2017 (2) TMI 22 - AT - Service Tax

Tribunal limits service tax demand for Clearing Agency, waives penalties

M/s Adarsh Marketing Versus CCE, Jaipur – I

The Tribunal ruled in favor of the Clearing and Forwarding Agency, limiting the service tax demand to the normal period and waiving penalties under ... Valuation - C&F Agency services - consideration received under various headings like salary of staff, rent of godown, miscellaneous receipts etc. - appellants claim that the amounts are towards reimbursement of the expenditure incurred by them and not to be added in the gross value for service tax - Revenue claims that all amounts received by the appellants in connection with providing C&F Agency services are to be added for calculating service tax. Held that: - the Hon’ble Delhi High Court in the case of Intercontinental Consultants & Technocrats Pvt. Ltd. vs. Union of India [2012 (12) TMI 150 - DELHI HIGH COURT] dealt with the scope of Section 67 (1), though the new valuation rule was also subject matter of decision by the Hon’ble Delhi High Court. The general principles of valuation and non-inclusion of certain cost and expenditure incurred by the service provider was the subject matter of the said decision. We also note that on similar set of facts, this Tribunal set aside the demands for extended period waived the penalties also - demand restricted to normal period - penalty waived - appeal disposed off - decided partly in favor of appellant. Issues: Valuation of services provided by Clearing and Forwarding Agency, applicability of service tax on various considerations received, imposition of penalties under Sections 76, 77, and 78 of the Finance Act, 1994, conflicting decisions by the Tribunal, reference to Larger Bench, interpretation of Section 67(1) of the Finance Act, 1994, waiver of penalties under Section 80 of the Finance Act, 1994.In this case, the appellants, a Clearing and Forwarding Agency, were providing services and discharging service tax regularly. A dispute arose regarding the valuation of their services, specifically related to various considerations like staff salary, godown rent, and miscellaneous receipts claimed as reimbursement of expenses not to be included in the gross value for service tax. The Revenue contended that all amounts received by the appellants for providing C&F Agency services should be added for calculating service tax, resulting in a demand of &8377; 17,51,059 and imposition of penalties under Sections 76, 77, and 78 of the Finance Act, 1994.The appeal focused on the limitation aspect of demand due to conflicting Tribunal decisions, leading to a reference to the Larger Bench. The appellant cited the decision in Sri Bhagavathy Traders vs. CCE, Cochin and the principles laid down by the Delhi High Court in Intercontinental Consultants & Technocrats Pvt. Ltd. vs. Union of India. Relief was sought against the extended period demand and waiver of penalties under Section 80 of the Finance Act, 1994.The arguments presented highlighted that the appellants had not paid the full liability of service tax as they chose to pay only a part of the consideration. The Revenue contended that the confirmed amount related to essential activities for providing taxable services and should not be excluded from the gross value, relying on the Larger Bench decision in Sri Bhagavathy Traders vs. CCE, Cochin.After hearing both sides, the Tribunal acknowledged the dispute regarding the valuation of C&F Agency services, particularly concerning reimbursable expenditures. Referring to the decision in Intercontinental Consultants & Technocrats Pvt. Ltd. vs. Union of India and previous Tribunal cases, the Tribunal restricted the demand to the normal period, waiving penalties under Section 80 of the Finance Act, 1994. The Tribunal found no justification for invoking fraud, suppression, or willful statement, leading to the disposal of the appeal in favor of the appellants.