2016 (4) TMI 934 - HC - Central Excise

Court directs re-examination of service tax calculation, sets cost threshold, upholding fairness in tax matters.

The Court allowed the petitioner's challenge against the order dismissing their appeal for not paying the statutory pre-deposit under Section 35F of the ... Valuation - Whether freight component has been included in computing the service tax payable - Engaged in multi-modal transport operations - Avail of services from transporters including seafaring vessels - Held that:- prima facie, there appears to be some substance in the petitioner’s assertion that the cost of freight which is charged from the clients by the petitioner and paid out to the transporters should be excluded in assessing the service tax. Such aspect of the matter was not considered by the concerned officer while assessing the service tax due. Accordingly, and without pronouncing finally on the merits or seeking to calculate the amount actually payable by the petitioner on account of service tax, the order impugned dated March 19, 2015 passed by the Commissioner of Service Tax (II) is set aside and the Commissioner is requested to look into such aspect of the matter on the basis of the papers that may be presented by the petitioner to pass a fresh order in accordance with law. - Appeal disposed of Issues:1. Challenge to order rejecting appeal for failure to pay statutory pre-deposit under Section 35F of the Central Excise Act, 1944.2. Inclusion of freight charges in service tax computation.3. Setting aside the order and directing the Commissioner to re-examine the matter.Analysis:1. The petitioner contested an order of the Customs, Excise and Service Tax Appellate Tribunal, Eastern Zonal Bench, which dismissed an appeal due to the petitioner's failure to make a statutory pre-deposit under Section 35F of the Central Excise Act, 1944. The petitioner, engaged in multi-modal transport operations, argued that the freight charges included in the service tax calculation were improper. The petitioner's grievance was that the freight component was erroneously considered in assessing the service tax payable, resulting in a demand exceeding Rs. 27 crore. The Court acknowledged the validity of the petitioner's claim regarding the exclusion of freight costs from service tax assessment, which was not duly considered during the initial evaluation.2. The Court, refraining from a final determination on the merits or the exact amount due, overturned the order dated March 19, 2015, issued by the Commissioner of Service Tax (II). The Commissioner was directed to reevaluate the matter based on submissions by the petitioner and issue a fresh order within six weeks. If the revised assessment found the petitioner liable for over Rs. 20 crore, the petitioner would be obligated to pay costs amounting to Rs. 50,000 to the department. However, if the final sum due was less, such costs would be waived. The case, W.P.No.103 of 2016, was resolved based on these directives.3. The Court's decision aimed to provide relief to the petitioner by setting aside the initial order and allowing for a reassessment by the Commissioner to address the issue of including freight charges in the service tax computation. The judgment emphasized the importance of proper evaluation and compliance with legal requirements, ensuring a fair and accurate determination of the petitioner's tax liability. The Court's intervention sought to rectify the oversight in the assessment process and uphold the principles of justice and lawful procedure in tax matters.