TaxTMI 
TaxTMI 
2026 (2) TMI 1012
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....entive received from airlines 2006-07 to 2009-10 8,80,339/- 2. Demand on Freight Brokerage 2006-07 to 2009-10 6,11,489/- 3. Demand on 100% value of Turnkey Import / Exports 2006-07 28,15,801/- 4. Demand on labour charges 2006-07 to 2009-10 1,18,621/- Total Disputed Tax 44,26,250/- 3. The facts of the case are that M/s. Blacker & Co Private Limited (hereinafter referred to as the 'appellant') is a company registered under the Companies Act, 1956 and is also a company within the meaning of the Companies Act, 2013. The appellant is an accredited Customs House Agent (CHA) registered with the Service Tax Department under the category 'Custom House Agent Service'. The appellant is also registered under 'business auxiliary service' in respect of the commission received from different airlines. 4. During the course of scrutiny of the appellant's records, it was noticed by the Departmental officers that the appellant had not paid / short paid Service Tax during the periods under dispute. It was alleged that the appellant had suppressed the values charged and realized in the course of rendering the services of CHA as well as bus....
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....elief that such incentive was received not for providing services as agent but for achieving / exceeding the business target given to it wherein no underlying service was involved. (iii) That in the instant case, 5% commission was received towards provision of service to the various airlines and on the same Service Tax was also discharged which is not in dispute. Hence, in terms of Section 67 of the said Act, 5% commission only amounts to the value of provision of service. The incentive received by the appellant is towards achieving the business target given by the different airlines which is has got no nexus with the provision of service as there is no underlying service. (iv) The appellant submits that its contentions have been upheld in the similar situations by the CESTAT, Bangalore in the case of Euro RSCG Advertising Ltd. vs. Commissioner of Service Tax, Bangalore [2006 (12) TMI 61 (CESTAT - Bangalore)] and Kerala Publicity Bureau vs. Commissioner of Central Excise [2007 (5) TMI 151 (CESTAT - Bangalore)]. Issue 2: Demand of Service Tax on Freight Brokerage received during the period from 2006-07 to 2009-10 (i) The appellant states that as an overseas freight broke....
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....y services, as provided in sub-clauses (i) to (vi) of Section 65(19), Service Tax could not have been levied on the amount of freight brokerage received by the appellant. (vii) Regarding the demand confirmed under the category of 'Business Auxiliary Service', it is argued that it is a settled position of law that when the Show Cause Notice does not specify under which clause of the definition of "business auxiliary service" the activity of the service provider falls, then demand is not sustainable. Reliance is placed upon the following case-law: i. Rajarshi Motors Private Limited versus Commissioner of Central Excise, Shillong, reported in 2024 (8) TMI 18 - CESTAT Kolkata. ii. Park Hospitals vs. Commissioner of Service Tax, Kolkata, reported in 2025 (2) TMI 419 - CESTAT, Kolkata; iii. Star Freight Pvt. Ltd. versus C.S.T. -Service Tax - Ahmedabad, reported in 2023 (9) TMI 71 - CESTAT Ahmedabad; iv. Commissioner of Customs And Central Excise, Goa versus Shri. Swapnil Asnodkar, reported in 2018 (1) TMI 266 - CESTAT Mumbai; v. United Telecoms Ltd. versus Commissioner of Service Tax, Hyderabad, reported in 2010 (10) TMI 730 - CESTAT, BANGA....
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....o followed during the period 2006-07. (iii) That the ld. adjudicating authority has observed that the above law position was substantially modified when Section 67 of the said Act was changed and amended vide the Finance Act, 2006 w.e.f. 18.06.2006 and simultaneously Service Tax (Determination of Value) Rules, 2006. The ld. adjudicating authority also stated that Circular dated 06.06.1997 was no longer in force from 18.04.2006 by virtue of Instruction No B1/4/2006 - TRU, dated 19.04.2006 wherein it was stated that all the circulars issued relating to value of taxable services are withdrawn. Accordingly, the Ld. adjudicating authority has considered the 100% (including the reimbursement cost) value as the taxable value. (iv) It is submitted that even after the introduction of Service Tax (Determination of Value) Rules, 2006 (hereinafter referred to as the 'Valuation Rules'), the reimbursement cost cannot form part of the taxable value. In this regard, the appellant submits that - Firstly, Section 67(1) of the said Act inter alia provides that service tax chargeable on any taxable service with reference to its value shall be the gross amount charged by the service provider for ....
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....lculated taking no. of Bills in each year as 502 with Rs. 500/- for labour charges"; that from the said language it is very much apparent that the demand has been quantified on presumptions and assumptions without any tangible evidence. In this regard, it is settled principle of law that findings based on presumptions and assumptions without any tangible evidence will be vitiated by an error of law. Reliance is placed upon the case of Oudh Sugar Mills Limited, reported 1962 (3) TMI 75 - SUPREME COURT. Hence, it is contended that the impugned order is liable to be set aside on this argument only. 6.1. Without prejudice to the above, the Ld. Counsel for the appellant have also tendered their submissions on the ground of limitation. They pointed out that in the instant case, the disputed demand pertains to the period from 2006-07 to 2009-10 and the impugned Show Cause Notice was issued on 26.05.2011 by way of invocation of extended period of limitation. It is submitted that the entire demand has been raised based on the figures disclosed by the appellant in the statutory returns and recorded in the Books of Accounts; that, the Department had not dug out any figure other than what h....
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....re not received by the assessee in relation to the service provided by them to their clients." We are surprised that after making such observations the authority has chosen to confirm the demand. In view of the above findings, the impugned Order-in-Appeal confirming the Order-in-Original does not have merit. We set aside the impugned order and allow the appeal with consequential relief." 9.2. Further, the above view was also taken by the Tribunal in the case of Kerala Publicity Bureau vs. Commissioner of Central Excise [2008 (9) S.T.R. 101 (Tri. - Bang.)], wherein the demand raised against the assessee was set aside by relying on the ratio of the decision in Euro RSCG Advertising Ltd. (supra). 9.3. Thus, by relying upon the decisions cited supra, we hold that the demand of Service Tax on the Target Incentives received by the appellant, as confirmed in the impugned order, is not sustainable. Accordingly, we set aside the same. 10. We also observe that Service Tax of Rs.6,11,489/- has been demanded from the appellant on account of freight brokerage received by them during the period from 2006-07 to 2009-10. The services rendered by the appellant included facilitation of expo....
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....tegory of 'Business Auxiliary Service', we observe that neither the Show Cause Notice nor the Order-in-Original has mentioned the specified sub-section of section 65(19) under which the service tax has been demanded. It is a settled position of law that when the Show Cause Notice does not specify under which clause of the definition of "business auxiliary service" the activity of the service provider falls, then demand is not sustainable. This view has been held by the Tribunal Hyderabad in the case of Syniverse Mobile Solutions Pvt Ltd vs. Commissioner of Cus, CE & S.T, Hyderabad - IV reported in 2023 (6) TMI 463 - CESTAT HYDERABAD, wherein it has been observed as under: - "11. Coming to the very first preliminary objection raised by the Appellant that the Show Cause Notice has failed to correctly specify the clause under which the Appellant services will fall, on perusal of the Show Cause Notice it is seen that the entire portion of Section 65(19) pertaining to Business Auxiliary Services has been extracted at Para 2 of the Show Cause Notice without any reference whatsoever as to under which clause of the Section 65(19) the services referred by the Appellant woul....
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....] In the recent decision of CESTAT, Delhi in the case of Balaji Enterprises Vs CCE and ST, Jaipur [2020(33) GSTL 97 (Tri-Del)] the Bench has considered even the arguments of the Department in respect of Collector Vs Pradyumna Steel Ltd., [1996 (18) ELT 441 (SC)] which is cited by the Learned AR in the present case and the Hon'ble Bench has held as under: 28. Likewise, the decision of the Supreme Court in Collector of Central Excise, Calcutta v. Pradyumna Steel Ltd. [1996 (82) E.L.T. 441 (S.C.)] would also not come to the aid of the Department. This decision holds that mere mention of a wrong provision of law, when power that has been exercised is available under a different provision, is by itself not sufficient to invalidate the exercise of that power. 29. The impugned order, therefore, can be set aside only on this ground as the show cause notice does not mention which service out of the seven services specified in Section 65(19) of the Act was undertaken by the Appellant. 9.1. Thus, by relying on the decision cited above, we hold that in the absence of a specific sub-section of Section 65(19) of the Finance Act, 1994 under which the service ta....
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....e. The agency commission received by the appellant is the actual consideration towards provision of the CHA service, for which the appellant has already paid Service Tax. Therefore, the issue involved in this case is related to the reimbursement of expenses which have been incurred by the appellant for its clients. 11.1. In this connection, we have gone through the clarification issued by the Board vide Service Tax Instruction F. No. B43/1/97 - TRU, dated 06.06.1997, whereby it has been clarified as under: - "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 lump sum 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%." [Emphasis supplied] 11.2. As p....
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....n such reimbursable expenses is not sustainable." [Emphasis supplied] 11.5. Therefore, in view of the findings in the foregoing paragraphs, we hold that the demand confirmed on this count is not sustainable. The same is thus set aside. 12. As regards the demand of Rs.1,18,621/- on 'labour charges', we find that the said demand pertains to labour charges bills raised on M/s. Flender Ltd., Kharagpur during the period from 2006-07 to 2009-10. The entire demand has been raised only on the basis of the assumption that the appellant had raised 502 bills every year and the labour charges raised on each bill were Rs. 500/-. However, apart from such assumptions, no verification has been conducted by the Revenue to ascertain as to whether any taxable service has actually been rendered by the appellant in this regard or not. 12.1. We take note of the fact that the appellant has quantified their Service Tax liability on the basis of actual invoices for the labour charges raised, which amounts to Rs.43,538/-, which the appellant stated to have already paid, along with interest of Rs. 22,901/- on 24.08.2011. 12.2. Thus, in the absence of any verification in respect of the actual n....