2017 (1) TMI 1749 - AT - Service Tax

Levy of service tax - clearing and forwarding agency - perform various duties like clearing cement unloading from railway, stacking storage, dispatch, realising sale proceeds, maintaining records, promoting the cement sales of the client and furnishing periodical records etc. - HELD THAT - The respondent acting as C F agent is liable for discharging service tax on the consideration received for such work. However, incidental to such work they were, in terms of contract, obliged to carry out certain other work. The expenses for the same were reimbursed on actual basis based on documentary evidence. Since these were reimbursed on actual basis, the impugned order held them as not to be considered for service tax purpose to tax the activity of C F Agent. The valuation and tax liability of C F agent service has been a subject matter of dispute. The Tribunal in various decisions held that if the C F agent is carrying out certain activities incidental and claims the expenses on actual basis, the same are not includible in the taxable consideration. These expenses may be like go-down rent, carting and shifting charges, transportation, maintenance of staff and other establishment for the client etc. Reference can be made to the decision of the Tribunal in the case of SANGAMITRA SERVICES AGENCY VERSUS COMMISSIONER OF C. EX., CHENNAI 2007 (7) TMI 33 - CESTAT, CHENNAI . The Tribunal held that reimbursable expenditures towards freight, labour, electricity, telephone etc. are not includible. Business auxiliary service relating to promotion of clients business - HELD THAT - The overall commission received by the respondent is subjected to tax. We are not informed about any part of commission not being subjected to tax, to be covered under BAS. In the absence of such specific finding, we are not in a position to interfere with the impugned order. Appeal dismissed - decided against Revenue.

Summary

Issues:
- Appeal against order of Commissioner (Appeals-II), Bhopal regarding service tax demand for clearing and forwarding services.
- Whether expenses reimbursed to C & F agents are part of taxable consideration for service tax purposes.
- Applicability of case laws in determining tax liability.
- Treatment of reimbursable expenditures in the valuation of C & F agent services.
- Tax liability on commission received for promotion of client's business.

Analysis:
The judgment pertains to an appeal by the Revenue against an order of the Commissioner (Appeals-II), Bhopal, concerning the service tax demand on clearing and forwarding services provided by the respondents. The contract between the respondents and their client involved various duties like clearing cement, storage, dispatch, and promoting sales. The Revenue contended that certain considerations received by the respondents were part of the gross value for service tax purposes. The Original Authority confirmed the service tax demand along with penalties. However, the Commissioner (Appeals) set aside the original order and allowed the appeal.

The main issue raised in the appeal was whether the expenses reimbursed to the C & F agents should be considered as part of the taxable consideration for service tax purposes. The Tribunal noted that while the respondents were liable to discharge service tax on the consideration received, the expenses reimbursed on an actual basis were not to be included for tax purposes. The Tribunal referred to various decisions where reimbursable expenditures such as go-down rent, transportation, and establishment charges were held to be excluded from the taxable value of the service.

Regarding the applicability of case laws, the Tribunal observed that the decisions cited by both parties were not conclusive. The Tribunal emphasized that if a C & F agent carries out certain incidental activities and claims expenses on an actual basis, those expenses should not be included in the taxable consideration. The judgment referred to precedents where similar principles were upheld by the Tribunal and the High Court.

In the context of business auxiliary services related to promoting the client's business, the Tribunal noted that the overall commission received by the respondent was subject to tax. However, in the absence of specific findings on any part of the commission not being taxed, the Tribunal declined to interfere with the impugned order. Consequently, the appeal by the Revenue was dismissed, and the Cross Objection was also disposed of.

In conclusion, the judgment provides clarity on the treatment of reimbursable expenditures in the valuation of C & F agent services for service tax purposes. It underscores the importance of considering actual expenses incurred by agents and highlights the relevance of case laws in determining tax liability in such matters.