2007 (2) TMI 100 - AT - Service Tax

Demand, interest and Penalty - Alleged that appellant had short pay the duty in respect to CHA service and C & F service and accordingly demand were made alongwith interest and penalty - Held that provision reason to be given in order for charging service tax

Summary

Issues:
- Demand of service tax for CHA and C&F agent services
- Burden of proof on the department
- Nature of taxable services under CHA
- Treatment of reimbursable expenses for CHA services
- Service tax liability on rental and distribution income for C&F agent services
- Invocation of extended period for non-compliance
- Penalty under Section 78 for alleged suppression of facts

Analysis:
The appeal before the Appellate Tribunal CESTAT, Bangalore was against the Order-in-Original passed by the Commissioner of Service Tax, Bangalore, regarding the demand of service tax for Customs House Agent (CHA) and C&F agent services. The Revenue issued a show cause notice alleging short payment of service tax for the period from 2001 to 2004, along with interest and penalties under various sections. The Adjudicating Authority confirmed the demand for CHA services and C&F agent services, imposing penalties and interest under different sections.

The appellants contended that the burden of proof was on the department to establish the taxable value of services rendered as CHA. They argued that the Adjudicating Authority did not provide sufficient reasons for demanding service tax on various recoveries under CHA services. The appellants relied on several case laws to support their argument and highlighted discrepancies in the calculation of service tax demand.

Regarding the nature of taxable services under CHA, the appellants emphasized that not all activities of a CHA agent are taxable under CHA services. They explained in detail the nature of various recoveries and expenses incurred during CHA services, challenging the inclusion of certain items as taxable under CHA services.

In respect of reimbursable expenses for CHA services, the appellants argued that income arising from such expenses charged on a notional basis is not chargeable to service tax, citing relevant judicial decisions. They also addressed the service tax liability on rental and distribution income for C&F agent services, pointing out that certain incomes were not subject to service tax based on tribunal decisions.

The appellants further raised concerns about the invocation of the extended period for non-compliance and disputed the penalty imposed under Section 78 for alleged suppression of facts. They argued that non-inclusion of the value of various services distinct from CHA activities does not constitute suppression of facts with intent to evade service tax.

After careful consideration, the Appellate Tribunal found that the Adjudicating Authority had not provided sufficient reasoning for confirming the demand on various activities of the appellants. The Tribunal set aside the impugned order and remanded the matter for de novo consideration, directing the Adjudicating Authority to scrutinize all records submitted by the appellants and pass a well-reasoned order within three months. The Tribunal emphasized the importance of proper justification for charging activities to service tax under CHA or C&F services.