2010 (6) TMI 248 - AT - Service Tax

Transport of goods by road service - Service tax as well as penalty was demanded from assessee on amount paid by it towards freight charges. Assessee, however contended that said amount represented only advance payment made to goods transport operators and was to be reimbursed by its clients and, thus it was not liable to pay service tax on same. Held that - matter could be conclusively decided only if assessee show would from its accounts, amounts that were reimbursed by its clients and therefore, impugned order was to be set aside, and matter was to be remitted to adjudicating authority for fresh decision.

Summary

Issues:
Resisting service tax demand and penalty on grounds of advance payment to truck drivers, reimbursement by clients, sufficiency of evidence, remand for fresh decision.

Analysis:
The assessees contested a service tax demand and penalty amounting to Rs. 50,399 each, arguing that the payment made towards freight charges was only an advance to truck drivers and would be reimbursed by their clients. The revision authority considered letters from clients stating they were paying service tax on lorry freight and requested the assessees not to claim service tax, deeming it insufficient to invalidate the demand. During the hearing, the assessees presented a certificate from a Chartered Accountant confirming that transport charges were paid on behalf of clients and subsequently collected from them. However, the Departmental Representative (DR) highlighted the necessity for the assessees to demonstrate from their accounts the amounts reimbursed by clients for a conclusive decision.

The presiding officer set aside the impugned order and remitted the case for a fresh decision to the adjudicating authority. The assessees were directed to produce their books of account to establish that the payments made were indeed reimbursed by their clients and reflected in their accounts. The fresh orders were to be passed after granting a reasonable opportunity to the assessees to present their defense. Consequently, the appeal was allowed by way of remand, providing an opportunity for further examination and clarification on the reimbursement of payments by clients.