2014 (4) TMI 996 - AT - Service Tax

Clear & Forwarding Agent - Valuation - whether the expenses as mentioned above which were being reimbursed by the principals to the appellants are includible in the assessable value of the C&F Agent services for payment of service tax - Held that - it is not the case of the appellant that the service recipient were reimbursing the expenses in question to them as per their legal obligations. In view of this, in terms of the judgement of the Larger Bench of the Tribunal in the case of Bhagavathy Traders (2011 (8) TMI 430 - CESTAT, BANGALORE) the amount received by the appellant from their principals would be includible in the assessable value. However, we find that since during the period of dispute, there were conflicting decisions on the point of dispute in this case because of which the appellant could have entertained a bonafide doubt about inclusion of reimbursement expenses in the assessable value, keeping in view the judgement of the Apex Court in the case of Continent Federation Joint Venture (2007 (8) TMI 11 - SUPREME COURT OF INDIA) and Uniworth Textile Ltd. (2013 (1) TMI 616 - SUPREME COURT), neither longer period for demand of short paid service tax can be invoked nor penalty under Section 78 of the Finance Act would be imposable. In view of this, we upheld the duty demand only for the normal limitation period, which would be quantified by the original adjudicating authority and would be recoverable from the appellant along with interest. However, imposition of penalty on the appellant under Section 78 is set aside. - Decided partly in favour of assessee.

Summary

Issues:
Dispute regarding assessable value of C&F Agent services and packaging services for the period from April 2002 to September 2006. Jurisdictional Addl. Commissioner confirmed service tax demand on C&F Agent services and packaging services. Appeal filed against the order-in-appeal dismissing the appeal.

Analysis:
The appellant, a Clear & Forwarding Agent, faced a dispute with the department over the assessable value of their services provided to M/s. Tata Chemicals Ltd. Mumbai. The department alleged that certain amounts received by the appellant should be part of the assessable value of the C&F Agent services. The jurisdictional Addl. Commissioner confirmed a service tax demand in this regard, along with interest and penalty under Section 78 of the Finance Act, 1994. The Commissioner (Appeals) upheld this order, leading to the present appeal.

The appellant argued that the expenses reimbursed to them by their principals for providing C&F Agent services should not be included in the assessable value. They relied on Tribunal judgments and a stay order by the Bombay Bench, emphasizing that service tax should only be charged on the commission received, not on reimbursement of actual expenses. They also contended that the extended period for issuing the show cause notice was not valid due to conflicting judgments on the issue involved.

The Joint CDR defended the order, citing a Larger Bench decision that reimbursement expenses are includible in the value of C&F Agent services. He argued that the appellant's failure to disclose the value of reimbursements in ST-3 Returns justified the longer limitation period and penalty imposition.

The Tribunal considered the conflicting decisions during the disputed period but relied on the Larger Bench decision, which held that reimbursement expenses are includible unless there is a legal obligation for the service recipient to pay. However, due to the appellant's genuine doubt based on conflicting judgments, the Tribunal ruled that the longer period for demand and penalty imposition were not justified. The duty demand was upheld for the normal limitation period, with the penalty set aside. The appeal was disposed of accordingly, maintaining the service tax demand on packaging services uncontested.