duty when the duty liability is computed the sale value is taken to be cum-duty value. The same principle has to be applied here also. Therefore, we set aside the impugned order and remand the matter to the Original authority for re-computation of the duty liability taking the gross receipt as inclusive of service tax. It is seen that when the appellants came to know all the correct legal position, they voluntarily paid even before the issue of show-cause notice. Thus, the imposition of penalty on the appellant is not sustainable. The same is set aside. Therefore I remand the matter to the Original authority to re-compute the tax liability and allow the appeal.

Summary

Issues:
Stay application and appeal filed against Order-in-Appeal No. 157/2006-ST - Liability towards service tax, penalties under sections 76, 77, and 78, re-computation of tax liability based on total receipt considered as cum-tax, applicability of Trade Notice and case laws.

Analysis:
The appeal before the Appellate Tribunal CESTAT Bangalore pertained to an Order-in-Appeal passed by the Commissioner of Customs & Central Excise, Cochin, involving the payment of service tax, interest, and penalties. The appellant, a C&F agent, did not dispute the service tax liability but requested the amount received from clients to be treated as cum-tax for re-computation of tax liability. The appellant cited a Trade Notice and case laws to support their position. The Tribunal noted the appellant's cooperation, voluntary payment of a portion of the tax liability before any notice, and the legal principle that gross receipts inclusive of tax are considered for tax computation.

The Tribunal referred to the Trade Notice clarifying that amounts received from clients should be considered inclusive of service tax for tax liability computation. It also cited case laws where penalties were not imposed due to genuine errors or lack of reasonable cause. The Tribunal emphasized that the legal principle of considering gross receipts as cum-tax was applicable, similar to Central Excise cases. It set aside the penalties imposed under sections 76 and 78, remanding the matter for recomputation of tax liability based on gross receipts inclusive of service tax. The Tribunal highlighted the appellant's proactive payment before any show-cause notice and directed the payment of appropriate interest for delayed service tax payment.

In conclusion, the Appellate Tribunal upheld the appellant's request for re-computation of tax liability based on total receipts considered as cum-tax, citing legal principles, Trade Notice, and case laws. The penalties under sections 76 and 78 were set aside, emphasizing the appellant's cooperation and proactive payment. The matter was remanded for the Original authority to re-compute tax liability, with directions to pay appropriate interest for delayed service tax payment, ultimately allowing the appeal.