2019 (11) TMI 304 - AT - Service Tax

Demand of service tax - clearing and forwarding agent service - Handling expenses - Misc Expenses - Re-stacking/reconditioning expenses - EDP expenses - Bank charges - CASM expenses - Primary freight - Secondary Freight - Service charges - whether the appellant is liable to pay service tax on various amounts enumerated at Sl No 3 to 11 in the table above on which they had not discharged service tax? - extended period of limitation. Handling expenses - HELD THAT - Revenue wanted to treat mere loading of sugar in the factory and unloading it into railway wagons as clearing and forwarding agency service. In the present case, handling is done in course of CFA operations - demand to this extent has to be confirmed. Miscellaneous expenses towards electricity, telephone, electrical maintenance etc. of the depots - HELD THAT - The service rendered by the appellant is only the operation of such godowns. Electricity, electrical maintenance sweeping etc. of the godowns are directly relatable to the maintenance of such premises which belong to M/s HLL. Instead of M/s HLL undertaking these activities, the appellant is doing these jobs and claiming reimbursement from M/s HLL. In our considered view, these cannot form part of the taxable services rendered by the appellant in this factual matrix - demand do not sustain. Restacking, reconditioning expenses - HELD THAT - These pertain to arrangement and rearrangement of the goods in the depot which lie at the heart of the C F Agent s activity and do not pertain to maintenance of the premises belonging to M/s HLL although this amount is paid separately to HLL - this forms part of the assessable value for the CFA services. EDP expenses - HELD THAT - The computer stationery, cartridges and computer maintenance are used in the godown as is evident from the agreement for the given activities of the appellant as C F Agent such as generation of invoices - these charges are essentially input expenses towards rendering of the C F agent services. Therefore the same are includible in the assessable value. Bank charges and CASM expenses - HELD THAT - It is not clear as to what these charges specifically pertain to from the records. Therefore, we do not find sufficient evidence on record to say that these are input services for rendering of C F agent services by the appellant. Primary freight secondary freight and service charges - HELD THAT - The C F Agent agreement that it does not include transportation of the goods as part of the service to be rendered. It is the case of assessee that they have a separate agreement with M/s HLL for transportation of goods which is not part of the CFA agreement. This can only be considered as Goods Transport Agency service - there is no evidence to the contrary. At any rate, if these are GTA services no service tax can be demanded from the service provider as the liability for paying service tax rests on the service recipient in terms of Section 68(2) of the Finance Act, 1994, read with Rule 2(d) of the Service Tax Rules, 1994 - demand do not sustain. Extended period of limitation - HELD THAT - It is not in dispute that the assessee has not disclosed all these facts to the department and they have come to light only on investigation/audit/ enquiries by the department. It is true that the assessee had filed service tax returns but these did not reflect the full and true value of the amounts received by them for rendering the services - there is nothing in the show-cause notice to justify the allegation of suppression knowingly and consciously with an intent to evade as above. Hence there are no sufficient grounds to invoke extended period of limitation. Penalties - HELD THAT - During the period, Section 80 was in vogue and hence invoking this provision, the penalties are set aside. The demand on handling expenses, restacking/reconditioning expenses, EDP expenses within the normal period of limitation made in the impugned order are upheld and the remaining demands are set aside - the matter is remanded to the original authority only for the purpose of calculation.

Summary

Issues Involved:
1. Handling expenses
2. Miscellaneous expenses
3. Restacking and reconditioning expenses
4. EDP expenses
5. Bank charges and CASM expenses
6. Primary freight, secondary freight, and service charges
7. Extended period of limitation and penalties

Detailed Analysis:

1. Handling Expenses:
The appellant paid handling expenses for primary handling (unloading at the depot) and secondary handling (loading into trucks). These activities are integral to the role of a Clearing and Forwarding Agent (CFA), involving receiving, storing, and dispatching goods. The tribunal confirmed that these charges form part of the consideration for CFA services and upheld the demand for service tax on these expenses, noting that the appellant had already been paying service tax on these charges from 01.04.2005.

2. Miscellaneous Expenses:
These expenses included electricity, telephone, and maintenance costs at the depots. The tribunal found that these costs were directly related to the maintenance of premises owned by M/s HLL and not part of the taxable services rendered by the appellant. Thus, the demand for service tax on these expenses was set aside.

3. Restacking and Reconditioning Expenses:
The tribunal determined that these expenses pertained to the arrangement and rearrangement of goods in the depot, which is central to the CFA's activities. Therefore, these expenses were considered part of the assessable value for CFA services, and the demand for service tax on these expenses was upheld.

4. EDP Expenses:
Expenses related to computer stationery, cartridges, and maintenance were deemed essential for the appellant's CFA activities, such as invoice generation. The tribunal concluded that these expenses are input costs for rendering CFA services and should be included in the assessable value. Thus, the demand for service tax on these expenses was upheld.

5. Bank Charges and CASM Expenses:
The tribunal found insufficient evidence to determine whether these charges were related to the input services for CFA activities. Consequently, the demand for service tax on these expenses was not upheld.

6. Primary Freight, Secondary Freight, and Service Charges:
The tribunal noted that the CFA agreement did not include transportation of goods as part of the service. The appellant had a separate agreement with M/s HLL for transportation, which falls under Goods Transport Agency (GTA) services. The liability for service tax on GTA services rests with the service recipient (M/s HLL) under Section 68(2) of the Finance Act, 1994. Since M/s HLL had already discharged service tax on these services, the demand for service tax on these charges was set aside.

7. Extended Period of Limitation and Penalties:
The tribunal found that the appellant had not disclosed all relevant facts to the department, leading to the discovery of under-valuation during investigations. However, the tribunal did not find sufficient grounds to justify the allegation of suppression with intent to evade tax. Consequently, the extended period of limitation was not invoked. Additionally, invoking Section 80, the tribunal set aside all penalties imposed on the appellant.

Conclusion:
The tribunal upheld the demand for service tax on handling expenses, restacking/reconditioning expenses, and EDP expenses within the normal period of limitation. The demands for miscellaneous expenses, bank charges, CASM expenses, and freight charges were set aside. All penalties were set aside, and the matter was remanded to the original authority for recalculation of the demands.