2006 (6) TMI 16 - AT - Service Tax

Service tax - Clearing and Forwarding agent - The appeal of appellant that they are in bona fide belief that transport charges thereof not includible in service of C & F agent, accepted

Summary

Issues:
1. Taxability of services provided by Clearing and Forwarding agents.
2. Inclusion of transportation charges in service tax paid by Clearing and Forwarding agents.
3. Taxability of loading and unloading charges under "Cargo Handling Services".
4. Applicability of larger period for demand when there is no intention to evade payment of duty.

Analysis:
The appeals before the Appellate Tribunal CESTAT, Bangalore arose from a common issue addressed in Order-in-Appeal No. 6/2005 and 4/2005 passed by the Commissioner of Customs & Central Excise (Appeals-II), Hyderabad. The appellants, engaged in providing Clearing and Forwarding services, were also involved in loading and unloading cement bags and collecting transportation charges. The Commissioner held both activities as taxable services of Clearing and Forwarding agents, leading to a challenge by the appellants.

The appellants argued that a previous case law established that separate transportation contracts should not have charges added to Clearing and Forwarding services. They also highlighted that loading and unloading charges were categorized under "Cargo Handling Services" by the Finance Act, 2002. The appellants contended that since the Department was aware of these activities and there was no intent to evade payment, the demand was time-barred. They further emphasized that service tax reimbursement was done in good faith, citing relevant case laws to support their position.

After considering arguments from both sides, the Tribunal referred to the precedent set in the case of E. V. Mathai & Co. v. CCE, Cochin, which established that separate transportation charges should not be included in the service tax paid by Clearing and Forwarding agents. Consequently, the Tribunal set aside the service tax demand related to Clearing and Forwarding charges. Regarding loading and unloading charges under "Cargo Handling Services," the Tribunal acknowledged the reimbursement of such charges from the service receiver, indicating no intent to evade payment. As a result, the impugned order was deemed improper and set aside, allowing the appeals with consequential relief.

In conclusion, the Tribunal's decision clarified the taxability of services provided by Clearing and Forwarding agents, the treatment of transportation charges, the categorization of loading and unloading charges under "Cargo Handling Services," and the significance of good faith reimbursement in service tax matters.