2011 (5) TMI 227 - AT - Service Tax

Demand - Assessable value - reimbursement of expenses - clearing and forwarding services - the first appellate authority granted relief to respondent in respect of clearing and forwarding services provided excluding reimbursed expenses from assessable value while law requires inclusion of assessable value to the gross receipt from provision of clearing and forwarding services Regarding penalty - because of the confusion at early stage of the implementation of law, the appellant need not suffer. Such reasonable cause grants relief to Assessee against penalty levied under section 76 of the Finance Act, 1994 - Appeal is partly allowed

Summary

Issues:
Revenue's appeal against the first Appellate Order reversing the adjudication order on the inclusion of reimbursed expenses in the assessable value of clearing and forwarding services.

Analysis:
The Revenue appealed the first Appellate Order, arguing that reimbursement of expenses should be part of the assessable value of the taxable service of clearing and forwarding services. The Revenue contended that the expenditure reimbursed, intimately connected to the service provided, forms part of the assessable value, citing precedents in support. The original authority had carefully examined the case and passed the appropriate order.

The respondent countered, claiming that the adjudicating authority had erred, and the Appellate Authority had rightly passed the order. The respondent challenged the adjudication order on three counts, with the first appellate authority granting relief by excluding reimbursed expenses from the assessable value. However, the Tribunal agreed with the Revenue, directing the reversal of the appellate order to impose service tax liability on the respondent as per the adjudication order.

Regarding penalties, the Tribunal found no evidence to support the claim of intentional evasion by the respondent. The allegation of intentional arrangement with another entity was deemed baseless, leading to the unsustainable levy of penalties under sections 78 and 75. The confusion at the early stage of law implementation was considered a reasonable cause, leading to the waiver of penalty under section 76.

The Tribunal confirmed the levy of interest under section 75 but partially allowed the Revenue's appeal. The judgment concluded by upholding the service tax demand as per the adjudication order, waiving penalties under sections 78, 76, and 75, and confirming the levy of interest under section 75.