2021 (8) TMI 450 - AT - Service Tax

Valuation of taxable service - clearing and forwarding services - inclusion of reimbursable charges received from the customers in the taxable value - man power supply service - taxability of packaging activity done by the appellant. Inclusion of reimbursable charges received from the customers in the taxable value - HELD THAT - It is brought out from facts that the appellant has not included the charges in the nature of electricity, diesel generator charges, fuel charges, telephone charges, water charges, stationery chargers etc. incurred for providing clearing and forwarding services in the taxable value. These are actual reimbursements made to the appellants by their customers - reliance can be placed in the case of INTERCONTINENTAL CONSULTANTS AND TECHNOCRATS PVT. LTD. VERSUS UOI. ANR. 2012 (12) TMI 150 - DELHI HIGH COURT - Since the activity of packing and repacking is a manufacturing activity the demand of service on such activity cannot sustain. Demand under man power supply service - HELD THAT - Admittedly, the services were provided to service recipient situate in SEZ. It is also brought out that as per Notification NO.40/2012-ST dated 20.06.2012, the service tax is exempted - Only because the appellant did not produce the above documents, the exemption as per Notification No.40/2012-ST was denied and the department has demanded service tax. It is seen from Annexure to the reply of SCN that the appellant has produced the document Form A2 along with reply. Section 51 of SEZ Act, 2005 is to have an overriding effect. The denial of the benefit of exemption by relying upon procedural requirement of a notification would be against the provisions laid down in the SEZ Act - the demand of service tax under Man power service cannot sustain. This issue is found in favour of the appellant and against the respondent. Packing and repacking services - demand of service tax under BSS - HELD THAT - The demand of service tax under Business Support Service on the activity of packing and repacking cannot sustain and requires to be set aside which we hereby do. It is also to be stated that definition of Business Support Service as contained in Finance Act, 1944 does not mention such activity of packing/repacking. For these reasons, the demand cannot sustain. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Inclusion of reimbursable charges in taxable value for clearing and forwarding services.
2. Demand under man power supply service for services provided to a recipient in SEZ.
3. Demand under Business Support Service for packing and repacking activities.

Analysis:
1. The appellants were found to have not included reimbursable charges received from customers in the taxable value for clearing and forwarding services, leading to a service tax liability. The department contended that these charges should be included. However, the appellant argued that as per a Supreme Court decision, reimbursable expenses like electricity and telephone charges should not be included in the taxable value. The Tribunal agreed with the appellant, citing the Supreme Court decision, and set aside the demand under this category.

2. The second issue pertained to a demand under man power supply service for services rendered to a recipient in a Special Economic Zone (SEZ). The appellant claimed exemption under a specific notification but failed to produce necessary documents, resulting in the denial of the exemption and a demand for service tax. The Tribunal analyzed the legal provisions and held that the denial of exemption based on procedural requirements of a notification was against the provisions of the SEZ Act. Citing the overriding effect of Section 51 of the SEZ Act, the Tribunal ruled in favor of the appellant and set aside the demand under man power supply service.

3. The third issue involved a demand under Business Support Service (BSS) for packing and repacking activities done by the appellant for exports. The department considered these activities as falling under BSS and demanded service tax. However, the appellant argued that packing and repacking activities constitute "manufacturing" under the Central Excise Act, not a service under BSS. The Tribunal agreed with the appellant, stating that the activity of packing and repacking should be considered a manufacturing activity, not a service under BSS. Therefore, the demand under BSS for these activities was set aside by the Tribunal.

In conclusion, the Tribunal found in favor of the appellants on all three issues, setting aside the demands and penalties imposed by the original authority. The impugned order was held to be unsustainable and was set aside, with the appeals allowed with consequential relief as per the law.