2010 (9) TMI 310 - AT - Service Tax

Valuation demurrage charges service tax sought after including demurrage charges under storage and Warehousing service - assessee may also be given a reasonable opportunity of adducing evidence as to the nature of goods stored/warehoused and the respective demurrage charges - demurrage charges collected in respect of agricultural produce is subject to levy of Service tax is no longer res integra inasmuch as this issue stands settled in favour of the assessee - appeals are disposed of

Summary

Issues:
1. Service Tax demand on demurrage charges collected by a company for storage and warehousing services.
2. Applicability of Service Tax on demurrage charges for agricultural produce.
3. Power of remand by the Commissioner (Appeals).
4. Consideration of demurrage charges in the taxable value of storage and warehousing services.

Analysis:
1. The original authority demanded Service Tax on demurrage charges from a company for storage and warehousing services. The Commissioner (Appeals) remanded the case to re-quantify the Service Tax on demurrage charges for goods other than agricultural produce. The appellate authority set aside the penalty and held the company liable to pay interest on the re-quantified amount. Appeal No. S.T./06/2007 challenged the decision of the Commissioner (Appeals).

2. The company contended that Service Tax was not leviable on demurrage charges for agricultural produce. The appellate authority noted the lack of evidence supporting this claim and cited a case law, but the issue was not properly considered. The case was remanded again to the original authority for re-quantifying the Service Tax on demurrage charges for agricultural produce, which is under challenge in appeal No. S.T./562/2008.

3. The Tribunal found that the Commissioner (Appeals) did not have the power of remand as per the Supreme Court ruling in MIL India Ltd. v. Commissioner. The lower appellate authority's orders were set aside on this ground, and the case was remanded for a fresh order on all issues, including the applicability of Service Tax on demurrage charges, giving the appellant a reasonable opportunity to be heard.

4. The Tribunal clarified that demurrage charges for agricultural produce were not subject to Service Tax as per the law and a circular issued by the Board. The lower appellate authority failed to consider the company's argument that demurrage charges for any goods were not taxable under storage and warehousing services. The case was remanded to address this fundamental question properly, emphasizing that demurrage charges for agricultural produce were not subject to Service Tax.

In conclusion, the appeals were disposed of by remanding the case to the lower appellate authority for a fresh order considering all issues, particularly the levy of Service Tax on demurrage charges, with a clear directive that demurrage charges for agricultural produce were not taxable.