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TMI Blog2025 (1) TMI 627X X X X Extracts X X X X X X X X Extracts X X X X ..... r everyday during which such failure continues but not exceed the amount of Service Tax payable) in terms of Section 76 of the Finance Act, 1994 is imposed for contravention of Section 68 of the Finance Act, 1994. e) Penalty amounting to Rs.1000/- (One Thousand only) in terms of Section 77 of the Finance Act, 1994 is imposed. f) Penalty amounting to Rs.2,27,292/- (Two lakhs twenty seven thousand two hundred ninety two only) in terms of Section 78 of the Finance Act, 1994 is imposed." 2.1 Appellant was working as loading and unloading agent to M/s Simbhaoli Sugar Mills Ltd., Ghaziabad they were not registered with the Department and were not paying the service tax. 2.2 On the of intelligence investigations were initiated against the Appellant and it was observed that the Appellant had not paid service tax of amounting to Rs.24,41,043/- received from the Appellant's clients as the commission as for being C & F Agents. 2.3 Show cause notice dated 13.03.2006 issued to the Appellant asking them as to why:- a) The Service Tax amounting to Rs.2,29,606/- (not paid) during the 2004-05 should not be demanded in terms of Section 73(a) and 73(1) of the Finance Act, 1994. b) The inte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... avelling, telephone and freight for which they receive payment from SSML in the form of reimbursement of expenses under a separate contract. They have added that the activity of brand promotion of the liquor of SSML by collecting data regarding market size, customer feedback, devising of sales promotion schemes etc. were not covered within the ambit of C & F Agents and as such no service tax was payable by them. In this regard they have relied upon the CBEC circular No.43/7/97-TRU dated 11.07.1997. They have also relied upon the and the decision of Hon'ble Tribunal in case of E.V. Mathai & Co. stating since the services were rendered under different contract they were not liable for service tax on loading and unloading. 10. The adjudicating authority has also relied upon the Board's circular No.B-43/7/97-TRU dated 11.07.1997 wherein it has been provided that a C & F Agent undertakes activities namely- (a) receives the goods from principal or his agent (b) warehouses these goods (c) receives dispatch orders from the principal (d) arrange dispatches of goods as per directions of the principal (e) maintains records of receipt and dispatch of goods (f) Preparation of inv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... godowns but this agreement has not been disclosed to the Department. It is further evident from the contracts between the appellant and SSML that the charges in the name of reimbursement of expenses are at fixed rates and not the actual expenses and also that the charges are based on another contract for arranging minimum quantity of sale of liquor from the godowns. 12. As per definition of C & F Agent as provided in 65 of the Finance Act, 1994, 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 is covered. From the facts of the case I find that the appellants are providing godowns for depositing of the goods by paying godown rent, are providing loading and unloading of the goods at godown thereby handling the goods, are providing marketing consultancy, providing telephone, paying freight, maintaining records, and providing several other services to M/s SSML related to the sale of country liquor for SSML. There is also an agreement that a minimum sale of the goods would be ensured by them on the basis of which fixed charges per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n'ble Supreme Court have quashed the provisions of Rule 5 provided for addition of such reimbursable expenses in value of taxable services is beyond the power conferred under Section 67. Relevant portion of the decision is reproduced below:- "21. Undoubtedly, Rule 5 of the Rules, 2006 brings within its sweep the expenses which are incurred while rendering the service and are reimbursed, that is, for which the service receiver has made the payments to the assessees. As per these Rules, these reimbursable expenses also form part of 'gross amount charged'. Therefore, the core issue is as to whether Section 67 of the Act permits the subordinate legislation to be enacted in the said manner, as done by Rule 5. As noted above, prior to April 19, 2006, i.e., in the absence of any such Rule, the valuation was to be done as per the provisions of Section 67 of the Act. 22. Section 66 of the Act is the charging Section which reads as under: "there shall be levy of tax (hereinafter referred to as the service tax) @ 12% of the value of taxable services referred to in sub-clauses of Section 65 and collected in such manner as may be prescribed." 23. Obviously, this Section refers t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... require elaborate reasoning to firmly state that the statute prevails over subordinate legislation and the byelaw, if not in conformity with the statute in order to give effect to the statutory provision the Rule or bye-law has to be ignored. The statutory provision has precedence and must be complied with." 27. The aforesaid principle is reiterated in Chenniappa Mudaliar holding that a rule which comes in conflict with the main enactment has to give way to the provisions of the Act. 28. It is also well established principle that Rules are framed for achieving the purpose behind the provisions of the Act, as held in Taj Mahal Hotel : "the Rules were meant only for the purpose of carrying out the provisions of the Act and they could not take away what was conferred by the Act or whittle down its effect." 29. In the present case, the aforesaid view gets strengthened from the manner in which the Legislature itself acted. Realising that Section 67, dealing with valuation of taxable services, does not include reimbursable expenses for providing such service, the Legislature amended by Finance Act, 2015 with effect from May 14, 2015, whereby Clause (a) which deals with 'consi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y relying on the existing law and should not find that his plans have been retrospectively upset. This principle of law is known as lex prospicit non respicit : law looks forward not backward. As was observed in Phillips v. Eyre [(1870) LR 6 QB 1] , a retrospective legislation is contrary to the general principle that legislation by which the conduct of mankind is to be regulated when introduced for the first time to deal with future acts ought not to change the character of past transactions carried on upon the faith of the then existing law. 29. The obvious basis of the principle against retrospectivity is the principle of "fairness", which must be the basis of every legal rule as was observed in L'Office Cherifien des Phosphates v. Yamashita-Shinnihon Steamship Co. Ltd. Thus, legislations which modified accrued rights or which impose obligations or impose new duties or attach a new disability have to be treated as prospective unless the legislative intent is clearly to give the enactment a retrospective effect; unless the legislation is for purpose of supplying an obvious omission in a former legislation or to explain a former legislation. We need not note the cornuco ..... 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