Service tax liability - Proportionate amount

[Guest]

We are providing C&F services for our clients who are manufacturers of Fertilizers. We are registered with the Service Tax under “C&F” “Cargo Handling” and “Storage & ware housing services”. We provide Loading/ Unloading of the fertilizers from railway wagons (Cargo Handling), store the same in my warehouses (Storage & ware housing) and dispatch to clients. As per our agreement we charge them for each of the services rendered by us on at a specific rate(M T basis) but not on commission basis. The Department has issued Show cause notice to us to pay service tax on the Gross amount charged/received by us. Since we are basically C&F agents we are of the view that we are liable to pay service tax on the net amount (i.e. amount received as per agreement less actual expenditure incurred by us like loading, unloading, go down rents and other expenditure) as it is the net amount which is our commission. We request you to offer your valuable suggestion/case laws in this regard.

AI Summary

Tax Dispute: C&F Company Challenges Tax on Gross Revenue, Argues for Tax on Net Commission Only A company providing Clearing and Forwarding (C&F) services, including cargo handling and warehousing for fertilizer manufacturers, received a show cause notice from the tax department. The notice demanded service tax on the gross amount charged, whereas the company believes tax should apply only to the net amount, excluding actual expenses like loading, unloading, and warehouse rents. They argue that their commission should be the taxable amount. A response from another participant indicates that service tax should be paid on the amount received for C&F services, not on reimbursable expenses, citing relevant case laws.