2008 (1) TMI 334 - AT - Service Tax

Department proceeded against the appellants on the ground that reimbursement of expenses has been more than 1% of net sales - appellants contend that they have received the reimbursement subject to the maximum limit of 1% net sales - held that the reimbursable expenses pertains to clearing and forwarding charges is not includible in the service tax stay application is allowed by granting full waiver of pre-deposit of the amount and staying its recovery till the disposal of the appeal

Summary

Issues:
1. Whether the appellant is required to pre-deposit Service Tax amount and equivalent penalties under Sections 76 & 78 of the Finance Act, 1994.
2. Whether the reimbursement of expenses over and above the ceiling of 1% net sales is includible in the element of Service Tax for the clearing & forwarding agent.

Analysis:

1. The appellant was required to pre-deposit Service Tax amount and penalties under Sections 76 & 78 of the Finance Act, 1994, due to the Department's claim that they received reimbursement of expenses exceeding the 1% net sales ceiling. The appellant contended that the reimbursement was within the 1% limit, which was not accepted by the Department. The Counsel cited previous Tribunal judgments supporting that certain reimbursable expenses like godown rent and freight are not includible in Service Tax for clearing & forwarding agents. The Tribunal, after considering the matter, found that the reimbursement of expenses related to clearing and forwarding charges is not subject to service tax. Therefore, the appellant was granted a full waiver of pre-deposit and a stay on recovery until the appeal's disposal. The Tribunal scheduled the appeal for final hearing on a specific date.

2. The Department's view was that the reimbursement of expenses exceeded 1% of net sales, which was reiterated by the JDR. However, the Tribunal, upon careful consideration, found that prima facie, the reimbursement of expenses for clearing and forwarding charges is not to be included in the service tax. The Tribunal noted that the appellant had a strong case in their favor, especially considering previous Tribunal judgments on similar issues. Consequently, the stay application was allowed, and the pre-deposit amount was fully waived, with recovery stayed until the appeal's final disposal. The Tribunal also decided to expedite the hearing due to the matter being covered by several Tribunal judgments.

In conclusion, the judgment by the Appellate Tribunal CESTAT Bangalore dealt with the issue of pre-deposit of Service Tax amount and penalties under the Finance Act, 1994, in relation to reimbursement of expenses for clearing and forwarding charges. The Tribunal found in favor of the appellant, granting a full waiver of pre-deposit and staying recovery until the appeal's final disposal, as the reimbursement of expenses was deemed not includible in the service tax based on established Tribunal precedents.