2005 (6) TMI 569 - Commissioner - Service Tax

Summary

Issues Involved:
1. Demand of service tax on various charges including godown rent and freight charges.
2. Allegation of suppression of facts by the appellant.
3. Appropriateness of penalties imposed under Sections 76 and 78 of the Finance Act, 1994.

Detailed Analysis:

1. Demand of Service Tax on Various Charges Including Godown Rent and Freight Charges:
The adjudicating authority had confirmed the demand of service tax on several charges, including minimum guarantee charges, miscellaneous expenses, material handling charges, godown rent, and freight charges. The authority interpreted the definition of "Clearing and Forwarding Agent" to include these charges under taxable services. However, the appellant contested this, arguing that certain charges like godown rent and freight charges should not be included in the taxable value.

The appellant provided evidence and legal precedents to support their claim, including:
- Section 65(25) and Section 65(105)-(j) of the Finance Act, 1994: These sections define the scope of services provided by clearing and forwarding agents.
- CBEC Circulars: Various circulars clarified that only the gross amount of remuneration or commission paid to such agents should be considered for service tax.
- Relevant Case Laws: The Tribunal in cases like Gujarat State Fertilizers and Chemicals Ltd. and E.V. Mathai & Co. held that charges like storage rent and transportation are not subject to service tax.

The appellate authority concluded that godown rent and freight charges should not be included in the taxable value for service tax purposes. The godown was provided by the principal, and the freight charges were reimbursed expenses, not part of the service remuneration.

2. Allegation of Suppression of Facts by the Appellant:
The department alleged that the appellant had suppressed facts by not disclosing the full taxable value, including various reimbursable expenses. However, the appellant argued that they had disclosed all relevant agreements and documents at the time of obtaining registration and had voluntarily paid service tax on certain charges along with interest.

The appellate authority found merit in the appellant's argument, noting that the appellant had not suppressed any material information. The agreements clearly indicated the nature of services and the reimbursable expenses, which were not intended to be part of the taxable value.

3. Appropriateness of Penalties Imposed Under Sections 76 and 78 of the Finance Act, 1994:
The adjudicating authority had imposed penalties under Sections 76 and 78 for contravention of the provisions of the Finance Act, 1994. The appellant contested these penalties, arguing that the inclusion of godown rent and freight charges in the taxable value was not justified and that there was no suppression of facts.

The appellate authority agreed with the appellant, stating that the penalties were not sustainable in law. The inclusion of godown rent and freight charges in the taxable value was not legally justified, and there was no evidence of intentional suppression of facts by the appellant.

Conclusion:
The appellate authority allowed the appeal, setting aside the demand for service tax on godown rent and freight charges, as well as the penalties imposed under Sections 76 and 78. The order was modified to the extent that the appellant's payment of Rs. 4,26,690/- towards service tax on miscellaneous expenses, minimum guarantee charges, and material handling charges was appropriated under the proper head, but the remaining confirmed amount and penalties were not sustainable in law.