2011 (5) TMI 140 - AT - Service Tax

Demand - transportation charges, pre-dispatch inspection charges, octroi and detention charges - Rule 6(8) of Service Tax Rules, 1994 - This is clearly a case where the Appellant is trying to reduce incidence of service tax by accounting his remuneration as a reimbursable expense - The Appellant could not have provided the service of C&F agents without employing clerks or having a telephone in his office - There is no proof adduced that the appellant had the responsibility to deliver the goods at the door step of the client - The incidence of taxation at the relevant time is fixed taking into account such multi-level incidence. What is not provided by law cannot be extended by judicial interpretation - if the godown is taken on rent by the Appellant for discharging his obligations under the contract, rent for godown will form part of the value even if it is reimbursed separately by the client - Matter remanded to re-examine the facts.

Issues:
1. Determination of taxable value for clearing and forwarding services.
2. Inclusion of various expenses in the taxable value for service tax calculation.
3. Applicability of penalties under sections 76, 77, and 78 of the Finance Act, 1994.

Analysis:

Issue 1: Determination of Taxable Value
The case involved the Appellant providing clearing and forwarding services to M/s. Whirlpool India Ltd. The primary contention was the determination of the taxable value for service tax calculation. The Revenue argued that various amounts received by the Appellant, such as remuneration under different headings like freight charges, loading/unloading expenses, phone expenses, etc., should be added to the value of commission declared for service tax calculation. The Appellant, on the other hand, argued that only the commission/service charges should be considered for service tax calculation. The Tribunal referred to Rule 6(8) of the Service Tax Rules, 1994, which deemed the gross amount of remuneration or commission paid to the agent as the taxable value. The Tribunal held that certain expenses like freight charges could be considered as reimbursable expenses if actual amounts were claimed, and such actual expenses should not form part of the taxable value.

Issue 2: Inclusion of Various Expenses
The case also addressed the inclusion of various expenses in the taxable value for service tax calculation. The Commissioner (Appeals) set aside the demand for service tax on certain charges like transportation charges, inward/outward charges, and others, while confirming tax demands on other items. The Appellant relied on circulars stating that reimbursable and out-of-pocket expenses should not be included in the taxable value. The Revenue argued that essential expenses incurred for providing the service, such as clerks' salaries, telephone charges, and godown rent, should be part of the taxable value. The Tribunal emphasized that expenses like pre-dispatch inspection, octroi, and detention charges should be allowed as abatement from gross receipts, subject to producing vouchers. The case of godown rent was subject to dispute based on the specific circumstances.

Issue 3: Applicability of Penalties
Regarding penalties under sections 76, 77, and 78 of the Finance Act, 1994, the Commissioner (Appeals) set aside the penalties imposed. The Tribunal ordered a re-examination of the penalties and other matters related to transportation charges, pre-dispatch inspection charges, octroi, and detention charges by the adjudicating authority. The Appellant was directed to produce vouchers for the concerned expenses for further examination.

In conclusion, the Tribunal disposed of the appeals filed by the Appellant and the department, emphasizing the need for a re-examination of certain expenses and penalties by the adjudicating authority based on the evidence presented.

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