2014 (2) TMI 862 - AT - Service Tax

Waiver of pre-deposit - Valuation - reimbursement of expenses - clearing and forwarding agent service/Customs House Agent service - Held that - in view of decision of the Hon ble Delhi High Court in Intercontinental s case 2012 (12) TMI 150 - DELHI HIGH COURT that once Rule 5 (1) of the Service Tax (Determination of Valuation Rules, 2006) has been struck down as ultra vires to Section 67, then question of fulfillment of conditions laid down under Sub-Rule (2) of Rule 5 of the Service Tax Valuation Rules, 2006, do not arise. - stay granted. Regarding on the issue of making available the cargo space by Airlines to its clients, we are at this prima facie stage not fully satisfied with the argument advanced by the Ld. Chartered Accountant that the same cannot come under the scope of Business Auxiliary Service provided as held by the Ld. Commissioner in the order with a detailed analysis of the respective work orders issued by the Airlines and the services rendered by the applicant. - stay granted partly.

Summary

Issues:
Waiver of pre-deposit of Service Tax and penalty under Sections 77 and 78 of the Finance Act, 1994.

Analysis:
The applicant sought waiver of pre-deposit of Service Tax amounting to Rs.18.21 Crores and penalty imposed under Sections 77 and 78 of the Finance Act, 1994. The demand included Rs.16.74 Crores for reimbursable expenses received and Rs.1.46 Crores from incentives received from Airlines. The Ld. Chartered Accountant argued that the demand related to reimbursable expenses was bad in law as Rule 5(1) had been struck down by the Hon'ble Delhi High Court. Additionally, they contended that the incentives received were not commissions but discounts, citing relevant judgments. On the contrary, the Ld. A.R. for the Revenue argued that the demand was valid under Rule 5(2) of the Service Tax Valuation Rules, 2006 and that the activities amounted to promotion and marketing services taxable under Business Auxiliary Service.

The Tribunal noted that Rule 5(1) had been struck down by the Hon'ble Delhi High Court, rendering the conditions under Rule 5(2) inapplicable. Consequently, the Tribunal found a prima facie case for waiving the pre-deposit of Rs.16.74 Crores related to reimbursable expenses. However, regarding the incentives received from Airlines, the Tribunal was not fully convinced by the argument that it did not fall under Business Auxiliary Service. The Tribunal directed the applicant to deposit 25% of Rs.1.46 Crores within eight weeks to stay the recovery of the balance amount during the appeal process. Failure to comply would result in the dismissal of the appeal without further notice.

In conclusion, the Tribunal granted partial waiver of the pre-deposit amount related to reimbursable expenses but required a partial deposit for the amount received as incentives from Airlines pending the appeal process.