2011 (1) TMI 241 - AT - Service Tax

Demand - Enhancement of penalty - whether the service tax to be confirmed on the gross value charged by the CHA without giving any benefit of demand on actual expenses undertaken by them on behalf of their customers - In view of the admission by the appellants that they are not able to produce the documentary evidence support the various reimbursable expenses - The break up of the total charges taken by the appellants from their client having not been substantiated the total gross value in the invoices is to be adopted as lumpsum amount and the taxable services are required to be taken as 15% of the lumpsum amount - the failure on the part of the appellant to substantiate the reimbursable expenses claimed on account of loss of documents cannot be held to be reflected on any mala fide on their part and if the 15% of the exempted amount charged resulting in less duty payment on them there is no warrant in imposing penalty under Sections 76 and 78 of the Finance Act - Accordingly decided in the favour of the assessee

Issues:
1. Dispute over service tax value for Customs House Agent (CHA) services from 2000 to 2005.
2. Confirmation of demand by the Assistant Commissioner and penalty imposition.
3. Commissioner's order enhancing penalty under Section 78.
4. Interpretation of service tax calculation on gross value charged by CHA.
5. Application of Board Circular No. B/43/1/97-TRU for service tax computation.
6. Failure to produce documentary evidence for reimbursable expenses.
7. Applicability of lumpsum amount for service tax calculation.
8. Imposition of penalties under Sections 76 and 78 of the Finance Act.

Analysis:
1. The Appellant, a registered service tax provider as a Customs House Agent, faced a dispute regarding the taxation of their services from 2000 to 2005. A show cause notice proposed a demand of Rs. 36,20,863, alleging that service tax should apply to the entire gross value without deducting reimbursable expenses. The adjudicating authority partially granted relief based on evidence provided but confirmed a demand of Rs. 24,18,925 due to lost documentation for other years, along with penalties.

2. The Commissioner issued a show cause notice to enhance the penalty under Section 78, resulting in an order increasing the penalty from Rs. 10 lakhs to Rs. 24,28,925, which was challenged in the appeal.

3. The main issue revolved around whether service tax should be levied on the gross value charged by the CHA without considering reimbursable expenses. The appellate authority upheld the demand on the entire value due to the Appellant's failure to prove the expenses.

4. The Appellant cited Board Circular No. B/43/1/97-TRU, emphasizing that service tax should be computed based on specific charges reflected in the invoice, excluding reimbursable expenses. They argued that since they showed reimbursable expenses separately in invoices, tax should only apply to agency charges.

5. The Revenue acknowledged the legal issue but denied extending benefits for years lacking documentation. The Appellant contended that if one year's documents were accepted, the loss of other years' documents should not impact the tax calculation, proposing the 15% rule for lumpsum amounts under the Circular.

6. Due to the Appellant's failure to provide evidence for reimbursable expenses, the Board Circular's 15% rule for lumpsum amounts was deemed applicable. The authorities were directed to calculate tax based on this rule.

7. Penalties under Sections 76 and 78 were set aside as the Appellant's failure to substantiate expenses did not indicate malice, and the tax calculation adjustment resulted in lesser duty payment.

8. Consequently, penalties were overturned, and both appeals were resolved accordingly.

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