2010 (12) TMI 471 - AT - Service Tax

Waiver of pre-deposit - Valuation - Reimbursement of the expenses -  The appellant provide the services as C&F Agents to their clients and in addition to commission being received from their clients, certain expenses incurred by them in providing the services are also reimbursed by them by the clients - whether the service tax is to be charged on the gross amount received by the appellant including the reimbursement of the expenses or is chargeable only on the amount received from the clients as commission - Prima facie, find that the appellant is not acting as pure agent - Prima facie view that the assessable value of the taxable service in this case would include the expenses incurred by the appellant while providing the service which were reimbursed by their client - The appellant have not been able to establish prima facie case -Hence, the stay petition is dismissed - Thus, the appellant are directed to deposit the entire amount.

Summary

Issues:
1. Dispute regarding service tax evasion by the appellant for the period April 2002 to March 2007.
2. Applicability of service tax on the gross amount received by the appellant, including reimbursement of expenses.
3. Interpretation of relevant provisions under the Finance Act, 1994 and Service Tax Valuation Rules.

Analysis:
1. The appellant, a Clearing and Forwarding Agent, faced allegations of suppressing taxable services amounting to Rs. 42,45,099, leading to a show cause notice for service tax demand, interest, and penalty. The Additional Commissioner confirmed the demand, upheld by the Commissioner (Appeals), prompting the appellant to file an appeal and stay application. However, the appellant failed to appear, resulting in an ex parte decision as per Rule 21 of the CESTAT Procedure Rules, 1982.

2. The dispute revolved around whether service tax should be levied on the gross amount received by the appellant, encompassing reimbursed expenses. The Tribunal analyzed the relevant provisions, noting that under Rule 5 of Service Tax Valuation Rules, 2006, costs incurred in providing taxable services are considered part of the assessable value unless the provider acts as a "pure agent." The Tribunal found that the appellant did not qualify as a "pure agent," hence expenses were to be included in the assessable value.

3. For the period pre-18-4-06, the Tribunal referred to Section 67 of the Finance Act, 1994, which mandated taxing the gross amount charged without excluding any expenses. Despite the appellant's argument based on Rule 6(8) of the Service Tax Rules, 1994, the Tribunal emphasized the primacy of the Act over Rules. Citing the Supreme Court's ruling in a related case, the Tribunal held that the Act's provisions prevail, necessitating the inclusion of reimbursed expenses in the assessable value. This interpretation aligned with a previous Tribunal decision.

In conclusion, the Tribunal dismissed the appellant's stay petition, directing them to deposit the entire service tax demand, interest, and penalty within eight weeks. The decision was based on the understanding that the assessable value included expenses reimbursed by the client, rejecting the appellant's contention for dispensation from the Central Excise Act provisions. Compliance was required by a specified date.