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2015 (4) TMI 577 - CESTAT MUMBAI

2015 (4) TMI 577 - CESTAT MUMBAI - 2015 (39) S.T.R. 616 (Tri. - Mumbai) - Clearing and forwarding (C&F) Agent service - 'freight rebate' and 'primary freight rebate' - Held that:- With respect to 'freight rebate' and 'primary freight rebate' received by the Respondent we find that the same is received due to Respondent's investment in 125 wagons and is clearly arising out of their arrangement with Indian Railways. In fact, Indian Railways has issued a circular to this effect entitling Respondent .....

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Ltd. or its customers, it cannot be linked with clearing and forwarding agent's service. Manner of routing the consideration cannot decide taxability of the transaction. Respondent has paid service tax on consideration received for providing clearing and forwarding agent's service under a separate contract with ACC Ltd or its client for this purpose. - Commissioner has rightly dropped the service tax demand on 'freight rebate' and 'primary freight rebate'.

Amount received as facility .....

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aking available the specified facilities or equipment to ACC Ltd. We have perused the scope of clearing and forwarding agent's services as clarified in the CBEC Circular and it clearly does not suggest that the tax is to be levied as C&F service for making available any facility but is to be levied only on providing of specified C&F services in which clearing and handling of goods are involved. - consideration received for facility charges is not liable to service tax as clearing and forwarding .....

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on Order-in-Appeal No. 32/STC/BR/08-09 dated 4.11.2008 passed by the Commissioner of Service Tax, Mumbai dropping the demand of ₹ 3,06,21,823/- and confirming the demand of ₹ 12,65,105/- with penalties against the Assessee. As such both the appeals are taken up together for consideration and disposal. 2. The brief facts of the case are as follows:- 2.1 The Assessee Bulk Cement Corporation (India) Ltd. (BCCL for short) was set up as a joint venture among (i) ACC Ltd., (ii) the Governm .....

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es- (a) The noticees are providing their special rail wagons for transport of the cement; (b) the noticee makes available special wagons for transportation in India Railways from M/s Associated Cement Companies Ltd, Wadi Plant located at Wadi (Karnataka) to Kalamboli (Maharashtra); (c) the noticee makes available its specialist equipment and arranges for unloading cement brought in on account of the client into silos; (d) the noticee will block silo space for storage of clients cement; (e) the n .....

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at site of client if any shortages due to railway wagons, tanker trucks and silos in time. Losses which will be incurred by client will be borne by the noticee. Client will not be responsible for damages or loss of goods in transit. 2.4 For the above clearing & forwarding operation the notice received remuneration which they split into heads like "Handling charges", 'freight rebate', 're-imbursement of primary freight, and 're-imbursement of secondary freight'. .....

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balance 22.5% directly to the noticees. They are not paying service tax on the income received as 'freight rebate'. The providing of wagons by the notices is a 'means of transport' and not for the business of transportation. (B) Handling charges: the noticee is receiving handling charges from their clients for stocking and dispatch of cement. These charges are received for providing handling, packing and dispatch of cement as per the schedule given by their clients. The current .....

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the payment of the freight amount of the entire rake to the Railways. The notice then recovers the freight amount from the other clients and reimburses 77.5% to M/s ACC Ltd. and retains 22.5% with themselves towards freight rebate. The noticee is not paying Service Tax on these charges. (D) Re-imbursement of secondary freight: For movement of cement by road from 'Kalamboli' to the site of the clients, M/s ACC Ltd. has entered into a contract with M/s Allsinghani Transport'. M/s ACC .....

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since the assessee provided the services of movement in specialized containers/wagons, unloading, stocking, and dispatch of the cement on behalf of their clients, the services provided by the noticees would therefore fall within the definition under Section 65(25) of the Act. As per Clearing & Forwarding operations agreements between the assessee and M/s ACC Ltd, the assessee is responsible for movements of cement in specialized containers/wagons, unloading, storage in silos, repacking into .....

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received part of the remuneratin as freight for movement of cement in specialized rail wagons from 'Wadi' to 'Kalamboli'. The assessee pays 77.5% of such remuneration to m/s ACC Ltd. as 'reimbursement of primary freight' and retains 22.5% with itself which is accounted in its books of accounts as freight rebate. The assesee also received additional remuneration (from its clients other than M/s ACC Ltd.) as 'road transportation charges' for movement of cement in s .....

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eceived from clients under the heads "primary" and "secondary" freight are reimbursements, is factually incorrect as the assessee has not spent any of these amounts on behalf of their clients. Therefore, recovering these amounts as reimbursements, without spending them on behalf of the clients, is incorrect. They have termed such remunerations as 'reimbursements' with the intention of suppressing the correct value of taxable service rendered in order to evade payment .....

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ing storage and handling of Bulk Cement (charges received are termed as 'Handling charges income'); are integral and inseparable activities of Clearing & Forwarding Agent's Service being provided by them. However, these were used as colourable devices, by them to suppress their Service Tax liability with an intention to avoid correct tax payment. 2.6 A show cause notice dated 13.10.2006 was issued to BCCL for the period April 20001 to March 2006 demanding service tax of ₹ 3 .....

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he Revenue & the Assessee are in appeal. Now we take up each of the appeals for consideration. Appeal No. ST/14/09 (Revenue appeal) 3. The Appeal has been filed by the Revenue against the OIO passed by the Commissioner, dropping service tax demand of ₹ 3,06,21,823 against Freight rebate, Primary & Secondary Freight reimbursement recovered by the Assessee. 4. The Ld. AR submits that the adjudicating authority has erred in dropping the demand in respect of Freight rebate, Primary &am .....

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e highlighted that while the Revenue is objecting to dropping of demand for all charges i.e. Freight rebate. Primary & Secondary Freight reimbursement charges, there is no appeal filed for dropping of demand for secondary freight reimbursement. Therefore, dispute only with respect to Freight Rebate and Primary Freight reimbursement must be considered. 5.1 With respect to Freight Rebate the Learned Counsel for the Respondent makes the following submissions: 5.2 The Respondent assessee had inv .....

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ax under the category C&F agent services under the show-cause notice dated 13.10.2006. 5.3 The manner in which this transaction is carried out form a fund flow perspective is that the Indian Railways would issue a rail receipt to ACC Ltd., indicating total freight payable amount; out of which ACC Ltd would pay 77.5% to Indian Railways and balance 22.5% to the Respondent. 5.4 The rail freight portion of 22.5% so received from ACC Ltd. is purely in the nature of rebate or subsidy received from .....

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ndent commences only after receiving the goods at the warehouse at Kalamboli. 5.5 The grounds of appeal raised by the Revenue does not bring out in any manner as to how the freight rebate received by the Respondent is connected with clearing and forwarding operations and in fact admits that the said amount is received as freight rebate. 5.6 With respect to Primary freight reimbursement the Learned Counsel for the Respondent makes the following submissions: 5.7 Primary freight reimbursement is si .....

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customer of ACC Ltd. would pay the entire freight amount to the Respondent and after retaining 22.5% for itself the Respondent would remit the balance 77.5% to ACC Ltd. which in turn would be remitted to Indian Railways by ACC Ltd. 5.8 Since the primary freight reimbursement is similar to the freight rebate received from Indian Railway, through ACC Ltd as submitted for Freight Rebate, primay freight reimbursement shall also be not leviable to service tax. Appel No. ST/25/09 (Assessee's appe .....

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frastructural facilities created by them and used by ACC Ltd. such as cranes, lifts, weighbridges etc. 7.1 He submits that, that the amount is charged for making the infrastructural facilities or equipment available for use by ACC Ltd and no service is rendered by them to ACC Ltd. 7.2 He further submits that, the confirmation of demand towards these recoveries under the clearing and forwarding service is patently erroneous for the reason that assessee-Appellant did not provide any service but on .....

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o be liable to service tax under C&F category. 7.4 He further submitted that demand could not have been raised invoking extended period of limitation, since assessement for the period 2001-02 and 2002-03 was already completed by the Department, evidence of which is enclosed with the Appeal memorandum. Further it can be seen from the letter dated 4.3.2004 issued to the Appellant that at the time of scrutiny it is stated that agreements with ACC Ltd were verified by the Department which specif .....

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of the above, assessee-Appellants cannot be said to have suppressed the facts since all the information was within the knowledge of the Department and therefore demand is liable to dropped on the ground of limitation also. 7.7 He further submitted that, penalty imposed is liable to be set aside since the issue involved is of interpretation of law. Thus, penalty under section 76 and section 78 of Finance Act, 1994 is liable to be set aside. Further, the impugned order levies penalty of ₹ 1 .....

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ed and the extended period of limitation is rightly invoked since the value of the said charges were not disclosed in the ST-3 returns. 9. Heard and carefully considered submissions made by both the sides. 10. We first deal with the Appeal filed by the Revenue. We find that after perusing the Appeal memorandum filed by the Revenue no grounds are taken challenging the Commissioner's view for secondary freight reimbursement, hence the order of the learned Commissioner dropping demand on Second .....

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nt for having provided any service to ACC Ltd or its customers and certainly not for providing any clearing and forwarding agent's service. As observed earlier when the amount became due to the Respondent due to their arrangement with Indian Railways, it cannot be said that it is towards clearing and forwarding agent for Indian Railways. Merely because the amount is routed or received through ACC Ltd. or its customers, it cannot be linked with clearing and forwarding agent's service. Man .....

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