2011 (4) TMI 452 - AT - Service Tax

Clearing and forwarding services - show cause notice dated 3.7.06 was issued demanding service tax amounting to Rs.36, 97, 509/- and education cess amounting to Rs.20, 240/- payable for the period April 2001 to September 2005 - This is clearly a case where the Appellant is trying to reduce incidence of service tax by accounting his remuneration as a reimbursable expense - There is no proof adduced that the appellant had the responsibility to deliver the goods at the door step of the client. In the case of freight revenue also conceded that it can be considered as reimbursable expense so long as actual freight amounts are claimed - Decided in favour of the assessee by way of remand

Summary

Issues:
Service tax liability on various charges received by the appellant, interpretation of service tax rules and valuation, applicability of penalties.

Analysis:

1. The appellant provided clearing and forwarding services to a company and received various payments under different heads like service charges, freight charges, phone expenses, etc. The Revenue contended that all these amounts should be considered as part of the value of services provided and service tax should be paid on the gross receipts.

2. The Revenue argued that the remuneration received as freight charges and other reimbursed expenses are part of the consideration for providing clearing and forwarding services. A show cause notice was issued demanding service tax, education cess, and penalties, which was confirmed in the order dated 3.4.07.

3. The Commissioner (Appeals) set aside the demand on certain charges but confirmed it on others. Penalties imposed were also set aside. Both the appellant and the department were aggrieved by this decision, leading to separate appeals being filed by each party.

4. The appellant's advocate argued that certain expenses should not be included in the taxable value based on circulars and case laws. The department, on the other hand, emphasized the gross amount charged as per Section 67 of the Finance Act, 1994, and argued that essential expenses should be part of the cost of service.

5. The Tribunal held that expenses like transportation charges, pre-dispatch inspection charges, octroi, and detention charges need re-examination. The appellant was directed to produce vouchers for these expenses. The matter of penalties was also ordered to be re-examined by the adjudicating authority.

6. The judgment clarified that while certain expenses like transportation charges and godown rent may form part of the taxable value, expenses like pre-dispatch inspection, octroi, and detention charges could be abated subject to production of vouchers. The case was sent back to the adjudicating authority for further examination.

7. In conclusion, the appeals filed by both parties were disposed of, with specific directions for re-examination of certain charges and penalties by the adjudicating authority.