2013 (8) TMI 216 - AT - Service Tax

Nature of service rendered by foreign agent - import of service - classification - Business Support service or Storage and Warehousing Services or Clearing & Forwarding Agency Service - section 65 (104c) The services would be to Logistics services for Comstar. A&S would provide the warehousing services using their warehouse facilities, information system comprising of the Warehouse Management system, communication facilities, and the service of log on with the noticee s India and Europe information connectivity, receiving in process comprising of inbound and outbound handling, storage, Customs handling, out bound transportation and one way pallet for outbound transportation. A&S would also provide insurance service for the goods of the notice during the tenancy of the custody with A&S. Held that - Prima facie demand of tax under Business Support Service was sustainable foreign agents were providing services to the assesse in relation to the assesse s business and the different activities would be covered in inclusive portion of the definition - Entitlement to avail cenvat credit for payment of tax which would be examined on the basis of record. Waiver of pre deposit aprima facie case is against the assessee - No waiver of pre deposit of entire amount of tax along with interest and penalty 18 lakhs were ordered to be submitted rest of the duty interest and penalty to be stayed till the disposal Decided partly in favor of assesse.

Summary

Issues:
Demand of service tax under Business Support Service for the period 2005-06 to 2009-10, applicability of Clearing & Forwarding Agency Service, classification under Storage and Warehousing Services, limitation on demand, suppression of facts, res judicata in taxation law, waiver of predeposit.

Analysis:

1. Demand of Service Tax under Business Support Service:
The applicants were engaged in manufacturing Startor Motor and Alternator for motor vehicles and supplied goods to foreign agents. The Commissioner confirmed a tax demand of Rs.74,25,412/- along with interest and penalty under Business Support Service. The advocate argued that the foreign agent's role might fall under Clearing & Forwarding Agency Service and that no service tax was payable as the service was rendered abroad. The Tribunal found that the foreign agents provided services related to the applicant's business, which could be covered under Business Support Service. The demand of tax under this category was deemed sustainable.

2. Applicability of Clearing & Forwarding Agency Service:
The advocate contended that the foreign agent's activity could be classified as Clearing & Forwarding Agency Service. However, the Tribunal noted that the services provided by the foreign agents were in relation to the applicant's business, falling within the inclusive portion of the Business Support Service definition. The argument for classification under Clearing & Forwarding Agency Service was not accepted.

3. Classification under Storage and Warehousing Services:
The advocate argued that if the activity was classifiable under Storage and Warehousing Services, no service tax was leviable under the Taxation of Services Rules. The Tribunal acknowledged this argument but found that the demand under Business Support Service was prima facie sustainable based on the services provided by the foreign agents.

4. Limitation on Demand and Suppression of Facts:
The advocate claimed that the demand was barred by limitation and that Revenue was already aware of the activities from earlier proceedings. The Tribunal noted that the limitation issue would be examined during the appeal hearing. The Revenue contended that there was no res judicata in taxation law and highlighted the suppression of facts to evade tax payment.

5. Waiver of Predeposit:
The Tribunal directed the applicant to deposit Rs.18,00,000/- within six weeks, failing which the predeposit of the balance tax, interest, and penalty would be waived. The compliance was to be reported on a specified date.

In conclusion, the Tribunal upheld the demand of tax under Business Support Service, rejected the applicability of Clearing & Forwarding Agency Service, and directed the applicant to make a partial deposit while considering the limitation issue for further examination during the appeal hearing.