2018 (6) TMI 441 - AT - Service Tax

Valuation - C&F Agency service - inclusion of reimbursable expenses - marketing the products on commission basis - Department was of the view that appellant is liable to pay service tax under C&F Agency service as well as under Commission Agency services - Held that - The issue whether reimbursable expenses can be included in the total taxable value for quantification of demand has been settled by the decision in the case of in the case of Intercontinental Consultants and Technocrats Pvt. Ltd. 2018 (3) TMI 357 - SUPREME COURT OF INDIA , wherein the Hon ble Supreme Court has held that such reimbursable expenses cannot be made part of total taxable value - the appellant is liable to get the benefit of exclusion of reimbursable expenses - For deciding the said issue and for exclusion of reimbursable expenses on the basis of records furnished by the appellant, the issue is remanded to the adjudicating authority. Penalty u/s 76, 77 as well as 78 of the FA - Held that - Needless to say that the penalty imposed under Sections 76 and 78 cannot sustain simultaneously - It is brought out from the facts that the appellant was under bonafide belief that they are not liable to pay service tax and was eligible for the exemption under N/N. 14/2004-ST dated 10.9.2004. Moreover, the issue whether reimbursable expenses can be included in the total taxable value was also under litigation - penalties set aside. Matter remanded to the adjudicating authority to requantify the demand after excluding the reimbursable expenses as claimed by the appellant - appeal allowed in part and part matter on remand.

Summary

Issues: Liability to pay service tax on C&F Agency services and Commission Agency services; Inclusion of reimbursable expenses in the total taxable value of services; Imposition of penalties under Sections 76, 77, and 78 of the Finance Act.

In this case, the appellant provided C&F Agency services to a company for marketing their products without discharging the service tax liability. The Department contended that the appellant was liable to pay service tax under both C&F Agency and Commission Agency services. The original authority confirmed the demand, interest, and penalties, which were upheld by the Commissioner (Appeals), leading to this appeal.

Regarding the inclusion of reimbursable expenses in the total taxable value, the appellant limited the challenge to this aspect. The appellant argued that reimbursable expenses should be excluded from the taxable value based on a Supreme Court decision. The Tribunal agreed that reimbursable expenses cannot be part of the total taxable value and remanded the matter to the adjudicating authority to exclude these expenses based on the documents furnished by the appellant.

The appellant also requested the waiver of penalties imposed under Sections 76, 77, and 78 of the Finance Act. The Tribunal found that the penalties could not be sustained simultaneously and noted that the appellant had a bona fide belief in their eligibility for exemption under a specific notification. Considering the reasonable cause for the failure to discharge the service tax liability and the ongoing litigation regarding the inclusion of reimbursable expenses, the Tribunal set aside all the penalties imposed.

In conclusion, the impugned order was modified to remand the matter for reevaluation by excluding reimbursable expenses and setting aside all penalties. The appeal was partly allowed on these grounds, providing relief to the appellant in terms of the liability and penalties imposed.