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TMI Blog2015 (4) TMI 577X X X X Extracts X X X X X X X X Extracts X X X X ..... ent's service. Manner of routing the consideration cannot decide taxability of the transaction. Respondent has paid service tax on consideration received for providing clearing and forwarding agent's service under a separate contract with ACC Ltd or its client for this purpose. - Commissioner has rightly dropped the service tax demand on 'freight rebate' and 'primary freight rebate'. Amount received as facility charges is towards making available certain facilities such as special wagons, specialist equipment for the use of ACC Ltd. The appellant-assessee has not provided any service to receive facility charges but has only made available certain facilities or infrastructure for the use of ACC Ltd. The record of the proceedings before us do not show any material to the effect that the appellant-assessee was engaged in providing any service to entitle them to receive facility charges other than merely making available the specified facilities or equipment to ACC Ltd. We have perused the scope of clearing and forwarding agent's services as clarified in the CBEC Circular and it clearly does not suggest that the tax is to be levied as C&F service for making available any facility bu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arrange to unload cement from their tanker trucks using compressor/blower installed at client's site. For this the notice bulker will also use the compressor shortages in quantities up to clients project in case the shortages are caused by the notice omissions or commissions; (h) the noticee is fully responsible to supply required cement at site of client if any shortages due to railway wagons, tanker trucks and silos in time. Losses which will be incurred by client will be borne by the noticee. Client will not be responsible for damages or loss of goods in transit. 2.4 For the above clearing forwarding operation the notice received remuneration which they split into heads like Handling charges , 'freight rebate', 're-imbursement of primary freight, and 're-imbursement of secondary freight'. The various heads are defined as under:- (A) Freight Rebate: Freight rebate is the arrangement made by the notices with Indian Railways in which the Railways in which the Railway grants to the noticees a compensation of 22.5% of the freight paid by the consignor in order to remunerate for the ownership of 125 wagons whose original cost is ₹ 25.79 crores. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (25) of the Act. As per Clearing Forwarding operations agreements between the assessee and M/s ACC Ltd, the assessee is responsible for movements of cement in specialized containers/wagons, unloading, storage in silos, repacking into bags and sacks, stocking, loading, dispatch unloading of cement at clients site, to make good any shortage in quantity of the cement, etc on behalf of M/s ACC Ltd. For the above 'clearing forwarding operation' the assessee received remuneration which they splitted into heads like Handling Charges . The amounts accounted as 'Freight rebate' is nothing but additional consideration flowing from M/s ACC LTd. to the assessee. In respect of other clients, the assessee received part of the remuneratin as freight for movement of cement in specialized rail wagons from 'Wadi' to 'Kalamboli'. The assessee pays 77.5% of such remuneration to m/s ACC Ltd. as 'reimbursement of primary freight' and retains 22.5% with itself which is accounted in its books of accounts as freight rebate. The assesee also received additional remuneration (from its clients other than M/s ACC Ltd.) as 'road transportation charges' for mo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he service tax demand in respect of the facility charges under Clearing Forwarding service. Hence, both the Revenue the Assessee are in appeal. Now we take up each of the appeals for consideration. Appeal No. ST/14/09 (Revenue appeal) 3. The Appeal has been filed by the Revenue against the OIO passed by the Commissioner, dropping service tax demand of ₹ 3,06,21,823 against Freight rebate, Primary Secondary Freight reimbursement recovered by the Assessee. 4. The Ld. AR submits that the adjudicating authority has erred in dropping the demand in respect of Freight rebate, Primary Secondary Freight reimbursement charges since the Respondent-assessee had used their wagons for providing C F services and considering the definition of C F services and considering the definition of C F services the amount recovered by the Respondent for providing wagons for transportation of goods is includible in the assessable value. 5. The Ld. Counsel for the Respondent submits that the Ld. Commissioner has rightly dropped the demand of ₹ 3,06,21,823/-. At the outset, he highlighted that while the Revenue is objecting to dropping of demand for all charges i.e. Freight reba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ht rebate received by the Respondent. The nature of transaction in this case is that clients of ACC Ltd. who cannot afford to hire entire wagon, requests ACC Ltd. to incur the rail freight for them and the same is reimbursed to ACC Ltd. through the Respondent. As in the case of freight rebate transaction, the Respondent is entitled to retain its share of 22.5% of the total freight amount which is termed as primary freight reimbursement. The fund flow of this transaction is that the customer of ACC Ltd. would pay the entire freight amount to the Respondent and after retaining 22.5% for itself the Respondent would remit the balance 77.5% to ACC Ltd. which in turn would be remitted to Indian Railways by ACC Ltd. 5.8 Since the primary freight reimbursement is similar to the freight rebate received from Indian Railway, through ACC Ltd as submitted for Freight Rebate, primay freight reimbursement shall also be not leviable to service tax. Appel No. ST/25/09 (Assessee's appeal) 6. This appeal is filed by the assessee against confirmation of demand of ₹ 12,65,105 by Learned Commissioner towards handling/facility charges recovered by them from ACC Ltd during the period 20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ormation was within the knowledge of the Department and therefore demand is liable to dropped on the ground of limitation also. 7.7 He further submitted that, penalty imposed is liable to be set aside since the issue involved is of interpretation of law. Thus, penalty under section 76 and section 78 of Finance Act, 1994 is liable to be set aside. Further, the impugned order levies penalty of ₹ 15,00,000 u/s 78 of the Finance Act, 1994 which is more than the permissible limit under the law, as section 78 envisages levy of penalty equal to amount of demand confirmed. A penalty of ₹ 500/- is also imposed under section 75A of the Finance Act, however the said section has been omitted from the Finance Act w.e.f. 10.09.2004. 8. The Ld AR reiterates the findings of the adjudicating authority and states that the Appellant shall be liable to pay service tax on the facility charges recovered and the extended period of limitation is rightly invoked since the value of the said charges were not disclosed in the ST-3 returns. 9. Heard and carefully considered submissions made by both the sides. 10. We first deal with the Appeal filed by the Revenue. We find that after per ..... X X X X Extracts X X X X X X X X Extracts X X X X
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