2017 (11) TMI 1574 - AT - Service Tax

Valuation - includibility - reimbursable expenses - charges collected under the heads A.R-4 expenses - DBK Charges - DEEC Endorsement Charges etc. - whether reimbursable expenses are includible in taxable value or not? - Held that - the issue is settled in the case of Commissioner of Service Tax Versus M/s. Sangamitra Services Agency 2013 (7) TMI 862 - MADRAS HIGH COURT , where it was held that Various expenditure includible in the taxable value of Carrying and Forwarding service were reimbursed by the principals on the basis of actuals - the demand on reimbursable expenses is neither legal nor proper and requires to be set aside. The amount, if any, collected over and above the actual would not fall under CHA Services - demand unsustainable - decided in favor of appellant. Business Auxiliary Services - demand on incentive received from Shipping Liner - Held that - the issue decided in the case of M/s. Indo Lloyd Freight Systems Pvt. Ltd. Versus Commissioner of Service Tax, Chennai 2017 (8) TMI 400 - CESTAT CHENNAI , where it was held that the activity of the appellant as a custom house agent is to provide services to importers/exporters and the disputed activity was only a facility arranged by them to their clients. The appellant has no obligation to arrange transport of cargo through a particular shipping liner. Therefore, the amount received cannot fall within the category of commission so as to be subjected to levy of service tax - demand under Business Auxiliary Services set aside. The learned counsel for appellant has also put forward the grievance that the Commissioner has not taken note of the amounts paid by the appellant - That appellant would be able to establish with documents that entire liability has been discharged before the issuance of show-cause notice - matter is remanded for such re-examination. Penalty u/s 76 and 78 - Held that - the appellant has discharged substantial portion of the demand even prior to issuance of show-cause notice - though it is alleged that appellant has suppressed facts with intent to evade payment of tax, there is no specific evidence to prove the same - penalties set aside. Appeal allowed in part and part matter on remand.

Summary

Issues Involved:
1. Demand of service tax on various services provided by the Custom House Agent.
2. Demand of service tax on incentive received from Shipping Liner.
3. Dispute over the amount already paid by the appellant.

Detailed Analysis:

1. The judgment addresses the demand of service tax on various services provided by the Custom House Agent (CHA). The appellant contested the demand related to CHA Services and Business Auxiliary Services. The appellant argued that certain charges collected were reimbursable expenses and should not be included in the taxable value. The appellant relied on previous judgments to support their argument. The tribunal agreed with the appellant, stating that demand on reimbursable expenses is not legal and should be set aside. The tribunal also clarified that any amount collected above actual expenses would fall under Business Auxiliary Services, not CHA Services. Therefore, the demand under CHA Services was deemed unsustainable and set aside.

2. The second issue involved the demand of service tax on incentives received from a Shipping Liner. The tribunal referenced a previous case where a similar issue was discussed, and it was held that such incentives cannot be taxed under Business Auxiliary Services. Following this precedent, the tribunal ruled that the demand under Business Auxiliary Services was unsustainable and set it aside.

3. Lastly, the appellant raised a concern regarding the Commissioner not considering the amounts already paid by them. The tribunal acknowledged that the appellant had discharged a substantial portion of the demand before the show-cause notice was issued. The tribunal found no specific evidence of intentional tax evasion and deemed the penalties imposed as unwarranted. Therefore, the penalties under sections 76 and 78 were set aside. The tribunal remanded the matter to the adjudicating authority to verify if the appellant had indeed paid the service tax for other services claimed by them. The judgment concluded by partially allowing the appeal, setting aside the demands under CHA Services and Business Auxiliary Services, and remanding the issue of verification of the amount already paid to the adjudication authority.