2017 (5) TMI 468 - AT - Service Tax

Valuation - Clearing and Forwarding Agency Service - various components/considerations/reimbursements received from M/s. HUL - includibility - Held that - Section 67 of the FA, 1994 clearly stipulates that when the considerations for provision of service is partly consisting of money, the other considerations should be arrived at in money terms, for tax purposes - there is no merit that the inclusion of the notional rent for tax liability as a part of consideration. Time limitation - Held that - the appellant did make intimation, in statutory returns regarding receipt of non-taxable considerations by them. Apparently, any scrutiny and assessment of such returns could have revealed more details regarding various categories of amounts on which the appellants are not paying service tax. These facts reveal that there is no case for invoking suppression or willful mis-statement against the appellant - penalties not imposed on same ground. Demand restricted to the normal period and penalties are also accordingly set aside - appeal allowed - decided partly in favor of appellant.

Issues: Valuation of taxable service for Clearing and Forwarding Agency, Time bar for demand, Inclusion of notional rent in tax liability, Allegation of suppression of facts, Service tax liability and penalties

Valuation of taxable service for Clearing and Forwarding Agency:
The appeal concerns the valuation of taxable services provided by the appellants as a Clearing and Forwarding Agency. The dispute revolves around the various components and considerations received from M/s. HUL, including reimbursement on depreciation of plant and machinery, bank interest, return on investment, and notional value of rent-free accommodation. The Commissioner confirmed a service tax liability of &8377; 99,70,247 covering a specific period. The appellant argued that their service tax liability should be restricted to the agency commission amount, citing judicial precedents and interpretations regarding reimbursable expenses for C & F agents.

Time bar for demand:
The appellant contended that a substantial part of the demand was time-barred as the show cause notice was issued after a certain period. They highlighted that they had indicated in their ST-3 returns the considerations on which service tax was not paid. The appellant argued that there was no case for invoking suppression or willful misstatement against them, as they had made intimation in statutory returns regarding non-taxable considerations received.

Inclusion of notional rent in tax liability:
The main contention was regarding the inclusion of notional rent for the premises used by the appellant without paying rent. The tribunal noted that the appellant had availed the facility of rent-free premises, which directly impacted the amount charged for services. The tribunal held that the notional rent constituted a non-monetary consideration received by the appellant for providing services, and thus should be included in the tax liability.

Allegation of suppression of facts:
The tribunal examined the allegation of suppression of facts against the appellant. It was observed that while the appellant had mentioned values exempt from service tax in their returns, the lack of detailed information on reimbursable expenditures led to the allegation. However, the tribunal found no case for suppression or willful misstatement, as the appellant had intimated in statutory returns about non-taxable considerations received.

Service tax liability and penalties:
The tribunal upheld the service tax liability of the appellant on merit but restricted the demand to the normal period, not the extended period. The penalties imposed on the appellants were set aside, considering the varying interpretations and litigations surrounding the valuation of Clearing and Forwarding Agency services. The tribunal found that the penalties were not sustainable based on the circumstances and legal precedents cited.

This comprehensive analysis of the judgment covers the issues of valuation of taxable service, time bar for demand, inclusion of notional rent in tax liability, allegation of suppression of facts, and the determination of service tax liability and penalties.

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