2008 (6) TMI 39 - AT - Service Tax

Classification - Weather Liaison work in connection with coal linkages is classifiable under C/F Agent Service as claimed by revenue or under Business Auxiliary Service as claimed by appellant - detailed examination of scope of service in each contract is necessity to decide liability and to classify the service provided since assessee has worked out liability if he is classified under C/F agent service, he is allowed stay for rest/balance of amount

Summary

Issues Involved:
1. Whether Noticee No. 1 is a clearing and forwarding agent within the meaning of Sec. 65 of the Finance Act, 1994?
2. Whether the value of taxable services included in the show cause notice dated 16-8-2004 issued by the Deputy Commissioner of Central Excise, Division-1, Nagpur should be excluded for the purposes of the instant proceedings?
3. Whether the freight financing charges received from Gujarat Electricity Board should be excluded from the value of taxable services?
4. Whether the value received in connection with the contract entered into by Noticee No. 1 with Tamil Nadu Electricity Board should be excluded from the value of taxable services?
5. Whether otherwise the liability has been correctly arrived at?
6. Whether the benefit of cum-tax value should be extended to Noticee No. 1?
7. Whether the longer period of limitation has been correctly invoked?
8. Whether interest is chargeable and penalty is imposable?

Detailed Analysis:

1. Clearing and Forwarding Agent Classification:
The adjudicating authority determined that the appellant provided "clearing and forwarding agent services" based on the agreements with various clients. The decision relied on the definition provided in Sec. 65 of the Finance Act and the Larger Bench decision in Larsen & Toubro Ltd. v. CCE, Chennai, which emphasized that the service should be connected with clearing and forwarding operations involving documentary processes and arrangements for transferring goods.

2. Exclusion of Value from Nagpur Commissionerate:
The appellant's plea regarding the exclusion of taxable services value included in the show cause notice issued by the Deputy Commissioner of Central Excise, Nagpur, was not accepted due to the absence of proof. The adjudicating authority did not find merit in the appellant's argument.

3. Freight Financing Charges from Gujarat Electricity Board:
The adjudicating authority held that the freight financing charges received from Gujarat Electricity Board were part of the taxable service value. The appellant's contention that these charges should be excluded was rejected, and the charges were attributed to clearing and forwarding services.

4. Value from Tamil Nadu Electricity Board:
The adjudicating authority also rejected the appellant's plea regarding the exclusion of considerations received from Tamil Nadu Electricity Board. It was held that these considerations were taxable under clearing and forwarding services, not under cargo handling services, as claimed by the appellant.

5. Correctness of Liability:
The adjudicating authority confirmed that the liability was correctly determined. The appellant's arguments did not lead to any revision of the tax liability assessed.

6. Benefit of Cum-Tax Value:
The appellant was granted the benefit of cum-tax value, which resulted in a concession in the tax liability. This adjustment was made while determining the final tax amount.

7. Longer Period of Limitation:
The plea of limitation was dismissed by the adjudicating authority. It was held that the longer period of limitation was correctly invoked due to the non-ambiguity of the law during the disputed period and the clarifications issued by the C.B.E.C.

8. Interest and Penalty:
Interest and penalties were imposed as a consequence of the law. The appellant's arguments against the imposition of penalties were not accepted, and the adjudicating authority ordered the enforcement of these penalties.

Appellant's Arguments:
The appellant argued that their services did not attract tax liability as clearing and forwarding agents but rather as business auxiliary services. They emphasized the nature of their work, which involved coordination and liaison activities rather than clearing and forwarding operations. The appellant also highlighted various circulars and notifications supporting their stance. They contested the jurisdiction and double taxation issues and argued that the proceedings were time-barred.

Revenue's Arguments:
The Revenue maintained that the appellant's services fell within the definition of clearing and forwarding operations and were taxable accordingly. They argued that the proceedings were not time-barred and that the appellant had failed to comply with the law, justifying the invocation of the longer period of limitation.

Tribunal's Decision:
The Tribunal directed the appellant to make a pre-deposit of Rs. 3,71,55,048/- during the pendency of the appeal. It acknowledged that the classification of services required detailed examination and noted the ongoing dispute before the Hon'ble High Court of Calcutta. The Tribunal also referenced the interim order by the High Court, which allowed the appellant to continue paying service tax under the business auxiliary service category.

Conclusion:
The Tribunal's decision emphasized the need for a detailed examination of the nature of services provided by the appellant to determine the correct classification. The appellant was directed to make a substantial pre-deposit, and the case was set for further scrutiny, considering the significant revenue involved and the pending decision of the Hon'ble Supreme Court in a related matter.