2018 (3) TMI 705 - AT - Service Tax

Tax Tribunal Decision: Demurrage charges upheld, penalties set aside under Section 80. Reimbursement expenses clarified.

Marine Container Services (South) Pvt. Ltd. Versus Commissioner of Central Excise And ST, Tirunelveli

The tribunal upheld the tax liability on demurrage charges as they were considered part of the appellant's work as a steamer agent and not penal in ... Valuation - inclusion of reimbursement of expenses - certain amounts received from the clients which the appellant claim to be reimbursable expenses as well as demurrage charges on containers which is not related to any service - Held that: - it is clearly recorded by the lower authority that the demurrage charges accruing to the liners is not subjected to tax. It is the amount which is retained by the appellant which cannot be considered as penal demurrage and is actually attributable to expenses in handling of containers and related activities which are more in the nature of ship husbandry work which is liable to be taxed. Other expenses like telephone charges, survey charges, document charges - Held that: - Apparently, there is no reimbursement on actual basis and the exclusion under the category of 'reimbursement expenses' cannot be admitted for such lump sum payment - the exclusion under the category of 'reimbursement expenses' are subject to the condition that such expenses would have been normally incurred by the client but incurred by the assessee-appellant and later reimbursed by the client on actual basis as per pre-arrangement known to both the parties. In the absence of such factual assertion in the present case, we are not able to interfere with the findings recorded on this count. Appeal dismissed - decided against appellant. Issues: Tax liability on demurrage charges and reimbursement expensesTax Liability on Demurrage Charges:The case involved appeals regarding the tax liability of the appellant as a steamer agent on certain considerations received in their activities. The dispute centered around demurrage charges on containers and whether they were related to any service. The tribunal noted that demurrage charges retained by the appellant were not penal charges but were attributable to expenses in handling containers, making them liable to taxation. The tribunal found that the charges were part of the appellant's work as a steamer agent and not penal in nature. The method of consideration receipt did not change this aspect. The tribunal upheld the tax liability on demurrage charges but set aside penalties imposed on the appellant under Section 80 of the Finance Act, 1994, considering the bona fide belief of the appellant and the interpretation of certain considerations.Reimbursement Expenses:Regarding other expenses like telephone charges, survey charges, and document charges, the tribunal found that charges reimbursed by the client on an actual basis were not taxable. However, the appellant had submitted details indicating lump sum payments as logistic fees without actual reimbursement. The tribunal held that without evidence of actual reimbursement as per pre-arranged agreements, the exclusion under 'reimbursement expenses' could not be accepted. The tribunal noted the absence of factual assertions supporting actual reimbursement. Despite upholding the tax liability on these expenses, the tribunal set aside the penalties imposed on the appellant under Section 80 of the Finance Act, 1994, due to the genuine belief of the appellant and the interpretational nature of the dispute. The appeals were dismissed with the modification of setting aside the penalties.