2014 (5) TMI 915 - AT - Service Tax

Valuation of services - clearing and forwarding agent service - whether the demurrage/wharfage and expenses for local transport are includible in the assessable value of the service - Held that - In terms of the respondent s contract with PCL, the respondent maintain godown at their principal s cost at various places for storage of cements and maintain proper records of receipt and dispatch of the cement. They are fully responsible for making arrangements for unloading/loading at railway stations/godowns and transportation thereof to various dealers/ stockiests, as per the directions of their principal. The wharfage/ demurrage is charged by the railways on account of detention of the goods in the rakes or at railway premises beyond the permissible period. This amount charged by the railways is paid by the respondent and is reimbursed to them on actual basis. The Commissioner (Appeals) in the impugned order has given a finding that he has examined a few samples of the railway receipts regarding demurrage/wharfage charges and he finds that the said amount are shown to have been received from PCL and that in view of this, he finds that the appellan s submission that they had acted only as a pure agent is correct. As regards the local transport, the same is arranged by the respondent for sending the goods to the PCL s godowns on their behalf or sending the same to various parties on the instructions of PCL. As per the findings of the Commissioner (Appeals), the goods are loaded in the trucks/lorries mentioning PCL as the consignor and the appellant pay the freight only as an agent of PCL for which they are reimbursed. Here also, the respondent would have to be treated as pure agent of the PCL for payment of expenses for local transport. Thus, in respect of both, demurrage/wharfage charged by the railways and expenses on local transport, the respondent have acted only as agent of PCL and, as such, the expenses for these items reimbursed to them on actual basis by their principal - PCL would be not includible in the assessable value of the C&F agent services provided by them - Decided against Revenue.

Summary

Issues:
1. Inclusion of demurrage/wharfage and local transport expenses in the assessable value of the service for service tax calculation.

Analysis:
The judgment pertains to a dispute regarding the inclusion of demurrage/wharfage and local transport expenses in the assessable value of clearing and forwarding agent services attracting service tax. The respondent provided C&F services to a cement manufacturer under a contract. The Assistant Commissioner initially held that these expenses should be part of the assessable value, resulting in a service tax demand. However, the Commissioner (Appeals) set aside this decision, stating that these expenses were incurred as a pure agent and should not be included in the assessable value. The Commissioner relied on previous Tribunal judgments emphasizing that expenses reimbursed to the service provider by the client would not form part of the assessable value.

The appeal by the Revenue against the Commissioner (Appeals) order was dismissed by the Tribunal. The Tribunal noted that the respondent acted as a pure agent for both demurrage/wharfage charges by the railways and local transport expenses. The respondent maintained godowns, arranged unloading/loading, and transportation as per the principal's directions. The charges for demurrage/wharfage and local transport were reimbursed by the principal on an actual basis. The Tribunal concurred with the Commissioner (Appeals) that the respondent's role as a pure agent in incurring these expenses meant they should not be included in the assessable value for service tax calculation. Therefore, the Tribunal upheld the decision of the Commissioner (Appeals) and dismissed the Revenue's appeal.

In conclusion, the Tribunal affirmed that the expenses for demurrage/wharfage and local transport incurred by the respondent while acting as a pure agent for the principal should not be considered part of the assessable value for clearing and forwarding agent services, thereby dismissing the Revenue's appeal.