AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2026 (4) TMI 65
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....that the appellant is registered service provider of clearing and forwarding agent services. During the course of audit of accounts of the assessee, it was noticed that the appellant was providing C & F Agent Service to various companies. On perusal of the appellant's C & F agreement with major customers, it was observed that the scope of service under the C & F agreement includes transportation of goods for delivery to the ultimate customers as per the instructions of the principals. It was observed that in addition to collecting C & F service charges from the Principals, the appellant also collected transport charges separately. However, for the purpose of calculation and payment of service tax under C & F service the appellant was not including the value of transportation charges. It was found that the appellant makes payment to the transporter and was not claiming such payment as reimbursement from the principal, and was showing it as expenses. The Department was of the opinion that in this case, for the transportation charges paid by the appellant, the service tax liability cannot be fixed on the principal for the reason that it is not the principal who is making payment to th....
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....equired for invoking the extended period of limitation has not been brought out, the invocation of extended period of limitation was incorrect in the present case. Reliance was placed on the decision in M/s. Adarsh Marketing v. CCE, Jaipur, 2017 (2) TMI 22-Cestat New Delhi, in support of the contention that extended period was not invokable. It was further submitted that the appeal may be allowed. 5. Ms. G. Krupa, Ld. Authorised Representative appearing for the respondent Ld. AR argues that on perusal of the suppliers services agreement between the appellant and M/s. Value India Pvt. Ltd. clause 9.2 which deals with 'primary and secondary transportation services', the appellant has been entrusted with the responsibility of the transportation. She draws attention to various clauses of the Agreements with various customers to contend that they list the nature of transportation services that the Appellant renders. She draws attention to the clauses indicating the compensation for transportation and warehousing services to be rendered by the appellant as well as the rates at which primary and secondary transportation are to be rendered. Attention is also drawn to the Appellant's agr....
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....r the transport charges collected by the appellant in addition to collecting C & F Charges from the Principals is liable for inclusion in the gross value for arriving at the service tax liability under clearing and forwarding Agent service? B) Whether the denial of cenvat credit availed by the appellant on outdoor catering services during the period September 2011 to March 2012 is correct? C) Whether the extended period of limitation was invokable in this case? 9. Before proceeding further, it is apposite to take note of the relevant statutory provisions providing the definition of clearing and forwarding agent as well as what constitutes the "taxable service". Section 65(25) stipulates that "clearing and forwarding agent" means any person who is engaged in providing any service, either directly or indirectly, connected with the clearing and forwarding operations in any manner to any other person and includes a consignment agent; Section 65(105)(j) provides that "taxable service" means any service provided or to be provided to any person, by a clearing and forwarding agent in relation to clearing and forwarding operations, in any manner; 10....
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....uld also be apposite to notice the decision of the Hon'ble Apex Court in Coal Handlers Pvt Ltd v. CCE, Range Kolkata-I, 2015 (38) STR 897 (SC), wherein the aforesaid definition of Clearing and Forwarding Agent as provided in Section 65(25) was considered and noticing the definition of forwarding agent in legal parlance it was stated as to what would constitute clearing and forwarding operations. The relevant portions are as under: "10. It would be relevant to point out the definition of 'forwarding agent', as known in legal parlance, from Black's Law Dictionary (Seventh Edition), which is as under : "forwarding agent. 1. A person or company whose business is to receive and ship goods for others - Also termed freight-forwarder. 2. A freight-forwarder who assembles less-than-carload shipments 'small shipments' into carload shipments, thus taking advantage of lower freight rates." The Penguin Business Dictionary defines this expression in the following words : "Forwarding agent. A General Agent who specializes in moving goods from a factory or port of entry to their proper destination. Such an agent normally owns the transport necessary for....
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....r of the transit. 443. Rights and liabilities of forwarding agents. - The rights and liabilities of a forwarding agent are governed by the general principles of the law of agency : and so he is entitled to be indemnified against all expenses incurred on behalf of his principal and to be paid his proper charges for his services. He is liable for failure to make proper arrangements for the carriage and for ancillary matters which he has undertaken, such as Customs clearance. He is not liable for the failings of persons with whom he makes contracts on behalf of his principal, unless he know of those failings and ought to have taken action either to remedy them or at least to inform his principal so that damage might be avoided or mitigated: thus he is under no duty to supervise the actions of carriers whom he reasonably and properly expects to perform their normal obligations competently. In ordinary transactions a forwarding agent is not liable for failing to insure the goods, in the absence of instructions from his customer to do so: but he may, in certain circumstances, be liable for not consulting his customer and advising him as to the proper transport and insur....
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....(25) as well as the "taxable service" as per Section 65 (105) (j) is noted. Thereafter the term "consideration" as provided in clauses (a) of the Explanation to Section 67 is extracted along with clause (c) of the explanation ibid defining "gross amount charged" and then it is alleged that from the above, it appears that any other amount collected under the head "Transportation charges" is liable for inclusion in the gross value for arriving at the service tax liability under Clearing and Forwarding Service. The service tax payable is thereafter tabulated in para 2.2. 15. We also notice that in the impugned order the Adjudicator has framed the issue to be decided as whether the Appellant is contractually obligated to undertake transport of goods as part of the 'C & F Agency service", thereby the transportation charges are to be part of the gross value charged for the 'C & F Agency services" or they act as a pure agent and the transportation charges incurred on behalf of the principal is reimbursed to appellant and thereby the transportation charges are not includible in the gross value charges for C & F Services. Thereafter, in para 8, the Adjudicator goes on to hold that there ....
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....pal, are at all times with the Principal. (Eg:- clause 3 of agreement with SKF). Clause 5 (b) stipulating the scope of operations state that the appellant shall be responsible for liasoning with customers and transporters. Clause 10.5 of the agreement with SKF requires the appellant to ensure that the relevant transport receipt in respect of the goods being transported bears the name of SKF as the consignor of the goods and the Appellant also has to collect the proof of delivery from the Transporter. Clause 19 stipulates that the SKF shall be responsible for insuring the goods against all risks at all times including while the goods are in transit. Clause 20 that details the terms of payment under clause 20.1 stipulates the consideration for services as more particularly specified and enumerated in Annexure B and clause 20.2 states that SKF shall reimburse such expenses after verification incurred by the appellant on submission of the actual bills/statements with supporting vouchers by the appellant. Annexure B does not indicate Transportation charges as part of the consideration in the schedule of charges and specifically states that consideration does not include reimbursable exp....
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....a C & F agent and arranging for transportation of the Principal's goods on behalf of the Principal, is therefore indemnified against such transportation expenses incurred on behalf of the Principal. The Appellant is not liable to pay the transportation charges of the carriers whom the Appellant engages to transport the goods of the Principal. The specimen evidences adduced by the Appellant at Annexure 18 of the Appeal paper book and addressed to the Revenue, showing the fact of payment of service tax by the consignors also remain uncontroverted. It is also pertinent that admittedly, for the services of the Appellant as a C & F agent, it is conceded in the SCN, as well as by the Adjudicator, that such service charges are separately charged and collected and there is no dispute that the Appellant is not paying the service tax thereon. 17. That apart, we also notice that the SCN has merely invoked the definition of consideration and gross amount charged under the explanation to section 67 to include the Transportation Charges in the taxable value. 18. At this juncture, it is apposite to refer to Section 67 of the Act, which is reproduced as under: "67. Valuation of taxa....
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....Service) Rules, 2006, stipulates as under: "5. Inclusion in or exclusion from value of certain expenditure or costs. - (1) Where any expenditure or costs are incurred by the service provider in the course of providing taxable service, all such expenditure or costs shall be treated as consideration for the taxable service provided or to be provided and shall be included in the value for the purpose of charging service tax on the said service. (2) Subject to the provisions of sub-rule (1), the expenditure or costs incurred by the service provider as a pure agent of the recipient of service, shall be excluded from the value of the taxable service if all the following conditions are satisfied, namely :- (i) the service provider acts as a pure agent of the recipient of service when he makes payment to third party for the goods or services procured; (ii) the recipient of service receives and uses the goods or services so procured by the service provider in his capacity as pure agent of the recipient of service; (iii) the recipient of service is liable to make payment to the third party; (iv) the recipient of service authorises the ser....
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....ore, the finding of the Adjudicator that Rule 5(1) has no application and yet the amounts can still be added to the value of C & F services rendered by the appellant to be made exigible to service tax is misconceived. 22. Be that as it may, Rule 5(1) ibid, even if it had been invoked, has since been found to be ultravires Section 67. We find that the issue of levy of service tax on expenditure or costs that are incurred by the Service Provider in the course of providing taxable service on behalf of the customers and which are reimbursed by the customers to the Service Provider, is no more res-integra in view of the decision of the Honourable Supreme Court in the case of UOI v Intercontinental Consultants and Technocrats Pvt Ltd, 2018 (10) GSTL 401 (SC) which has considered the issue of liability to pay service tax on such expenses received by the service provider, apart from the consideration received for rendering the services, on which the service provider has discharged the liability to pay service tax. The Honourable Supreme Court affirmed the decision of the Delhi High Court in Intercontinental Consultants & Technocrats Pvt Ltd v UOI, 2013 (29) STR 9 (Del), wherein Rule 5(1....
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....on 67 (unamended, i.e., prior to May 1, 2006) or after its amendment, with effect from, May 1, 2006. Once this interpretation is to be given to Section 67, it hardly needs to be emphasised that Rule 5 of the Rules went much beyond the mandate of Section 67. We, therefore, find that High Court was right in interpreting Sections 66 and 67 to say that in the valuation of taxable service, the value of taxable service shall be the gross amount charged by the service provider 'for such service' and the valuation of tax service cannot be anything more or less than the consideration paid as quid pro qua for rendering such a service. 25. This position did not change even in the amended Section 67 which was inserted on May 1, 2006. Sub-section (4) of Section 67 empowers the rule making authority to lay down the manner in which value of taxable service is to be determined. However, Section 67(4) is expressly made subject to the provisions of sub-section (1). Mandate of sub-section (1) of Section 67 is manifest, as noted above, viz., the service tax is to be paid only on the services actually provided by the service provider. 26. It is trite that rules cannot go beyond the st....
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....tatutory notification, may physically consists of words printed on papers. However, conceptually it is a great deal more than an ordinary prose. There is a special peculiarity in the mode of verbal communication by a legislation. A legislation is not just a series of statements, such as one finds in a work of fiction/non-fiction or even in a judgment of a court of law. There is a technique required to draft a legislation as well as to understand a legislation. Former technique is known as legislative drafting and latter one is to be found in the various principles of "interpretation of statutes". Vis-a-vis ordinary prose, a legislation differs in its provenance, layout and features as also in the implication as to its meaning that arise by presumptions as to the intent of the maker thereof. 28. Of the various rules guiding how a legislation has to be interpreted, one established rule is that unless a contrary intention appears, a legislation is presumed not to be intended to have a retrospective operation. The idea behind the rule is that a current law should govern current activities. Law passed today cannot apply to the events of the past. If we do something today, we do....
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....taxable service shall only be the gross amount charged by the service provider 'for such service' and the valuation of tax service cannot be anything more or less than the consideration paid as quid pro quo for rendering such a service. Concededly, the period involved in the present Appeal is from 2008-09 to 2011-12, and hence the aforesaid decision would squarely apply, rendering the entire demand of the alleged service tax short paid under C & F services, as confirmed in the impugned order, unsustainable, and liable to be set aside. Resultantly, we are also of the opinion that the consequential demand of interest and penalties imposed in this regard are also unsustainable and liable to be set aside. We also find that the reliance placed by the Appellant on the decision of a coordinate bench of this Tribunal in Synergy Baxi Logistics Pvt. Ltd. Vs. CCE, Jaipur, 2019 (11) TMI 1166 - CESTAT, New Delhi appropriate as the Tribunal has in the said decision, noticed the aforecited Trade Notice issued by Revenue and held that the activity of C & F agent is primarily responsible for delivery and forwarding and not the transport activities as such. The Tribunal had also observed that in has....