2024 (9) TMI 552 - AT - Service Tax

Leviability of VAT/CST - appellant company charges handling charges @0.6% to 1% from their dealers/customers, which is part of sales consideration - inclusion in the assessable value or not - invocation of extended period of limitation. Inclusion in the assessable value or not - HELD THAT - The present controversy has been decided by the Ahmedabad Bench of this Tribunal in the case of M/S GUJARAT BOROSIL LTD VERSUS COMMISSIONER OF C. EX. S. TAX, SURAT-II 2017 (7) TMI 1034 - CESTAT AHMEDABAD , where the issue involved was whether the amount equal to 7% of the value of the goods, collected as insurance charges under the head cost of transportation from the dealers/buyers is includible in the assessable value and chargeable to duty. The Tribunal had categorically noted that the issue of charging duty on the said insurance charges by adding to the assessable value is settled by this Tribunal as similar proceedings initiated has been decided in M/S GUJARAT BOROSIL LTD VERSUS COMMISSIONER OF C. EX. S. TAX, SURAT-II 2017 (7) TMI 1034 - CESTAT AHMEDABAD - The Tribunal arrived at the conclusion that the amount equal to 7% of the value of the goods collected as insurance charges under the head cost of transportation from the dealers/buyers is not the excess amount of insurance charges collected and retained by the appellant but the amount has been collected as compensation for breakages during the course of transit by issuing credit notes. Thus, the payment made by the assessee to its customers for breakages and losses neither tantamounts to insurance nor cost of transportation and is includible in the assessable value. Invocation of the extended period of limitation - HELD THAT - The Tribunal observed that once the facts are within the knowledge of the Department, being always in dispute, hence the allegation that they have suppressed the facts from the knowledge of the Department is not acceptable in view of the principle of law laid down by the Apex Court in PUSHPAM PHARMACEUTICALS COMPANY VERSUS COLLECTOR OF C. EX., BOMBAY 1995 (3) TMI 100 - SUPREME COURT and P B PHARMACEUTICALS (P) LTD. VERSUS COLLECTOR OF CENTRAL EXCISE 2003 (2) TMI 68 - SUPREME COURT . Similarly, the imposition of penalty was held to be un-warranted and un-justified as the issue related to the interpretation of Valuation Provisions and the duty was confirmed only for the normal period. The question of invocation of extended period of limitation and imposition of penalty, etc. is also not sustainable. The impugned order is set aside - appeal allowed.

Summary

Issues:
Appeal against order-in-original affirming demand of service tax, interest, and penalty on handling charges. Interpretation of handling charges as part of sales consideration for VAT/CST purposes. Allegation of charging insurance premium without paying service tax. Invocation of extended period of limitation. Imposition of penalty.

Analysis:
The judgment pertains to separate appeals filed by a company and two directors challenging an order affirming the demand of service tax, interest, and penalty on handling charges. The company, engaged in manufacturing ceramic tiles, charges handling charges from dealers/customers to compensate for breakage/quality defects and maintain brand value. The department alleged that the handling charges were collected as insurance premium without paying service tax, leading to a demand notice. The issue revolved around whether handling charges were part of sales consideration for VAT/CST purposes or constituted a service attracting service tax.

The appellant argued that a similar issue was decided in a previous case by the Tribunal, where it was held that such charges were not excess insurance charges but compensation for breakages during transit. The Tribunal concluded that the handling charges were not leviable to service tax as they formed part of the assessable value for VAT or CST determination. The judgment referenced the Apex Court's affirmation of the decision in the previous case, supporting the appellant's position.

Regarding the invocation of the extended period of limitation, the Tribunal held that the facts were not suppressed by the appellant, citing legal precedents. The imposition of penalty was deemed unwarranted as the issue related to valuation provisions and duty was confirmed only for the normal period. Ultimately, the Tribunal set aside the impugned order, allowing all appeals and ruling in favor of the appellant and directors.

In conclusion, the judgment provides a detailed analysis of the handling charges issue, referencing previous decisions and legal principles. It clarifies the treatment of handling charges for tax purposes and addresses the aspects of limitation period invocation and penalty imposition, ultimately ruling in favor of the appellant and directors, setting aside the demand of service tax, interest, and penalty.