2008 (5) TMI 96 - AT - Service Tax

Activities carried out of clearing and forwarding by the Appellant as an agent are squarely fall under the class C/F agency and liable to service tax an agent even if provide service to single principal is liable to pay tax if re-imbursement expenditure, bending charges etc. are inevitably incurred to provide a service, they should be included in cost of service matter remanded to examine whether larger period is invocable or not, to examine valuation matter & penalty matter

Issues Involved:
1. Classification of services under 'clearing and forwarding agent's service'.
2. Entitlement to deductions and correct valuation of taxable services.
3. Invocation of the longer period of limitation.
4. Chargeability of interest and imposition of penalty.

Detailed Analysis:

1. Classification of Services:
The primary issue was whether the services rendered by the appellant fell under the category of 'clearing and forwarding agent's service'. The adjudicating authority held that the appellant had rendered such services from September 1999 to March 2004. The appellant's plea that it provided business support services under business auxiliary service was rejected. The tribunal confirmed that the appellant's activities, including receiving/dispatching materials, warehousing, arranging transport, and maintaining records, constituted 'clearing and forwarding operations' as defined under Section 65(105)(i) of the Finance Act, 1994. The tribunal also noted that the term 'clearing and forwarding agent' includes consignment agents, thereby rejecting the appellant's claim of being merely a consignment agent.

2. Entitlement to Deductions and Valuation of Taxable Services:
The appellant claimed deductions from gross receipts to determine the value of taxable services. The adjudicating authority denied these deductions, holding that all expenditures incurred were related to taxable services. The tribunal upheld this decision but remanded the issue for detailed examination of specific receipts claimed as reimbursements, bending and bundling charges, and stock verification charges. The tribunal emphasized that only expenditures directly related to the principal activity of clearing and forwarding operations should be included in the value of taxable services.

3. Invocation of Longer Period of Limitation:
The adjudicating authority invoked the longer period of limitation, citing wilful suppression of material facts by the appellant. The tribunal upheld this decision, noting that the appellant sought registration and started paying taxes only after a search conducted on 19-4-2002. The tribunal remanded the issue for re-examination to determine the appropriate period for invoking the longer limitation period based on evidence.

4. Chargeability of Interest and Imposition of Penalty:
The adjudicating authority imposed interest and penalties under Sections 75, 76, 77, and 78 of the Finance Act, 1994. The tribunal upheld the charge of interest and penalties, noting that service tax law was in its infancy, and deliberate defiance or wilful evasion of tax by the appellant was not clearly established. The tribunal remanded the issue for re-adjudication, emphasizing that penalties should not be mechanically imposed and should be reconsidered based on the appellant's intent and actions.

Conclusion:
The tribunal concluded that the appellant's activities fell under 'clearing and forwarding agent's service' and were liable to service tax. The issues of deductions, longer limitation period, and penalties were remanded for re-examination. The adjudicating authority was directed to re-adjudicate the matter, providing the appellant with a fair opportunity of hearing.

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