2012 (9) TMI 23 - AT - Service Tax

Clearing & Forwarding Service giving of godown on hire to client for keeping of the goods for which they were acting as clearing and forwarding agent demand initially issued holding the same to fall under category storage & warehousing service, subsequently dropped under review order, revenue contended cost of storage space forming integral part of the value of C&F service provided - assessee contended it to be reimbursement of expenses extended period of limitation Held that - There is a legal infirmity that tax is demanded under a category of service different from the one for which demand was initially issued. There is also the issue that Clearing and Forwarding Service could be rendered using a godown made available by the service recipient. In this case the service recipient has taken godown on rent from the service provider itself. This has to be seen as a case of tax planning rather than tax evasion. Hence, extended period of time could not have been invoked. Therefore, notice dated 13.9.2006 is held to be time barred Decided in favor of assessee

Summary

Issues:
1. Classification of service for service tax payment.
2. Demand for service tax on godown rent.
3. Validity of extended period for demand.
4. Allegation of suppression in tax payment.

Classification of service for service tax payment:
The appellants, acting as a clearing and forwarding agent, were paying service tax on commission received for their services. However, a separate contract with a client for renting out a godown raised questions regarding service tax on the godown rent. The Revenue contended that the godown rent should be taxed under "Storage and Warehousing" services. The appellant argued that the godown expenses were reimbursable and not part of their service value. They maintained that renting out a godown was not inherently part of their clearing and forwarding service. The Tribunal noted the legal infirmity in demanding tax under a different service category than initially proposed and ruled in favor of the appellant.

Demand for service tax on godown rent:
The Revenue issued a demand for service tax on the godown rent, alleging that the appellants were attempting to reduce tax liability by not including the godown expenses in their service value. The Revenue argued that the cost of storage space was integral to the clearing and forwarding service provided. The appellant contended that the separate godown contract was not for tax evasion but for tax planning purposes. The Tribunal found that the extended period for demanding the tax was not justifiable in this case, as it was more a case of tax planning rather than evasion.

Validity of extended period for demand:
The original Show Cause Notice demanding tax for a specific period was issued invoking an extended time period. The appellant argued that due to legal interpretations and CBEC clarifications on reimbursable expenses, the extended period for demanding tax was not valid. The Tribunal agreed with this argument and held that the demand was not maintainable due to the time limitation.

Allegation of suppression in tax payment:
The Revenue alleged that the appellants suppressed the separate godown contract to reduce tax liability, invoking an extended period for tax demand. However, the Tribunal viewed the situation as a case of tax planning rather than evasion. They concluded that the extended period for demanding tax was not justified in this scenario. Consequently, the Tribunal set aside the impugned order and allowed the appeal.

This judgment highlights the importance of accurate classification for service tax payment, the distinction between tax planning and evasion, and the limitations on demanding tax based on extended periods and legal interpretations.