2018 (2) TMI 1116 - AT - Service Tax

Clearing and forwarding agency service - appellant received ₹ 2,91,000/- per month from IOCL and did not discharge the service tax on said amount - Department was of the view that the said amount is also includible in the total taxable value in respect of C&F Agency services - Held that - Larger Bench decision in the case of Sri Bhagawathy Traders Vs CCE Cochin 2011 (8) TMI 430 - CESTAT, BANGALORE relied upon which has held that only the actuals can be considered to be reimbursable expenses which are to be excluded from the total taxable value. For the limited purpose of re-consideration whether the amount received is reimbursable expenses or not and whether the decisions relied upon would apply to the case, we remand the matter to the adjudicating authority. Penalty imposed is unwarranted and is set aside. Appeal allowed in part and part matter on remand.

Summary

Issues:
1. Whether the amount received by the appellant as reimbursable expenses for infrastructure facilities in respect of C&F Agency service is includible in the total taxable value?
2. Whether the penalty imposed on the appellant is justified?

Analysis:

Issue 1:
The appellants, engaged in providing clearing and forwarding agency service, received a fixed amount of ?2,91,000 per month from M/s.IOCL for the period in question but did not discharge the service tax on this amount. The Department contended that this amount should be included in the total taxable value for C&F Agency services, leading to show cause notices and subsequent penalties. The appellant argued that the amount was for reimbursable expenses towards infrastructure facilities, citing the agreement terms and previous court decisions. The Department, however, claimed that the expenses were not reimbursable and must be included in the taxable value. The Tribunal noted the ambiguity regarding whether the amount was actual and incurred by the appellant on behalf of M/s.IOCL. Consequently, the matter was remanded to the adjudicating authority for further verification.

Issue 2:
The appellant had already paid the entire service tax liability along with interest, indicating good faith. The Tribunal considered previous court decisions where similar amounts were treated as reimbursable expenses not to be included in the taxable value. Consequently, the Tribunal found the penalty imposed to be unwarranted and set it aside. The matter was remanded for re-consideration on whether the amount received constituted reimbursable expenses and if the previous decisions were applicable in this case. The appeals were partly allowed and partly remanded for further review.

This judgment highlights the importance of clarifying whether amounts received as reimbursable expenses are to be included in the taxable value for service tax purposes, emphasizing the need for proper documentation and verification to determine the nature of such payments.