2010 (7) TMI 161 - AT - Service Tax

Valuation of clearing and forwarding agent service- Whether in determining valuation of clearing and forwarding agent service charges such as go-down rent, loading and unloading, security charges, electricity, cartage, stationery and printing, telephone, fax charges, photo expenses, repacking charges, traveling charges, internet charges etc. are excluded on the ground that they are collected as reimbursement from the service receiver ? Held that-non- reliability of earlier decisions by itself not a ground for referring matter to Larger Bench. Reference returned to Division Bench for passing appropriate orders.

Summary

Issues:
1. Valuation of clearing and forwarding agent service charges.
2. Whether expenses such as go-down rent, loading and unloading, security charges, and others are excluded as reimbursement.
3. Correctness of judgments relied upon by the appellant.

Analysis:
1. The case involved a reference to the Larger Bench regarding the valuation of clearing and forwarding agent service charges. The appellant claimed to collect service charges under two heads: 'Commission' and 'reimbursement of expenses.' The dispute centered around whether expenses like go-down rent, loading and unloading charges, cartage, stationery, printing, telephone, and others should be excluded as reimbursement. The Larger Bench noted that the appellant's breakdown of charges seemed artificial, and it was unclear what activities fell under the service of a clearing and forwarding agent. The Bench observed that the decisions relied upon lacked reasoning for excluding amounts collected as reimbursement, leading to an expansion of the excluded categories in subsequent decisions. The Bench opined that the value for services should be the gross amount charged, determined as per Section 67 of the Finance Act, requiring reconsideration of the previous decisions.

2. The Bench highlighted that the decision to refer the matter to a Larger Bench arises in cases of conflicting decisions, difficulty in agreeing with previous views, or substantial questions of public importance. However, in this case, the referral order lacked disclosure of reasons for the conclusions in the decisions relied upon by the appellant. The absence of reasoning in an order was deemed insufficient to establish a legal principle. Citing the Apex Court's guidance, the Bench emphasized the importance of reasoning in decisions to establish a legal ratio. As the referral Bench found no reasoning in the decisions, it was within the Division Bench's discretion to decide the matter based on the merits and applicable law.

3. The Bench concluded that since the referral Bench did not confirm a view on the issue or face conflicting decisions, the prima facie inadequacy of earlier decisions was insufficient grounds for referral. Referring to a decision in a related matter, the Bench indicated that the issue had been elaborately addressed previously. Consequently, the referral was returned to the Division Bench for appropriate action in line with legal provisions.

This detailed analysis of the judgment highlights the complexities surrounding the valuation of service charges and the necessity of clear reasoning in legal decisions to establish legal principles effectively.