2008 (4) TMI 70 - AT - Service Tax

Activity of sale of goods supplied by the manufacturer, against commission - expenses incurred by assessee in connection with this activity were reimbursed by their principal - period prior to the date on which Consignment Agents Service was brought within the purview of Business Auxiliary Service - assessee is held to have rendered C & F Agent s Service inasmuch as they had undertaken clearing and forwarding operations also for and on behalf of the principal demand justified

Summary

Issues:
- Demand of service tax, interest, and penalties on the assessee for a specific period.
- Dispute over the nature of services provided by the assessee.
- Assessment of penalties under Sections 76 and 78 of the Finance Act, 1994.
- Appeal against the reduction of penalty under Section 76.

Analysis:

1. Demand of Service Tax, Interest, and Penalties:
The appeal was against the demand of service tax, interest, and penalties imposed on the assessee for the period from 1-7-2000 to 31-3-2003. The assessee received goods on a commission basis from a manufacturer, sold them on behalf of the manufacturer, and received commission in return. The department raised a demand for the differential tax, interest, and penalties based on certain reimbursed expenses not accounted for by the assessee. The original authority confirmed the taxable service value, demanded service tax, interest, and imposed penalties under Sections 76 and 78 of the Finance Act, 1994.

2. Dispute Over Nature of Services:
The dispute revolved around whether the assessee provided "Clearing and Forwarding Agents Service" or acted as "consignment agents." The original authority confirmed the service tax liability considering the activities undertaken by the assessee, which included clearing and forwarding operations for the principal. The Commissioner (Appeals) upheld the adjudication but reduced the penalty under Section 76. The Tribunal held that the assessee's activities fell within the definition of "Clearing and Forwarding Agent" based on precedents and larger bench decisions, rejecting the arguments presented by the assessee.

3. Assessment of Penalties:
The original authority imposed penalties under Sections 76 and 78 of the Finance Act, 1994, for delayed payment of service tax and suppressing information regarding taxable services. The Commissioner (Appeals) reduced the penalty under Section 76 to Rs. 10,000. The Tribunal upheld the reduction of penalty under Section 76, stating that the appellate authority's exercise of discretion was correct based on the facts of the case, dismissing the Revenue's appeal against the penalty reduction.

In conclusion, the Tribunal dismissed the assessee's appeal against the demand of service tax, interest, and penalties, upholding the decision that the assessee provided "Clearing and Forwarding Agent's Service." The Tribunal also dismissed the Revenue's appeal against the reduction of penalty under Section 76, affirming the lower appellate authority's discretion in the penalty assessment.