2013 (8) TMI 117 - AT - Service Tax

Service Tax on C&F Service - Assessee received an amount of ₹ 1,46,05,000/- from M/s Hindustan Lever Ltd. (HLL) for carrying out services of cold storage/clearing and forwarding operations of frozen products. According to department, the said service is chargeable to service tax - Assessee is paying service tax under C&FA service except on the cold storage charges - Cold storage facility is distinct and different for C&F operation and therefore these charges are not liable to be included in taxable value of C&FA services Held that - In para 2.1 of the agreement, assessee has agreed to provide cold storage for the purpose of storing and forwarding the frozen products belonging to HLL. In Article 2.13 to 2.29 of the Agreement in view of perishable nature of the goods, assessee is required to maintain specific temperature for storage of frozen goods before dispatching the same as per direction of HLL. Therefore, the storage of the goods in cold storage is an inseparable part of Clearing & Forwarding activity undertaken by the assessee - Since storage of the goods in cold storage is essential part of assessee s C&F operations, cold storage charges are required to be added in taxable value of C&FA services Decided against the Assessee. Classification of services under C&FA or under storage and warehouse Held that - For classification one has to apply Section 65A(2)(b) of the Finance Act under what services is to be classified under service which gives essential character of the service - Storage of frozen goods in cold storage is an inseparable part of assessee s activity of clearing & Forwarding operation - Therefore essential character of service is C&FA service and therefore service is classifiable under C&FA service. Limitation Held that - For the first time the Revenue wrote a letter dated 27.9.2002 asking assessee to pay tax for the period Sept. 2001 to July 2002. Assessee replied this letter vide their letter dated 8.11.2002 thereafter there was correspondence on 20.11.2002 from the department and replied by assessee on 9.12.2002 - Assessee is not paying duty on cold storage charges was known to department in 2002. Quantum of Cold Storage Charges is already part of agreement and is fixed on monthly basis - Therefore extended period based on suppression of fact cannot be invoked in the present case and therefore demand beyond period of one year is time-barred in the present case Decided in favor of Assessee.

Summary

Issues:
1. Whether the activity of storing goods in cold storage can be covered under Clearing and Forwarding Agent Service.
2. Whether the demand for service tax is within the time limitation.

Analysis:

Issue 1: Activity of Storing Goods in Cold Storage
The dispute in the appeal revolves around whether the activity of storing goods in cold storage can be considered part of Clearing and Forwarding Agent (C&FA) Service. The assessee argued that cold storage charges should not be included in the taxable value of C&FA services as cold storage is distinct from C&FA operations. However, the tribunal found that the storage of goods in cold storage was an integral part of the C&FA activity undertaken by the assessee. The agreement between the parties clearly outlined the provision of cold storage for storing and forwarding frozen products, making it inseparable from the C&FA services. Therefore, the tribunal ruled in favor of including cold storage charges in the taxable value of C&FA services.

Issue 2: Time Limitation for Demand
The second issue pertained to the time limitation for the demand of service tax. The Revenue contended that the extended period should apply as the assessee did not declare the storage charges in their returns. However, the tribunal noted that the department was aware of the non-payment of duty on cold storage charges since 2002, as evidenced by the correspondence between the parties. As the quantum of cold storage charges was fixed and known to both parties, the tribunal held that the demand beyond one year was time-barred. The tribunal rejected the Revenue's argument for invoking the extended period based on suppression of facts, citing that the circumstances did not warrant it. Consequently, the appeal succeeded on the ground of time-bar, leading to the failure of the Revenue's appeal.

In conclusion, the tribunal disposed of the appeals based on the above findings, emphasizing the inclusion of cold storage charges in the taxable value of C&FA services and the time-barred nature of the demand for service tax.