C&F agent's reimbursable expenses at predetermined rates included in assessable value for service tax following Sri Bhagavathy Traders precedent

CESTAT Kolkata held that reimbursable expenses received by C&F agent at predetermined rates are includable in assessable value for service tax purposes, following the precedent in Sri Bhagavathy Traders case. The tribunal found expenses were paid on lumpsum basis monthly, not actual reimbursement, making them part of service consideration. However, extended period of limitation was rejected as no evidence established wilful suppression or intent to evade tax, with appellant having registered and paid tax on commission. Demand was restricted to normal limitation period with penalty set aside due to absence of suppression with intent to evade.

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Issues Involved:
1. Valuation for the purpose of demanding Service Tax on the C&F agent service.
2. Applicability of Service Tax on reimbursable expenses.
3. Invocation of the extended period of limitation.
4. Imposition of penalties.

Summary:

1. Valuation for the purpose of demanding Service Tax on the C&F agent service:
The Tribunal observed that the appellant rendered services such as unloading cement from wagons, loading cement onto trucks, and local transportation, which fall under the category of C&F agent service. The appellant contended that charges for activities like loading and unloading are not includable in the assessable value and that they are liable to pay Service Tax only on the fixed commission received from the principal. However, the Tribunal noted that the remuneration claimed by the appellant was not on an actual basis but paid on a lump sum basis every month, indicating that the expenses were not reimbursed as a 'pure agent'. Thus, the expenses received were towards rendering of C&F service, and the appellant is liable to pay Service Tax on these reimbursable expenses.

2. Applicability of Service Tax on reimbursable expenses:
The Tribunal relied on the decision of the Larger Bench, CESTAT, Bangalore in the case of M/s. Sri Bhagavathy Traders v. Commissioner of Central Excise, Cochin [2011 (24) S.T.R. 290 (Tri. - L.B.)], which held that reimbursable expenses received in connection with rendering of service in respect of C&F agent services are includable in the assessable value. Accordingly, the Tribunal held that the reimbursable expenses collected by the appellant are includable in the gross value for the purpose of charging Service Tax under the category of C&F agent service.

3. Invocation of the extended period of limitation:
The appellant argued that they had no intention to evade Service Tax and that they took registration and paid Service Tax immediately upon realizing their liability. The Tribunal observed that Service Tax on C&F agent service was a new levy, and there were confusions regarding the value on which Service Tax was payable. The Show Cause Notice did not bring any evidence of mens rea on the part of the appellant to evade payment of Service Tax. Therefore, the Tribunal held that the Service Tax demanded by invoking the extended period of limitation is not sustainable and restricted the demand to the normal period of limitation.

4. Imposition of penalties:
Considering there was no suppression of fact with the intention to evade payment of tax, the Tribunal set aside the penalty imposed on the appellant. The demand of Service Tax was confirmed for the normal period of limitation, and the appellant was liable to pay Service Tax, if any, for the normal period along with interest, after adjusting the Service Tax already paid for the normal period of limitation.

Order:
1. The demand of Service Tax for the C&F agent service rendered by the appellant is confirmed for the normal period of limitation.
2. No penalty is imposable on the appellant.
3. The appeal is disposed of on these terms.

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