2015 (12) TMI 1271 - AT - Service Tax

Waiver of pre deposit - business auxiliary service - reimbursement of expenses - Held that - There was no direct nexus between the incentive received and the service provided. It is noticed that in the case of M/s. Agronaut Logistics (India) Pvt. Ltd. Vs. Commissioner of Service Tax, Chennai by the appellant was heard on Monday, Tribunal prima facie opined that appellant therein had not acted as an agent on behalf of the freight forwarding service provider. It acted independently like a service provider in railway tender to rent luggage bogies. This, prima facie, convinces that the appellant has acted on principal to principal basis at arms length. - prima facie case tilting balance of convenience in favour of the appellant, without expressing any opinion at this stage, there shall be waiver of predeposit during pendency of the appeal. - Stay granted.

Summary

Issues Involved:
Service tax demand on reimbursement of expenses and commission and incentive receipt from clearing and forwarding service under business auxiliary service category.

Analysis:

1. Reimbursement of Expenses: The service tax demand of &8377; 46,06,468/- was partly based on reimbursement of expenses amounting to &8377; 14 lakhs. The counsel pointed out that the issue of reimbursement of expenses is subjudice before the Apex Court in a specific case. This indicates that the legality and applicability of taxing reimbursement of expenses are under consideration at a higher judicial level.

2. Commission and Incentive Receipt: The remaining demand was related to commission and incentive receipt from providing clearing and forwarding services. The appellant argued that they had purchased space and services without acting as an agent for any principal. Reference was made to a similar case before the Tribunal, where it was noted that pending appeal could lead to a waiver of predeposit. This suggests that there is a precedent for allowing waiver of predeposit in cases involving commission and incentives for services.

3. Tax on Incentive Received: A significant portion of the demand, amounting to &8377; 44,20,717/-, was linked to tax on incentives received by the appellant. It was contended that these incentives were not for providing services but for booking certain services. The Tribunal observed that there was no direct nexus between the incentive received and the services provided. Referring to a previous case, the Tribunal indicated that the appellant had acted independently, akin to a service provider, rather than as an agent. This suggests a nuanced understanding of the nature of incentives in relation to service provision.

4. Decision and Ruling: After hearing both sides and examining the records, the Tribunal found a prima facie case indicating that the appellant had operated on a principal-to-principal basis at arm's length. Considering this, the Tribunal decided to tilt the balance of convenience in favor of the appellant. As a result, without expressing a final opinion, the Tribunal ordered a waiver of predeposit during the appeal's pendency. This ruling showcases the Tribunal's consideration of the specific circumstances and the balance of convenience in deciding on the predeposit requirement.

In conclusion, the judgment delves into the nuanced aspects of service tax demands related to reimbursement of expenses, commission, and incentives in the context of business auxiliary services. It highlights the ongoing legal considerations at higher judicial levels, precedents for waiver of predeposit, and the importance of establishing a direct nexus between incentives received and services provided. The ruling reflects a balanced approach by the Tribunal in considering the appellant's position and the need for a fair resolution during the appeal process.