2018 (6) TMI 809 - AT - Service Tax

Clearing and Forwarding Agency Service - whether the appellant-assessee, a Clearing and Forwarding agent have been rightly subjected to demand of additional Service Tax as short paid? - Held that - The appellant is not liable to service tax on the ground that the payments they have received on the pure agent basis by way of reimbursement of expenses incurred on behalf of the principal - the appellant is liable to pay service tax on the amount of remuneration/commission received from the Principal for the services provided, which will also include the amount of 5% given by the Principal on the expenses as pure agent. Matter remanded to the adjudicating authority for the limited purpose of recalculation of tax payable - appeal allowed by way of remand.

Summary

Issues:
1. Whether the appellant, a Clearing and Forwarding agent, was rightly subjected to demand of additional Service Tax as short paid.

Analysis:
The case involved the appellant, a Clearing and Forwarding agent, being accused of short paying Service Tax. The Revenue claimed that the appellant had underpaid Service Tax by a significant amount for the period from April 2002 to September 2006. The matter had previously been remanded to the Adjudicated Authority for further review. The Adjudicated Authority confirmed the demand, penalties, and interest. The appellant then appealed to the Commissioner (Appeals) who upheld the demand but set aside the penalty under section 76.

In the subsequent appeal before the Tribunal, the appellant argued that they should not be liable to pay service tax on amounts received as a pure agent for reimbursement of expenses, citing a judgment by the Hon'ble Delhi High Court confirmed by the Supreme Court. The appellant highlighted specific clauses in the agreement with the principal company, demonstrating that the amounts received were only as remuneration over and above actual expenses incurred. The Tribunal noted that recent clarifications by the Delhi High Court and Supreme Court supported the appellant's position that no service tax is payable on amounts received as a pure agent for reimbursement of expenses.

The Tribunal held that the appellant was not liable to pay service tax on amounts received as a pure agent for reimbursement of expenses but was liable for service tax on the remuneration/commission received from the principal. The case was remanded to the adjudicating authority for recalculation of the tax payable based on the Tribunal's findings. The appellant was directed to provide detailed explanations and supporting documents within 60 days. The Tribunal also dismissed the Revenue's appeal for the deletion of penalty under section 76, upholding the dropping of the penalty.

In conclusion, the Tribunal allowed the appeal, remanding it for recalculation of tax payable, and dismissed the Revenue's appeal for the deletion of penalty under section 76.