2015 (4) TMI 577 - AT - Service Tax

Clearing and forwarding (C&F) Agent service - freight rebate and primary freight rebate - Held that - With respect to freight rebate and primary freight rebate received by the Respondent we find that the same is received due to Respondent s investment in 125 wagons and is clearly arising out of their arrangement with Indian Railways. In fact, Indian Railways has issued a circular to this effect entitling Respondent to receive 22.5% of the freight amount as rebate to the Respondent. This amount has not become payable to the Respondent for having provided any service to ACC Ltd or its customers and certainly not for providing any clearing and forwarding agent s service - when the amount became due to the Respondent due to their arrangement with Indian Railways, it cannot be said that it is towards clearing and forwarding agent for Indian Railways. Merely because the amount is routed or received through ACC Ltd. or its customers, it cannot be linked with clearing and forwarding agent s service. Manner of routing the consideration cannot decide taxability of the transaction. Respondent has paid service tax on consideration received for providing clearing and forwarding agent s service under a separate contract with ACC Ltd or its client for this purpose. - Commissioner has rightly dropped the service tax demand on freight rebate and primary freight rebate . Amount received as facility charges is towards making available certain facilities such as special wagons, specialist equipment for the use of ACC Ltd. The appellant-assessee has not provided any service to receive facility charges but has only made available certain facilities or infrastructure for the use of ACC Ltd. The record of the proceedings before us do not show any material to the effect that the appellant-assessee was engaged in providing any service to entitle them to receive facility charges other than merely making available the specified facilities or equipment to ACC Ltd. We have perused the scope of clearing and forwarding agent s services as clarified in the CBEC Circular and it clearly does not suggest that the tax is to be levied as C&F service for making available any facility but is to be levied only on providing of specified C&F services in which clearing and handling of goods are involved. - consideration received for facility charges is not liable to service tax as clearing and forwarding agent s service - Decided against Revenue.

Summary

Issues Involved:
1. Service tax liability on 'Freight Rebate' and 'Primary Freight Reimbursement'.
2. Service tax liability on 'Secondary Freight Reimbursement'.
3. Service tax liability on 'Handling/Facility Charges'.
4. Invocation of the extended period of limitation.
5. Imposition of penalties under sections 75A, 76, and 78 of the Finance Act, 1994.

Issue-wise Detailed Analysis:

1. Service Tax Liability on 'Freight Rebate' and 'Primary Freight Reimbursement':
The Revenue contended that the amounts received by the assessee as 'Freight Rebate' and 'Primary Freight Reimbursement' should be included in the assessable value for service tax under Clearing and Forwarding (C&F) services. The assessee argued that these amounts were rebates or subsidies from Indian Railways due to their investment in specialized wagons and were not related to any C&F services provided to ACC Ltd. The Tribunal found that these amounts were indeed rebates from Indian Railways and not payments for any services rendered to ACC Ltd. The Tribunal upheld the Commissioner's decision to drop the service tax demand on these amounts, stating that the rebates were not linked to C&F services.

2. Service Tax Liability on 'Secondary Freight Reimbursement':
The Revenue did not appeal against the Commissioner's decision to drop the service tax demand on 'Secondary Freight Reimbursement'. Therefore, the Tribunal upheld the Commissioner's decision, and no further analysis was provided on this issue.

3. Service Tax Liability on 'Handling/Facility Charges':
The assessee appealed against the confirmation of the service tax demand on 'Handling/Facility Charges'. The assessee argued that these charges were for making available certain facilities and equipment to ACC Ltd. and not for providing any C&F services. The Tribunal reviewed the agreements and found that the charges were indeed for making available facilities and not for any service rendered. The Tribunal concluded that these charges did not fall under the scope of C&F services as clarified by the CBEC Circular and thus were not liable to service tax.

4. Invocation of the Extended Period of Limitation:
The assessee contended that the extended period of limitation should not have been invoked as the relevant information was within the knowledge of the Department, and there was no suppression of facts. The Tribunal did not specifically address this issue in detail but implicitly accepted the assessee's argument by allowing their appeal.

5. Imposition of Penalties:
The assessee argued that the penalties imposed under sections 75A, 76, and 78 of the Finance Act, 1994, were not justified as the issue involved was one of interpretation of law. The Tribunal did not explicitly address the penalties in their final order but by allowing the assessee's appeal, it impliedly set aside the penalties.

Conclusion:
The Tribunal dismissed the Revenue's appeal and allowed the assessee's appeal, thereby dropping the service tax demands on 'Freight Rebate', 'Primary Freight Reimbursement', and 'Handling/Facility Charges'. The Tribunal also impliedly set aside the penalties imposed on the assessee.