2023 (10) TMI 742 - AT - Service Tax

Non-payment of service tax - C F Agency Service - godown Charges - Security charges - Guard charges - Electricity Charges etc. - HELD THAT - From the Agreement, it is seen that the Appellant is required to take delivery of the goods from Railway Station and other places and store the same properly and they should clear the same to various clients of the principal. These activities very clearly show that the Appellant is carrying the activity of Clearing and Forwarding service. Therefore, the Appellant‟s submission that they are only carrying on the C F Vendor services is rejected. On going through Annexure 2 of the Agreement, it is seen that the amounts mentioned under the headings Rent, Security and Guards etc. are rounded figures and reflect that these are expenses which are being incurred by the Appellant. It is not mentioned anywhere that the expenses are being incurred on behalf of the principal to qualify as reimbursable expenses. Taking into consideration the fact that the Appellant has enclosed various challans showing normal payment of Service Tax of Rs.60,346/- along with interest of Rs.1934/-, it is opined that out of the total confirmed demand, after proper verification, the amounts already paid should be adjusted - matter remanded back to the Adjudicating Authority who will get these facts verified and confirm the demand for the net amount - appeal disposed off.

Summary

Issues:
The issues involved in this case are whether the Appellant providing C & F Vendor service is liable to pay Service Tax, the nature of services being provided by the Appellant, and the applicability of reimbursement in the payment of Service Tax.

Issue 1 - Liability to Pay Service Tax:
The Appellant claimed they were not liable to pay Service Tax under the service of C & F Vendor service as they were not undertaking "clearing and forwarding" activities. However, the Department issued a Show Cause Notice alleging that the Appellant was providing C & F Agency Service and not paying Service Tax on various charges. The demands were confirmed by the lower authorities, leading the Appellant to appeal before the Tribunal.

Issue 2 - Nature of Services Provided:
The Appellant contended that they were only "C&F Vendors" to the principal and not providing "clearing and forwarding" services. They argued that in case of reimbursement, they are not obligated to pay Service Tax, citing a relevant case law. On the other hand, the Authorized Representative pointed out specific clauses in the Agreement showing that the Appellant was required to undertake activities that fall under C & F Agency service, including storing and clearing goods for various clients. The representative argued that the expenses incurred by the Appellant were not reimbursements but normal costs of a C & F Agent.

Issue 3 - Applicability of Reimbursement in Service Tax Payment:
The Tribunal analyzed the Agreement and observed that the Appellant was indeed engaged in activities that constitute Clearing and Forwarding service. The Tribunal also noted that the expenses mentioned in the Agreement were incurred by the Appellant and not qualified as reimbursable expenses. Referring to a previous judgment, the Tribunal emphasized that costs for input services cannot be treated as reimbursable costs.

In the judgment, the Tribunal rejected the Appellant's argument that they were only providing C & F Vendor services, concluding that they were indeed engaged in Clearing and Forwarding activities as per the Agreement. The Tribunal also highlighted that the expenses incurred by the Appellant were not reimbursable but normal costs of a C & F Agent. Despite this, the Tribunal acknowledged the Appellant's payment of Service Tax and interest, directing the Adjudicating Authority to verify the amounts paid and adjust the confirmed demand accordingly. The penalties imposed on the Appellant were set aside due to the majority of the Service Tax already being paid.