2014 (8) TMI 515 - HC - Service Tax

Waiver of pre deposit - Clearing and Forwarding Agent - Discrepancy in books of accounts - Held that - The Appellant prima facie was registered as a Clearing and Forwarding Agent. The returns for service tax were filed. During the audit the difference was noted in the amounts received from the clients in the balance sheet and in the amounts on which service tax was paid as per the statutory returns. The Appellant failed to reconcile this difference, therefore, the demand was confirmed - The component has been bifurcated and the Tribunal was shown that the amount of freight was taken into consideration while confirming the demand and which cannot form a part of taxable service. The amount received as destination charges which are in respect of clearance of goods at the destination by the foreign service provider is the component that could not have been taken for the purpose of service tax liability. If these are destination charges collected from the customers in India and the amount has been taken again while confirming the demand, then, the service which is exfacie not taxable has been brought to tax - the aspect is arguable - amount of pre-deposit ordered by tribunal modified and reduced - decided partly in favor of assessee.

Summary

Issues involved:
1. Justification of directing the appellant to deposit a specific amount under Section 35F of the Act.
2. Applicability of service tax on amounts collected over and above the freight amount in the nature of margin/profit on freight.
3. Applicability of service tax on services received from a foreign service provider performed entirely outside India.
4. Justification of not making out a prima facie case for total waiver of duty.
5. Sustainability of the impugned order of the Appellate Tribunal in the facts and circumstances of the case.

Analysis:
1. The appeal raised questions regarding the justification of directing the appellant to deposit a specific amount under Section 35F of the Act. The appellant, a Clearing and Forwarding Agent, was alleged to have merged actual expenses with additional charges to evade service tax. The Tribunal found that service tax liability cannot be imposed on clearing and forwarding charges based on relevant provisions governing taxable services provided by the agent to the client.

2. The issue of applicability of service tax on amounts collected over and above the freight amount was contested. The appellant argued that if clearing and forwarding operations are separate, tax should not be levied. Reference was made to a judgment by the Punjab and Haryana High Court. The Tribunal's decision to relieve the appellant from predeposit of service tax was highlighted by the Revenue's counsel.

3. The controversy over the applicability of service tax on services received from a foreign service provider performed entirely outside India was addressed. The Tribunal examined the component of destination charges and found discrepancies in the tax liability calculation. The Tribunal scaled down the tax liability but rendered a finding against the appellant concerning destination charges received from the foreign service provider.

4. The issue of not making out a prima facie case for total waiver of duty was raised. The Tribunal balanced the arguments presented by both parties and modified the order, directing the appellant to deposit a specific sum within a stipulated period. The judgment emphasized the need to balance rights and equities in such cases.

5. The overall sustainability of the impugned order of the Appellate Tribunal in the specific circumstances of the case was evaluated. The High Court modified the order, directing the appellant to make a deposit and allowing the Appeal to proceed further in accordance with the law. The judgment aimed to serve the interest of justice while maintaining a fair balance between the parties involved.