2010 (11) TMI 644 - AT - Service Tax

Waiver of pre-deposit - Custom House Agent service - Claim of the appellant that they were acting as an agent of the service recipient as regards the ocean freight/air freight and therefore the actual cost of ocean freight/air freight has to be included for the purpose of calculating service tax - As such the decision of the Tribunal in the case CCE v. Kulcip Medicines (P.) Ltd. 2009 -TMI - 33117 - PUNJAB AND HARYANA HIGH COURT held that the Tribunal had accepted the contention that ocean freight also should be included for the purpose of service tax levy prima facie appears to be wrong - Held that appellant has been able to make a prima facie case in their favour and accordingly this is a fit case for waiver of pre-deposit under section 35F of Finance Act, 1994 made applicable to service tax matters by section 83 of Finance Act, 1994.

Summary

Issues:
Service tax demand on Custom House Agent service, inclusion of ocean/air freight for service tax calculation, differentiation of cases, applicability of CHA license, waiver of pre-deposit under Finance Act, 1994.

Analysis:

The appellant, a service provider registered as a Custom House Agent, faced a service tax demand of Rs. 1,75,61,350 with interest and penalties under the Finance Act, 1994. The dispute arose from the classification of the appellant's activities under clearing and forwarding agent service, with the rejection of the appellant's claim that they acted as an agent of the service recipient for ocean/air freight costs. The Tribunal considered the appellant's argument citing previous cases where stay petitions were allowed, and the inclusion of ocean freight for service tax levy was discussed. The Commissioner differentiated the present case from previous decisions based on the appellant's lack of a CHA license, leading to a contentious issue regarding the appellant's classification as a C&F agent. The Tribunal acknowledged the arguable nature of including ocean/air freight costs for service tax calculation and the need for a detailed examination of the appellant's case. Consequently, the Tribunal found that the appellant had made a prima facie case in their favor and granted a waiver of pre-deposit under section 35F of the Finance Act, 1994, applicable to service tax matters, along with a stay against the recovery of service tax, interest, and penalties during the appeal process.