TaxTMI 
TaxTMI 
2023 (8) TMI 852
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....case are that assessee M/s J.B. Shah are engaged in providing services of "Customs House Agents' (CHA) Services. During the course of search and scrutiny of records of assessee it was revealed that assessee were raising two sets of invoices, one towards service agency charges which was considered for payment of Service tax and other set for reimbursing various expenses incurred on behalf of their client on which service tax was not discharged. It was alleged that this pattern of invoicing was adopted to suppress the actual service charges collected and to pay less service tax. Assessee were taking advantage of the Circular F. No. B43/1/97-TRU dated 06.06.1997 which envisaged 'payment made by CHA on behalf of the client, such as reimbursement expenses incurred are not to be included for computing the Service tax. It was also observed by the investigating officers that assessee had wrongly availed Cenvat Credit on input services such as transportation service and photography service. Accordingly, a detail show cause notice dated 30-03-2009 was issued to the assessee proposing service tax demand of Rs. 1,60,84,680/- for the period from 01.10.2003 to 31.03.2008 leviable on the reim....
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....cise- 1996 (87) ELT 19(SC). 2.3 He also submits that all the reimbursable expenses on which demand of Service tax is confirmed by the Learned Commissioner are for activities which can be carried out by others who do not require any CHA license. Thus, the activities which are outsourced and are not carried out by appellant but by others who are not CHAs, such activities are outside the scope of definition of taxable service of CHA service as given in Section 65(105)(h) of the Finance Act, 1994 and they cannot be taxed under the category of CHA service. 2.4 He also argued that for the period after 19.04.2006 when Service tax (Determination of Value) Rules, 2006 introduced rule 5(2) related to pure agent, appellant has excluded amounts recovered as pure agent only in those cases where all condition of Rule 5 (2) are satisfied and has paid due service tax even on reimbursements when any of the said conditions are not satisfied. Appellant also submitted the sample documents to the adjudicating authority to show that appellant recovered actual expenses incurred. The Learned Commissioner has, sheer disregard of sample documents, tired to compare income and expenses head wise and confirm....
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....n. Assessee have filed ST-3 returns and there is not an iota of evidence of any suppression or intent to evade payment of tax on appellant part. Further, the issue of taxability of reimbursement of expenses has travelled up to Hon'ble Supreme Court and before many lower appellate forums. This shows that the issue involved is of pure interpretation of legal provisions and therefore it cannot be said that assessee has any mala fide intention. Further SCN is issued to the assessee based on all the details taken from assessee's records and appellant have not suppressed any fact with intention to evade payment of service tax. In these circumstances, charges of suppression or willful misstatement does not survive against assessee and thus extended period of limitation is not invokable in the present matter. 2.8 As regard the revenue's appeal he submits that Ld. Commissioner has dropped demand of total service tax of Rs. 79,00,204/-. Further as per the working prepared by the appellant, demand of service tax to the tune of Rs. 11,59,917/- is dropped for the expenses actually treated as incurred as the impugned order has confirmed demand only on difference between amount appearing on cred....
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....roper. However as regard the said dispute we find that CA certified documents are submitted by the assessee before the Ld. Commissioner. The Ld. Commissioner in Para 54.2.6 and 54.2.7 of impugned order recorded the detail finding on said "Examination Charges" and "Miscellaneous Charges" and after verification of the month wise ledger, journal voucher, sample copies of bills and verification of the service tax paid by the assessee on taxable services Learned Commissioner concluded that service tax on „Examination Charges and Miscellaneous charges stands paid under the head "Agency Charges" for the period 2006-07 to 2007-08. Hence the order of the learned Commissioner dropping demand sustains and we do not find it necessary to interfere in his findings. 4.2 We also find that after perusing the appeal memorandum filed by the Revenue no grounds are taken challenging the Commissioner's view for dropping demand of Rs. 79,00,204/- as stated in Para 57.10. of the impugned order in respect of freight forwarding activities which are not taxable under the category of CHA Service for Ahmedabad, Baroda and Nagpur and also ground of lack of Jurisdiction for Baroda and Nagpur, hence the or....
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.... clients/ customers. The appellant has rightly contended that these reimbursable expenses are not in the nature of service and, therefore, no Service Tax could have been levied. 4.5 The issue that whether the reimbursable expenses should be part and parcel of the service charge of CHA has been clarified by the Board in the Circular No. B43/1/97-TRU dated 06.06.1997 which is reproduced below: F.No. B 43/1/97-TRU, Dated 6-6-1997 Imposition of Service Tax on services rendered by Custom House Agents and Steamer Agents regarding. By the issue of Notification No. 17/96-Service Tax dt. 6.6.97, service tax has been imposed on Custom House Agents and Steamer Agents w.e.f. 15.6.97. The service Tax is imposed under the provisions of Chapter V of the Finance Act, 1994 (32 of 1994), as amended. 2. CUSTOM HOUSE AGENTS In the context of these two services, certain points have been raised for clarification which are discussed below: 2.1 The expression "Custom House Agent" has been defined to mean a person licensed, temporarily or otherwise, under the regulations made under sub-section (2) of Section 146 of the Custom Act, 1962. A person is permitted to operate as a Custom House Agent....
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.... the practice obtaining is to show the charges for services as " agency commission", "charges", "agency and attendance charges", "agency charges" and some similar descriptions. The service tax will be computed only with reference to such charges. In other words, payments made by CHA on behalf of the client, such as statutory levies (cess, Customs duties, port dues, etc.) and various other reimbursable expenses incurred are not to be included for computing the service tax. 2.5 In many cases, the Customs House Agent undertakes "turnkey" imports and exports where a lump sum amount is charged from the client for undertaking various services. In these cases, the lump sum amount covers not only the "agency commission" fee but also other expenses and no separate break-up is given in respect of these expenses. It has been decided that in such cases, the value of the taxable service shall be 15% of the lumpsum amount charged to the client. The Custom House Agents are required to show the service charges as 15% of such lumpsum amount of the bills and Service Tax of 5% will be chargeable on the above 15%. 2.6 Some times, CHAs sub-contract their work to CHAs located in other stations. In s....
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....ervices is not sustainable. 4.7 In the present matter Learned Commissioner also upheld the service tax demand on reimbursable expenses invoking Rule 5(2) of Service Tax (Determination of Value) Rules, 2006. We find that the Hon'ble Apex Court in the case of UOI Vs. Intercontinental Consultants and Technocrats Pvt. Ltd. (supra) held Rule 5 of Service Tax (Determination of Value) Rules, 2006 as ultra vires to Section 67 therefore, considering this settled legal position, we are of the view that the reimbursable expenses incurred by the CHA which is other than the CHA Agency charges cannot be taxable hence, the demand of Service Tax on this count is clearly not sustainable. 4.8 As regard the issue of wrong availment of Cenvat credit in respect of transportation services and photography services, we find that Ld. Commissioner as regard the said issue observed as under: " I find that at para 33 of the show cause notice, it is simply alleged that the said service provider has wrongly availed the cenvat credit on various input services such as transportation services and photography services which appeared inadmissible as per Rule 2(l) of Cenvat Credit Rules, 2004. I find that this is....
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....ircular read with the judgment of Hon'ble Supreme Court in the case of Intercontinental Consultants supra. At the relevant time the issue was not free from doubt. Therefore, lot of litigations were in pipeline, on the same issue and finally it was decided by the Hon'ble Supreme Court and the Board also issued a Circular specifically for the CHA service that over and above the CHA service charges on reimbursement no service tax was payable. On this undisputed fact, we are of the view that the appellant have rightly entertained the bonafide belief that the over and above the CHA service charges, the reimbursement expenses are not taxable. Hence there is absolutely no suppression of fact on the part of the appellant, therefore the demand for the extended period is not sustainable also on the ground of limitation. Our above view is supported by the following Judgments: In the case of Adani Enterprise Ltd Vs. CST the Hon'ble Supreme Court has passed the following decision: "19. As regard the limitation issue argued by the Learned Counsel, we find that in the facts of the present that firstly the issue involved is of pure interpretation of legal provisions therefore, it cannot be said....