2009 (1) TMI 178 - AT - Service Tax

Tribunal reverses service tax, rejects penalty in C&F services case

The Tribunal set aside the confirmation of service tax against the appellant for C&F services, as the lower authority's rejection of the appellant's ... Reimbursement of Expenses – Clearing and Forwarding Agent’s Service - Commissioner (Appeals) has rejected the appellant’s claim of deduction on account of various reimbursable expenses such as freight, postage, telephone, loading/unloading charges and octroi, on the ground that the contract dated 1-4-2000 entered by the appellant does not indicate that the service user will reimburse the above amount. Accordingly, he has confirmed the service tax on the gross value of the service charges recovered by the appellant – But, Para 4.1 of the contract states that expenses incurred by the appellant on actual basis are reimbursable – Therefore matter has been remanded – Since there is no mala-fide intention is proved on the part of assessee – penalty waived under section 80. Issues:1. Confirmation of service tax against the appellant for C&F services.2. Rejection of appellant's claim for deduction on reimbursable expenses.3. Imposition of penalty under section 76 of the Finance Act, 1994.Confirmation of Service Tax:The judgment addresses the confirmation of service tax against the appellant for C&F services rendered by them. The Commissioner (Appeals) rejected the appellant's claim for deduction on various reimbursable expenses like freight, postage, telephone charges, etc., due to the absence of clear indications in the contract regarding reimbursement by the service user. The Tribunal found this rejection to be factually incorrect. The contract did specify that expenses incurred by the appellant were reimbursable, leading to the conclusion that the lower authority's findings were based on incorrect grounds. Consequently, the impugned order was set aside, and the matter was remanded for re-quantification of the liability based on the appellant's claim.Rejection of Claim for Deduction:The issue of rejecting the appellant's claim for deduction on account of reimbursable expenses was closely examined. The Tribunal noted that the contract explicitly stated that expenses incurred by the appellant were reimbursable. The Commissioner (Appeals) had based the rejection on the absence of such indications in the contract. However, the Tribunal, after reviewing the contract, found that the lower authority's findings were factually incorrect. As a result, the impugned order was set aside, and the matter was remanded for further verification and re-quantification of the liability based on the appellant's claim.Imposition of Penalty under Section 76:Regarding the imposition of penalty under section 76 of the Finance Act, 1994, the original adjudicating authority had detailed observations on the matter. The authority acknowledged that the appellant had obtained service tax registration before commencing business and had not violated certain provisions of the Finance Act. Additionally, it was noted that there was no mala fide intention on the part of the appellant to evade service tax. Citing a precedent, the Tribunal emphasized that in the absence of mala fide intentions, penalties should be set aside. Consequently, the Tribunal decided not to impose any penalty on the appellant, considering the absence of mala fide intentions and the findings of the original adjudicating authority. The appeal was disposed of accordingly.