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TMI Blog2005 (6) TMI 569X X X X Extracts X X X X X X X X Extracts X X X X ..... -2-2005, they have deposited ₹ 1,00,000/- (Rs. One lakh only) vide TR 6 challan No. BAMD-04/2004-05 dtd. 5-3-2005. Therefore the case is taken up for final decision. 3. The brief facts of the case are as under - (i) The department has issued show cause notice on 10-2-2004 alleging that the appellant failed to pay service tax on the total taxable value including the commission and reimbursement of certain essential expenses i.e. amount of minimum guarantee charges, misc expenses, material handling expenses directly or indirectly, relating to C F Agent activity. Also they have not included the value of the rent paid for the godown charges and the reimbursement of freight claim. Further they failed to disclose the fact to the department; hence there is a suppression of facts. Therefore the appellant is contravened the provisions of Sections 67, 68, 73(9) of Chapter V of the Finance Act, 1994 read with Rule 6(8) of Service Tax Rules, 1994. Further, for contravention the abovesaid provisions they are liable for penal action under Sections 76 and 78 of the said Act. (ii) The adjudicating authority decided the case vide OIO NO. 261/2004 dated 31-8-2004. He finds that, as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t transportation of goods fall under service tax net, the said service i.e., transportation of goods is exempted from service. (iii) Clearing and Forwarding agents services were brought under the service tax net by Finance Act, 1997 w.e.f. 16-7-1997 through Notification No. 26/1997 dated 11-7-1997. Initially, the burden of collecting or payment of service tax was on the person who engages a clearing and forwarding agents. In other words, the receiver of C F Agent's service was liable to service tax. The liability was shifted from the receiver to the provider of service in the case of C F Agents by Notification No. 7/99-ST dated 1-9-1999. Section 65(25) of Finance Act, 1994 as amended reads as under : Clearing and forwarding agents means any person who is engaged in providing any service, either directly or indirectly, connected with the clearing and forwarding operations in any manner to any other person and includes a consignment agent. Section 65(105)-(j) which defines taxable services in respect of clearing and forwarding agents reads as under: any service provided to a client by a clearing and forwarding agent in relation to clearing and forwarding operati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... noted that the value of taxable service rendered by clearing and forwarding agents continue to remain as the gross amount of remuneration or commission (by whatever name called) paid to such agent by the principal or the client engaging the agent. Only activities which are connected with the clearing and forwarding activities directly or indirectly for which service charges are received can be considered as service charges, which are subject to tax in respect of C F agents. The Central of Excise and Customs vide Circular dated 24-4-2002 has clarified in the context of storage of liquid cargo that the agencies are providing only storage facility for liquid cargo which has been imported or is intended for export. They charge rent for storage of liquid cargo deposited with them. They are not connected with the vessel bringing the goods and are not concerned with customs formalities. They issue invoices to customers towards storage charges and for no other charges. These agencies are not receiving any commission from the principal but only rental for storage facility, whereas a C F agent's remunerations is in the form of commission. The Tribunal in the case of Gujarat State ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the remuneration or commission which has been identified and paid to the said C F Agent. Therefore, there is no legal basis to propose to include the godown rentals and freight charges in the taxable value for the purpose of arriving service tax liability. Also it is clear from the following features of the C F Agent agreement that the godown rentals and freight are totally outside the scope and purview of C FA services: (a) The C FA is appointed for a particular area; (b) The goods are directly dispatched by the company to the C F agents freight paid; (c) The C FA does not have any privity or contract with the owner of the premises. (the premises are leased by the company from the landlord). (d) The agent does not have any lien on goods or on godown premises; (e) The C FA provides services inter alia stocking of goods, verification of goods, compliance with invoicing, complying with the dispatch and delivery instructions issued by the company etc. In view of above, godown rentals and freight are not forming part of the taxable service of C F Agent and accordingly, there is no justification or legal basis to confirm the inclusion of value of god ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the said agreement says that : The C F Agent shall at no time have any lieu on the goods or the godown premises for its charge, remuneration or dues of whatsoever nature . para 26 says It 'is expressly agreed between the parties that the company providing such godown space without any commensuration of charges and would be purely incidental and for the purpose of the C F Agent carrying out is obligations under this agreement . Therefore the allegation, godown facility is essential to carry out the C F Agent's activity and hence godown rent is liable for payment of S. Tax is not sustainable because in this case the appellant has not received godown rent from the principal. It is paid by the principal to the owner of godown under separate agreement : Also as per Section 67 of the Act defines the value of taxable service as : The gross amount charged by the service provider for such service rendered by him. The use of the ward 'charged' makes it clear that the service provider must raise a bill on the principal. No evidences forthcoming before me to show that the godown rent is reimbursed by the principal to the appellants. 7. As regards ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... forwarding agent by the principal engaging such an agent. 8. The appellant rightly pointed out that the godown rent for storage facility is not attract service tax in view of the case of Gujarat State Fertilizers and Chemicals Ltd. - 2002 (148) E.L.T. 1122 discussed above and also freight charges for providing facility of transportation is not attract service tax in view of the case E.V. Mathai Co. v. Commissioner of Central Excise - 2003 (157) E.L.T. 101 has held that service tax is not imposable on transportation charges and the tax can be imposed only on remuneration for service provided as C F Agents. The Circular MF (DR) TRU F.No. 341/11/98-TRU, dated 23-8-1999 clarify that the value of taxable service rendered by clearing and forwarding agents continue to remain as the gross amount of remuneration or commission (by whatever name called) paid to such agent by the principal or the client engaging the agent as provided under sub-rule (8) to Rule 6 of the Service Tax Rules, 1994. Rule 6(8) is as under : The value of taxable service in relation to the services provided by a clearing and forwarding agent to a client for rendering services of clearing and forwarding operatio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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