2017 (9) TMI 159 - AT - Service Tax

Valuation - C&F services - includibility - reimbursement of the expenses like electricity charges, freight charges, telephone, office staff and salary, collected by appellant from their client - Held that - the so called reimbursement on account of various expenses such as electricity charges, telephone, freight charges, salary etc. are part and parcel of gross value of the C & F Agent Service, hence the same is chargeable to service tax. Penalty - Held that - Larger Bench in the case of Sri Bhagwati Traders 2011 (8) TMI 430 - CESTAT, BANGALORE , has held that the appellant entertaining bona fide belief is reasonable, therefore they made out a case for waiver of penalty imposed under Section 78 by invoking Section 80 of the Finance Act - penalty set aside. Appeal allowed - decided partly in favor of appellant.

Summary

Issues:
1. Taxability of reimbursement of expenses collected by the appellant.
2. Time bar on demand.
3. Imposition of penalties under Section 78 of the Finance Act.

Analysis:

Taxability of Reimbursement of Expenses:
The appellant, engaged in providing C & F Agent Service, collected reimbursement of expenses like electricity charges, freight charges, etc., in addition to service charges but did not discharge service tax on such reimbursement. The adjudicating authority upheld the demand on the reimbursement. The appellant argued that only Clearing and Forwarding Agent service is taxable, relying on precedents. The Revenue contended that reimbursable expenses form part of the gross value of the service. The Tribunal, citing a Larger Bench judgment, ruled in favor of the Revenue, holding that such reimbursements are taxable as part of the service value.

Time Bar on Demand:
The appellant claimed the demand was time-barred, citing a Tribunal decision stating no suppression of facts. The Tribunal did not find merit in this argument, as the issue was decided by the Larger Bench judgment, and the demand was upheld.

Imposition of Penalties:
Regarding penalties under Section 78 of the Finance Act, the appellant argued for waiver due to a bona fide belief supported by conflicting judgments. The Tribunal acknowledged the genuine belief due to the contentious issue and multiple judgments but set aside the penalty invoking Section 80 of the Finance Act. The impugned order was modified, partially allowing the appeal.

This judgment clarifies the taxability of reimbursement of expenses in C & F Agent Service, the applicability of time limits on demands, and considerations for imposing penalties under Section 78 of the Finance Act. The decision highlights the importance of legal precedents and the reasonableness of beliefs in tax matters.