2018 (2) TMI 1177 - AT - Service Tax

Penalty - Valuation - CHA Services, for service tax purpose - quantification of lump sum amount - Held that - As the amounts were to be reconciled in the accounts and the non-payment in time is attributable to reconciliation of receipt, we find that it is a fit case for invoking Section 80 for waiver of penalty imposed on this tax liability - penalty set aside - appeal allowed.

Summary

Issues involved:
1. Valuation of services rendered by a licensed Custom House Agent for service tax purpose.
2. Whether expenses incurred by the agent, which are reimbursed by the client on an actual basis, should be included in the taxable value for service tax calculation.
3. Short payment of duties under the tax entry Steamer Agent Services and the waiver of penalty under Section 80.

Analysis:
1. The appeal addressed the valuation of services provided by a licensed Custom House Agent (CHA) for service tax purposes. The dispute centered around quantifying the lump sum amount charged by the agent to determine the taxable value. The Revenue argued that all amounts billed and collected by the agent should be included in the gross amount for taxation. However, the agent contended that expenses incurred during their work, which were reimbursed by the client on an actual basis, should be excluded from the taxable value. The Trade Notice No. 39/97 stated that the lump sum amount for CHA services should include not only the agency commission but also other expenses where no separate breakup is given. The Tribunal emphasized that reimbursable expenses incurred by the agent and reimbursed by the client on an actual basis should not be included in the taxable value for service tax calculation.

2. The Tribunal analyzed the scope of reimbursable expenses in detail, emphasizing that such expenses should meet specific criteria to be excluded from the taxable consideration. The expenses must be incurred by the service provider on behalf of the service recipient and reimbursed on an actual basis without any mark-up. The Trade Notice stipulated that the lump sum amount should include all receipts where no separate breakup is available for claim from the client. The Tribunal concluded that expenses incurred by the CHA on an actual basis and reimbursed by the client should not be added for service tax purposes, as it falls beyond the scope of Section 67 of the Finance Act 1994. Referring to a previous decision, the Tribunal reiterated that taxable amounts should not include separately billed reimbursable expenses received on an actual basis.

3. Another issue involved a short payment of duties under the tax entry Steamer Agent Services, where the appellant requested a waiver of penalty under Section 80. The appellant acknowledged the tax liability but argued that the short payment was due to reconciliation issues, not willful misstatement. The Tribunal found that the demand was not contested on merit, and the penalty imposed was sought to be waived due to reasonable cause for non-payment related to reconciliation of receipts. Consequently, the Tribunal set aside the impugned order regarding the valuation of CHA services and the penalty imposed on Steamer Agent Services, disposing of the appeal accordingly.