2024 (12) TMI 671 - AT - Service Tax

Classification of services - Clearing and Forwarding Agent services or Cargo Handling Service? - extended period of limitation - HELD THAT - It is found that the appellant has a case as regards the sustainability of the demand on limitation. The issue of payment of service tax on reimbursements was decided by the Hon'ble Apex Court in the judgement of UNION OF INDIA AND ANR. VERSUS M/S. INTERCONTINENTAL CONSULTANTS AND TECHNOCRATS PVT. LTD. 2018 (3) TMI 357 - SUPREME COURT - It is found that the service tax demand along with interest and imposition of penalties under the provisions of the Finance Act, 1994 during the relevant period are not sustainable. The impugned order is set aside and the Appeal is allowed.

Summary

Issues:
Classification of services provided by the appellant under "Clearing and Forwarding Agent" services or "Cargo Handling Service"; Applicability of service tax on loading, unloading, and station charges; Validity of demand for service tax on reimbursements; Issue of limitation in issuing show cause notice; Imposition of interest and penalty.

Analysis:

1. The appellant was discharging service tax under the category of "Clearing and Forwarding Agent" services for providing services to a cement company. The Department issued a show cause notice for including loading, unloading, and station charges in the taxable value, which the appellant contested.

2. The appellant argued that their activities did not fall under "Clearing and Forwarding Agent" services but under "Cargo Handling Service," citing two orders by the Commissioner (Appeals) supporting their classification. They also relied on legal precedents to argue that the Department cannot take different stands for different assesses.

3. The appellant further contended that as per a Board Circular, they were not liable to pay service tax on loading and unloading activities when individuals hire labor directly. They also cited various judicial decisions to support their claim that no service tax is payable on reimbursements.

4. The appellant maintained that they followed Rule 6(8) of the Service Tax Rules, 1994, and started paying tax on reimbursements after the rule was omitted in 2006. They argued that the demand for service tax on reimbursable expenses before 2006 was unsustainable, and the demand should have been issued within one year from filing ST-3 returns.

5. The appellant emphasized that they paid service tax on the service portion and provided evidence of accounting practices to support their claim. They argued that the invocation of the extended period of limitation was unsustainable, citing various judicial decisions in their favor.

6. The Tribunal observed that the appellant provided loading, unloading, and cleaning services for cement bags and received reimbursement from the cement company. Considering the classification issue, limitation, and payment of service tax on reimbursements, the Tribunal found in favor of the appellant.

7. The Tribunal held that the demand for service tax, interest, and penalties during the relevant period was not sustainable based on legal precedents and the decision of the Hon'ble Apex Court. Consequently, the impugned order was set aside, and the appeal was allowed with consequential relief, if any as per law.