2024 (5) TMI 465 - AT - Service Tax

Valuation - C F agent service - inclusion of reimbursement of expenses - charges collected for activities like loading, unloading, etc are includable in the assessable value or not - expenses incurred and reimbursed on actual basis to be included in assessable value or not - extended period of limitation - penalty. Appellant stated that they were not aware of the Service Tax liability on C F agent service rendered by them, they had no intention to evade payment of Service Tax. HELD THAT - The appellant has been reimbursed the expenses at a specific pre-determined rate. If the reimbursement is on actual basis, it cannot be a fixed pre-determined amount. It would vary every month - the remuneration claimed by the appellant is not on actual basis, but paid on a lumpsum basis every month. Thus, we hold that the expenses are not reimbursed to the appellant on actual basis as a 'pure agent'. Accordingly, we hold that the expenses received are towards rendering of C F service and the appellant is liable to pay service tax on these reimbursable expenses. The Larger Bench, CESTAT, Bangalore in the case of SRI BHAGAVATHY TRADERS VERSUS COMMISSIONER OF CENTRAL EXCISE, COCHIN 2011 (8) TMI 430 - CESTAT, BANGALORE-LB held that reimbursable expenses received in connection with rendering of service in respect of C F agent services are includable in the assessable value. Thus, these reimbursable expenses collected by the appellant are includable in the gross value for the purpose of charging service tax under the category of C F agent service. Extended period of limitation - HELD THAT - The appellant have taken registration and paid Service Tax on the commission received by them and accordingly filed returns immediately upon being notified about their liability. The Show Cause Notice has not brought any evidence regarding mens rea on the part of the appellant to evade payment of Service Tax. The allegation of wilful mis-statement and suppression of facts with intent to evade payment of Service Tax needs to be established with positive evidence. However, it is observed that no such evidence is available on record to establish the intention on the part of the appellant to evade the payment of Service Tax - the Service Tax demanded by invoking the extended period of limitation is not sustainable in this case. Accordingly, the demand of Service Tax is restricted to the normal period of limitation. Penalty - HELD THAT - There is no suppression of fact with intention to evade payment of tax established in this case. Since the demand is confirmed only for the normal period of limitation, no penalty is imposable on the appellant. The demand of Service Tax for the C F agent service rendered by the appellant is confirmed for the normal period of limitation. The appellant is liable to pay Service Tax, if any, for the normal period, along with interest, after adjusting the Service Tax, if any, already paid by them for the normal period of limitation - Penalty set aside - appeal allowed in part.

Issues Involved:
1. Valuation for the purpose of demanding Service Tax on the C&F agent service.
2. Applicability of Service Tax on reimbursable expenses.
3. Invocation of the extended period of limitation.
4. Imposition of penalties.

Summary:

1. Valuation for the purpose of demanding Service Tax on the C&F agent service:
The Tribunal observed that the appellant rendered services such as unloading cement from wagons, loading cement onto trucks, and local transportation, which fall under the category of C&F agent service. The appellant contended that charges for activities like loading and unloading are not includable in the assessable value and that they are liable to pay Service Tax only on the fixed commission received from the principal. However, the Tribunal noted that the remuneration claimed by the appellant was not on an actual basis but paid on a lump sum basis every month, indicating that the expenses were not reimbursed as a 'pure agent'. Thus, the expenses received were towards rendering of C&F service, and the appellant is liable to pay Service Tax on these reimbursable expenses.

2. Applicability of Service Tax on reimbursable expenses:
The Tribunal relied on the decision of the Larger Bench, CESTAT, Bangalore in the case of M/s. Sri Bhagavathy Traders v. Commissioner of Central Excise, Cochin [2011 (24) S.T.R. 290 (Tri. - L.B.)], which held that reimbursable expenses received in connection with rendering of service in respect of C&F agent services are includable in the assessable value. Accordingly, the Tribunal held that the reimbursable expenses collected by the appellant are includable in the gross value for the purpose of charging Service Tax under the category of C&F agent service.

3. Invocation of the extended period of limitation:
The appellant argued that they had no intention to evade Service Tax and that they took registration and paid Service Tax immediately upon realizing their liability. The Tribunal observed that Service Tax on C&F agent service was a new levy, and there were confusions regarding the value on which Service Tax was payable. The Show Cause Notice did not bring any evidence of mens rea on the part of the appellant to evade payment of Service Tax. Therefore, the Tribunal held that the Service Tax demanded by invoking the extended period of limitation is not sustainable and restricted the demand to the normal period of limitation.

4. Imposition of penalties:
Considering there was no suppression of fact with the intention to evade payment of tax, the Tribunal set aside the penalty imposed on the appellant. The demand of Service Tax was confirmed for the normal period of limitation, and the appellant was liable to pay Service Tax, if any, for the normal period along with interest, after adjusting the Service Tax already paid for the normal period of limitation.

Order:
1. The demand of Service Tax for the C&F agent service rendered by the appellant is confirmed for the normal period of limitation.
2. No penalty is imposable on the appellant.
3. The appeal is disposed of on these terms.

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