2017 (9) TMI 944 - AT - Service Tax

Business Auxiliary service - Steamer Agent services - non-payment of service tax on considerations which should form part of taxable value under the category of Steamer Agent Service and Business Auxiliary Service - period from 1.10.2001 to 31.3.2006 - Held that - the Tribunal examined similar issue in DSP Merrill Lynch Ltd. Vs CST Mumbai 2016 (2) TMI 221 - CESTAT MUMBAI - The Tribunal held that amount of write backs are those which are yet to be claimed by the assessee. These amounts are payable to the client when the claims are lodged. Accordingly, they cannot be considered as consideration received towards services rendered. Regarding exchange rate, appellants are uniformly following the rate as per the date of accounting of receipt of brokerage / commission. The difference in exchange rate which is because of date of presentation of accounts for realization is not attributable to extra consideration. The same will work whether negative or positive side which is not considered for tax liability by the appellant. They calculate tax liability as per the date of brokerage, accounting, and there is no reason to infer infirmity in such action. Brokerage Rate - Held that - The services rendered to shipping line are rightly taxable under Steamer Agents Service . Appellant admits this legal position. However, their claim is in respect of services rendered to other steamer agents. The same is not liable to be taxed as Steamer Agent Service . At best, it could be only Business Auxiliary Service - The split up figures can be verified based on the documents submitted by the appellant and duty liability can be worked out on that basis. Documentation charges - Held that - when the activities constitute services provided directly to a customer and do not constitute service provided on behalf of principal, the same cannot be taxed under BAS - In the present case, the residual clause has no application since it is not established that the said service is incidental to any of the services listed from clauses (i) to (vi) under BAS - tax liability set aside. Time limitation - Held that - jurisdictional officer has endorsed the ST-3 returns which can happen only on due satisfaction of verification of all documents and not on mere perusal of the returns - demand for extended period not sustained, and limited to normal period only - penalty also set aside. Appeal allowed - decided partly in favor of appellant.

Summary

Issues:
1. Dispute related to non-payment of service tax under "Steamer Agent Service" and "Business Auxiliary Service" for the period from 1.10.2001 to 31.3.2006.
2. Whether certain considerations should form part of taxable value under the mentioned categories.
3. Applicability of service tax on amounts retained from cargo owners, cheques not encashed by customers, exchange rate differences, and brokerage amounts received.
4. Contesting the demand on limitation grounds.
5. Tax liability on brokerage amounts received from liners and other steamer agents.
6. Taxability of amounts collected as document charges from customers.

Analysis:
1. The appellant contested the demand on both merit and limitation grounds. The dispute revolved around various considerations that the authorities claimed should be part of the taxable value under "Steamer Agent Service" and "Business Auxiliary Service" categories. The appellant argued that certain amounts were not received as consideration for taxable services, and they followed accounting standards and tax laws in reversing such amounts not attributable to services rendered.
2. The appellant also challenged the service tax liability on amounts affected by exchange rate fluctuations, explaining their billing practices and the non-consideration of realized amounts post-billing. The Revenue's focus on positive exchange rate fluctuations was countered by the appellant's assertion that they discharged service tax obligations based on billing dates and exchange rates.
3. Regarding brokerage amounts, the appellant differentiated between brokerage received from liners and other steamer agents, asserting that tax liability should only apply to services rendered to liners under "Steamer Agent Service." They contended that services provided to other steamer agents should fall under "Business Auxiliary Service," which was not invoked in the case.
4. The issue of taxation on documentation charges collected from customers was also raised. The appellant argued that such charges were directly related to services rendered to customers and did not fit within the scope of Business Auxiliary Service as claimed by the lower authorities.
5. On the limitation aspect, the appellant highlighted their regular filing of ST-3 returns verified by the jurisdictional Superintendent, indicating compliance and non-justification for invoking suppression in the assessment. The Tribunal ultimately ruled in favor of the appellant, setting aside the demand for the extended period and the associated penalty, emphasizing the importance of due verification and satisfaction in tax assessments.