2016 (6) TMI 318 - AT - Service Tax

Extended period of limitation - Demand of Service tax - including both fixed and variable amounts of commission in the taxable value - Clearing and Forwarding agent services - Suppression - Held that - the Revenue has taken up an identical issue regarding valuation of the services covering an earlier period by invoking the suppression clause and claimed the extended time limit for demand of service tax. On an identical issue invoking suppression and extended time limit for one more time clearly cannot be done and hence the demand for the period beyond the normal time limit available under Section 73 of the Finance Act, 1994 fails. With reference to the Section 67 of the Finance Act, 1994 read with Service Tax (Determination of Value) Rules, 2006, the consideration has to include all amounts charged for providing service. This should include the fixed as well as variable parts of the consideration received by the appellant. This brings us to the claim of the appellant that he functioned as a pure agent of the service receiver and hence the amount reimbursed by M/s Lafarge India Limited cannot form part of value of taxable service. The first appellate authority has clearly given a finding that the appellant has not satisfied the conditions prescribed in Rule 5 of the Service Tax (Determination of Value) Rules, 2006 to satisfy the criteria for a pure agent. Therefore, no reason found to defer from that view and hence uphold the merits of the order. However, the demand will need to be reworked out for the normal time limit under Section 73. - Appeal disposed of

Issues involved:
1. Challenge to Order-in-Appeal dated 25.03.2009 on time limit and merit.
2. Valuation of taxable services for service tax purposes.
3. Claim of being a pure agent of the service receiver.

Analysis:

Issue 1: Challenge to Order-in-Appeal
The appellant challenged the Order-in-Appeal dated 25.03.2009 on both time limit and merit grounds. The appellant argued that the Revenue had previously raised an identical issue through a show cause notice dated 24.04.2007, covering a specific period, alleging suppression. The appellant contended that the Revenue could not invoke the suppression clause again for the same issue. Additionally, the appellant claimed that they had informed the department about discharging service tax only on the variable portion of the commission. On the merit aspect, the appellant asserted that they acted as a pure agent of the service receiver, M/s Lafarge India Limited, and thus, the reimbursement of expenses incurred on behalf of the service receiver should not be included in the taxable service value.

Issue 2: Valuation of Taxable Services
The Tribunal considered the valuation of taxable services in accordance with Section 67 of the Finance Act, 1994, read with the Service Tax (Determination of Value) Rules, 2006. The Tribunal noted that the consideration for service tax purposes should encompass all amounts charged for providing the service, including both fixed and variable components of the consideration received by the appellant. The appellant's claim of being a pure agent was scrutinized, and it was found that the appellant did not meet the conditions specified in Rule 5 of the Service Tax (Determination of Value) Rules, 2006 to qualify as a pure agent. Therefore, the Tribunal upheld the merits of the order, directing a re-calculation of the demand within the normal time limit under Section 73, leading to modifications in the penalties imposed on the appellant.

Issue 3: Claim of Being a Pure Agent
Regarding the appellant's claim of being a pure agent of M/s Lafarge India Limited, the Tribunal concurred with the first appellate authority's finding that the appellant did not fulfill the criteria outlined in Rule 5 of the Service Tax (Determination of Value) Rules, 2006 to be classified as a pure agent. Consequently, the Tribunal upheld the lower authority's decision on this matter, emphasizing that the reimbursement received by the appellant from M/s Lafarge India Limited could indeed form part of the value of the taxable service provided.

In conclusion, the Tribunal dismissed the appeal on the time limit issue due to the Revenue's prior invocation of the suppression clause and upheld the valuation of taxable services, rejecting the appellant's claim of being a pure agent. The Tribunal directed the reworking of the demand within the normal time limit and modification of penalties accordingly.

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