TMI Blog2015 (12) TMI 1105X X X X Extracts X X X X X X X X Extracts X X X X ..... classification. Thus it is a clear case of courier service provided by the appellants to DHLI. It has been admitted that the network fee is only in respect of the Billed shipments as a compensation for funding the network costs. In fact the appellants receive services of the DHLI only for billed shipments. For Unbilled shipments no services are provided by DHLI to appellants. In respect of the Unbilled shipments it is the appellants who provide services to the DHLI. However since a single consolidated account is maintained the amounts payable by appellant to DHLI and those payable by DHLI to appellant get adjusted against each other. While doing so they are maintaining a consolidated account of amounts to be paid and only net transaction are made on monthly basis. From above it is apparent that as a result of the setting off of amounts payable against receivables there has been a undervaluation of not only assessable value in respect of courier service provided by the appellants but also of the courier service received by the appellants. Appellants are recouping their compensation i.e. costs as well as an arm' length margin (costs plus 10%), from the billed shipments contrac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rovided to arrive at assessable value. There is no case for invoking Section 80. The demand in respect of services received by appellant and where service tax has been demanded on reverse charge basis is set aside for the period beyond the normal period of limitation. - For the demand in respect of services provided by appellant to DHLI in respect of Unbilled consignments the benefit of calculation of tax on cum duty basis is allowed. - The penalty under Section 78 is reduced correspondingly to the revised amount of demand worked out after allowing cum duty benefit and limitation worked out - Penalty under Section 77 is upheld - Petition disposed of. - Appeal No. ST/MA(Ors)/97877 & ST/CO/91100/14, Appeal No. ST/85770/14 - - - Dated:- 30-10-2015 - M V Ravindran, Member (J) And Raju, Member (T) For the Appellants : Shri N Venkatraman, Sr Adv. And Shri Anupam Dighe, Adv For the Respondent : Shri V K Singh, Spl Counsel ORDER Per Raju 1. DHL group has an integrated global network which consists of DHL International Gmbh, i.e. the network owner, DHL aviation companies, DHL hub companies (sorting centers where shipments from different countries are received, so ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red by the Company and of the remittances made or tobe made to DHL. g) To allow DHL (at its own cost) the right of audit of the Company's books of account to determine the accuracy and proper categorization of the Local Costs. 2.2 In the performance of its obligations contained in clase 2.1 hereof the Company further agrees and undertakes that it shall: a) maintain the highest operational and ethical standards in the running of its business in the Territory; b) comply with all local national and international laws, ordinances, rules and regulations which are enforceable against the company in the territory; c) provide efficient courteous and highly customer information and service; d) utilize identifying characteristics of the Network in substantially the same combination arrangement and manner as developed and displayed by the network so that the company's business will be readily recognizable by customers or potential customers as having access to the network 3. DHL OBLIGATIONS 3.1 In consideration of the performances by the company of the obligations set out in clause 2 hereof, DHL agrees and undertakes to allow the company to have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l currency amount within 30 days of the invoice date or such longer period allowed by DHL. Any invoice rendered by DHL after the 25 th day of the month as aforesaid shall be deemed to have been delivered on the 25 th day of the month following the actual date of delivery. 4.5 DHL agrees that throughout the duration of this agreement consolidated monthly total payables and receivables viz. network fees, international costs paid on behalf of DHL by the company, EXB charges billed and collected elsewhere, and EXB charges billed and collected locally shall be net off thereby permitting a net monthly remittance. 1.3 Thus it is seen that in terms of the contract the job of the appellant was to perform all functions within the territory of India. For all consignments coming into the territory of India from abroad it was responsible for collection of the same from DHLI office and delivery to consignees in terms of clause 2.1(b) of the agreement. In case of out of India bound consignments from the consignors, do the necessary documentation and deliver the same to DHLI in India for transportation form the territory to destinations abroad through the Network in terms of clause 2.1 (c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appellants pay Network Fee to fund the cost of network, at avail access to global DHL Network. Global DHL network is accessed by appellant to perform delivery or procurement of billed consignments, outside India. Again it is seen that while obligation of DHLI was only with regards to the consignments collected by the appellants in India, the obligation of the Appellant was with respect to not only consignments collected by it in India but also in respect of consignments booked by other franchisee's DHLI located abroad. 1.6 Billed vs Unbilled transactions: The cases where the appellants bill the retail clients, and receive money, are termed as billed transactions. In these cases the retail clients pay the appellants directly for the service of delivering or collecting consignments. These transactions were termed as Billed transactions by the appellants. The 2 nd category are those cases where the network entities, i.e. DHLI Franchisees located outside India, are engaged by the retail clients for the service. In those cases the appellants undertake the activity of either collecting the consignments from the consignor and delivering the same to the DHLI hub in India, or of coll ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onsignments booked by the network entities located abroad (unbilled consignments). In order to arrive at the compensation being received by the appellant's in respect of the courier services being provided by appellants to DHL International, the total compensation received form DHL International had to be apportioned between the billed and unbilled consignments. To arrive at the compensation received for the courier services given to DHL International in respect of the unbilled consignments the show cause notice suggested apportionment on the basis of the weight of the consignment. In other words, it was proposed to apportion the total amount of cost plus 10% consideration received by the appellant in proportion of the weight of the billed and unbilled consignments. Thus if the total amount received by the appellants was rupees hundred and they had handled 10 kg of billed consignments and 15 kg of unbilled consignments then the total amount received by them was apportioned in the issue of 10:15. In other words it was proposed that in such a scenario the compensation received for billed consignments was ₹ 40 and for unbilled consignments it was 70. For this calculation the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... DHLI and thus should not be deducted from the network fee for computation of assessable value. On that basis it was alleged that the appellants have undervalued the assessable value by wrongly claiming reduction of investment rebate, custom clearance charges and finance charges from the network fee. 1.10 The show cause notice was partially confirmed in the adjudication proceedings. While doing so the Commissioner rejected the contention that the services provided by the appellants to DHL International are in the nature of business support service and not courier service. On the basis of date of bifurcations of the outbound consignments provided by the appellants, the demand in respect of billed outbound consignments was dropped. 1.11 It was held in the order that W.E.F. 16.05.2008, when the definition of courier service was amended by replacing the words service provided to customers' by the words service provided to any person', the service provided by the appellant to DHL International would be correctly classifiable as courier service. The order referred to the circular issued from F. No. 341/43/96-TRU dated 31 October 1996, where it has been clarified that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der of Commissioner. They challenged it on following grounds i) The classification of service provided to DHLI by the appellant, in respect of unbilled consignments, is not courier service but Business Support Service. ii) The network agreement is not an agreement for provision of service but merely on agreement to ascertain network fee. iii) No separate consideration is paid by DHLI to appellants for the services given by the appellants to DHLI in respect of unbilled consignments. Therefore there is no liability to service tax. iv) DHLI is merely funding the operation and since there is no consideration for the service provided, therefore there is no service provided. v) There is no law to determine the Assessable Value in the circumstances and therefore there no tax can be collected. vi) They have paid service tax on entire consideration received from the retail client and on entire network fee paid to DHLI therefore there cannot be any more liability. vii) The service provided by them to DHLI is an export of service. The cost plus consideration adjusted against the Network Fee results in savings of foreign exchange for this purpose. viii) N ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ia and delivery to DHLI premises in India In the instant case DHLI are the service receivers and they have hired the appellants for the job. The entire operation takes place within India. The support service for business are defined as follows [(104c) support services of business or commerce means services provided in relation to business or commerce and includes evaluation of prospective customers, telemarketing, processing of purchase orders and fulfilment services, information and tracking of delivery schedules, managing distribution and logistics, customer relationship management services, accounting and processing of transactions, operational or administrative assistance in any manner, formulation of customer service and pricing policies, infrastructural support services and other transaction processing. Explanation . -For the purposes of this clause, the expression infrastructural support services includes providing office along with office utilities, lounge, reception with competent personnel to handle messages, secretarial services, internet and telecom facilities, pantry and security; The nature of services in BSS is totally different from the servi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsidered as a consideration for any service provided. He argued that the Customs clearance costs and finance expenses are reimbursable local costs as per agreement. He argued that appellant do not undertake a separate activity for separate consideration and therefore are not liable to tax. He further argued that valuation rules do not prescribe a mechanism to determine the value of service where the consideration is unascertainable. He argued that the order is not a reasoned and speaking order. He further argued that the cost plus mark-up retained by the appellant is not consideration for undertaking shipments under the network contracts. He argued that in order delivery service tax bill has to be rendition of a service and receipt of consideration for the same. He argued that the network agreement does not provide for a separate consideration and the notice wrongly seeks to allocate costs as consideration. He further argued that as a result of this the local costs will be taxed twice. He argued that the value of the billed consignments, on which tax has been paid, already include the local costs incurred by the appellants. He argued that it is a case like that of warranty provider ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me activity is done by appellants. When any consignment is either to be collected or to be delivered in India the same activity is done by appellants. When any consignment is either to be collected or to be delivered outside India the same activity is done by DHLI. The transfer of goods from India to outside India and vice versa is also done by DHLI. A Perusal of the clause 2 and 3 of the agreement shows (reproduced in para 1.1 above) the obligations of each of the parties. DHLI has similar agreements with franchisees outside India. DHLI pays consideration to appellants in terms of clause 4 of the agreement (reproduced in para 1.1 above). The agreement stipulates that DHL will pay the company for all its costs and over and above 10% extra. The international costs will be for the sole account of DHL and shall not be included in the local costs. 2.2.2 The appellant, when it receives the payment from retail client, terms it as a billed consignment, whereas when the appellants undertakes the activity of picking up or delivering for DHLI, they term it as an unbilled transaction. The actual amount payable by DHLI to the appellants is the costs plus 10% mark-up calculated as per memora ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... From the discussion it is clear that there are 4 activities being undertaken by the Appellant. These categories are Billed (Bills raised by Appellant) Unbilled (Bills not raised by Appellant but by DHLI or it's franchisees abroad) Export of consignments Collection of consignments from client in India and delivery to DHLI in India A C Import of consignments Delivery of consignments to consignees in India after collection of the same from DHLI in India B D A. Collection of Consignments in India for delivery to consignee in any foreign country, but delivered to DHLI office in India for onward movement using DHLI network, where payment received by appellant. B Consignments coming from any foreign country for delivery to consignee in India, collected and transported to India using DHLI network, where payment received by appellant. C Collection of consignments from consignors in India and delivery of consignments to DHLI within India for onward deliv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... DHLI on monthly basis. Accordingly, without prejudice to our arguments that there is no separate consideration, it is submitted that through the appellant is not receiving any foreign exchange, the balancing payment in order to prevent outflow of foreign exchange, can be considered as receipt of foreign exchange for the purpose of compliance with the export rules. In other words they have claimed that they have adjusted the not only the payments to be made by DHLI for billed and unbilled transactions against the Network fee, but also cost and incentives. As a result they had to pay Net amount as Network fee. In para 1.3 of the appeal the appellants have asserted that '1.3 In this regard, it is submitted that the Network Agreement only provides a formula to compute the network fee payable to DHLI for provision of access to DHL network. The retention of cost plus mark up from the local revenue of the appellant cannot be construed as consideration for service rendered by appellant to DHLI.' According to them the value of service provided by DHLI in respect of billed consignments, which they have chosen to call as network fee and on which they are discharging tax, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etwork agreement). 2.4 DHL India is also responsible for delivering shipments billed by DHL entities outside India, to consignees located in India (Unbilled shipments). 2.5 DHL India discharges service tax on gross revenue earned from its customers. DHL India also discharges service tax under reverse charge on the Network fees paid to DHLI. It has been admitted that the network fee is only in respect of the Billed shipments as a compensation for funding the network costs. In fact the appellants receive services of the DHLI only for billed shipments. For Unbilled shipments no services are provided by DHLI to appellants. In respect of the Unbilled shipments it is the appellants who provide services to the DHLI. However since a single consolidated account is maintained the amounts payable by appellant to DHLI and those payable by DHLI to appellant get adjusted against each other. While doing so they are maintaining a consolidated account of amounts to be paid and only net transaction are made on monthly basis. This is also apparent from the analysis, in para 2.4 to 2.7 below, of the example given by them in their own appeal. 2.3.5 The Network fee is payable by the app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the appellants are maintaining a consolidated account, where all payables are adjusted against receivable, they are they cannot alter the assessable value for the purpose of service tax. Moreover clause 4 the network agreement does not talk about adjusting such incentives against the network fee. 2.3.7 In terms of the Network agreement the only deduction allowed from the revenue generated by using the Network is the local costs (trading costs in the above format) and a 10% mark-up on the same. In the instant case the investment rebate and the Customs clearance costs/Finance cost are not part of the local costs therefore the mark-up of 10% is not being given to the appellants. Had it been the local costs the appellants would have got the 10% mark-up on the same. This is what the Schedule A to the Network agreement also confirms. It clarifies that 'D) Reimbursible Costs shall mean the following costs, which will be reimbursed without any uplift i) Interest expenses (income) excluding Hire Purchase Interests ii) Customs clearance activities' The local costs are the costs of the appellant, incurred in providing courier service, which are returned with a ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve claimed that the Rule 5 of the Valuation Rules provide for the reimbursement of expenditure or costs incurred by the service provider in the course of the provision of service to the service recipient. It has been claimed that there is no provision to deal with the costs incurred by the service recipient could be added. They have claimed that rule 7 of the Valuation rules provides that the value of taxable service provided by a service provider outside India to a service recipient in India will be actual consideration charged for it. Their argument seems to be that irrespective of the assessable value determined under the law the actual amount remitted is the Assessable Value. This is a misplaced notion. The law is very clear in this regard. The Value for the purpose of Service tax is to be thegross amount charged for the service. SO if one receives a service from a person and also provides a service to the same person, the service tax is payable on both the transactions independently. They cannot set off value of service provided against value of service availed to arrive at assessable value. In this case it appears that they have adjusted the amount payable for services receiv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ine how the statement would look like for each of the transactions separately. Considering equal local expense (Rs 75 each) in all four categories and equal revenue (Rs 500 each) for both billed categories, there being no revenue for unbilled categories. Dr Cr Local Expenses Cat A 75 Cat B 75 Cat C 75 Cat D 75 Total 300 NA Revenue billed to local customers Cat A 500 Cat B 500 Cat C 0 Cat D 0 Total 1000 Service tax paid Mark up Cat A 7.5 Cat B 7.5 Cat C 7.5 Cat D 7.5 Total 30 Network fee payable to DHLI (Revenue billed less local cost plus market price ₹ 1000 less ₹ 330) 670 Service tax paid under reverse charge 2.6 The situation becomes clearer when each situation is examined separately in isolation. 2.6.1 CATEGORY A Ser ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsignments abroad. It carries it to DHLI office in India and delivers the same to the appellants in India. The entire courier charges is received by the appellant form the client. The entire money received from the client is for the courier services of carrying the consignment from the consignor abroad to the consignee in India, and that becomes the Assessable Value for the purpose of Service Tax at the hands of the franchisee. The appellant receives the money from the client and pays the DHLI all of it, except the 110% of the appellant's costs, as network fee. The appellant pay the service tax on the entire amount received from the retail client. In accounting terms CATEGORY B will be. Dr Cr Local Expenses 75 NA Revenue billed to local customers 500 Assessable value Mark up 7.5 Network fee payable to DHLI (Revenue billed less local cost plus mark up ie ₹ 500 less ₹ 82.5) 417.5 A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... expenditure exceeds revenue) 0 Revenue received by appellant from the customer i.e. DHLI 82.5 Value for the purpose of Service Tax 26.4 CATEGORY D If only activity listed in column (D) is carried out and no other activities are happening. It can be seen that the DHLI organizes to receive consignments abroad and delivers the same to the appellant at the DHLI office in India. The appellant carries it and delivers the same to consignee in India. The entire courier charges, for carrying the consignment, from the consignor abroad to the consignee in India, are received from the client by DHLI (or its franchisees abroad). The DHLI engages the appellant for picking up the consignment from the DHLI office in India s and delivering the same to the consignor's premise. The 110% of the appellant's costs, is paid by ZDHL to the appellant as consideration for this service as per the agreement. The money received by the appellant for picking up the consignment from the DHLI office in India s and delivering the same to the consignor's premise, i.e. 110% of the appellant's costs, beco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant. The service tax in the consolidated statement is paid only on ₹ 670/- and in the detailed elaborate statement it required to be paid on ₹ 835/-. The difference of ₹ 175/- between he actual Network Fee of ₹ 835/- and the adjusted Network Fee of ₹ 670/- is on account of adjustment of the cost plus consideration paid to the appellants by DHLI. It has been paid only on amount appearing after adjustment. Not only they have not paid service tax on the transactions of Category C and D but also on Network fee payable. They have in their appeal also admitted to this adjustment and netting of transaction as can be seen in para 2.8 below. 2.8 They have admitted that they are setting of the payables against receivables. They have claimed that they have adjusted the payments to be made by DHLI for unbilled transactions against the Network fee. The fact that the Network fee is solely for the billed operations has also been admitted by them. They have themselves described the arrangements as follows 2 Network Agreement 2.1 DHL India has entered into a contract (Network Agreement') with DHLI on principal to principal basis 2.2 As per the Netw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ideration for the services provided by the appellant are adjusted against the money payable to DHLI for the services received in respect of billed shipments. 2.10 The appellants in para 4.1 of the written submissions filed in tribunal, have given following illustration as an example of cases where the domestic revenue is insufficient to cover the consideration to be paid to appellants. Illustration 2 is the scenario when the revenue from the billed consignment is less than the 110% of the local expenses. Dr Cr Local Expenses (including expenses for billed and unbilled shipments, such as vehicle costs, IT, Manpower etc) 1100 NA Revenue billed to local customers 1000 Service Tax paid Mark up @ 10% of the expenses 110 Amount to be paid by DHLI (where cost plus mark-up cannot be recovered from revenue earned in India 210 Network fee (since the cost plus mark up is 1210,the revenue billed is in excess of the cost. Hence, no networ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s for the Unbilled consignments'. For the billed consignments the consideration is directly received by the appellants from the retail clients. 2.10.2 Thus from the above analysis it emerges that the appellants are getting a consideration from the DHLI on the costs plus basis. The figures for the Network fee are arrived on net basis after deducting the appellant's consideration, not only of billed consignments in respect of which they receive some services from DHLI, but also of Unbilled consignments in respect of which no services are provided by DHLI to appellants and other costs. Thus it is held that adjustment of the receivables for service provided against the amounts payable for the service received, or incentives and costs, is incorrect. The service tax in each case has to be paid on the Gross value of each service separately. 2.11 It was also argued that the Service tax law at the material time did not provide a mechanism to determine value of services in the instant case. They argued that the consideration received by them cannot be bifurcated in respect of the Billed and Unbilled Consignments. The appellants argued that at the material time there was no pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ore the assessable value cannot be ascertained under section 67 of the Act and therefore reliance has to be placed on the rules. The position of the appellant is that there are no rules to cover the situation and therefore assessable value cannot be determined and therefore no duty can be charged. The impugned order however relies on the Section 67 to arrive at the Assessable Value. An examination of the Section 67 and the Rules as they existed at the material time shows that, in case the provision of service is for consideration in Money, the Assessable Value is the gross amount charged for such service. Clause (i) of subsection 1 of section 67 specifically provides that in a case where the provision of service is for a consideration in money, be the gross amount charged by the service provider for such service provided or to be provided by him'. In the instant case the entire consideration is in money terms. Thus value has to be arrived at in terms of Clause (i) of subsection 1 of section 67. The notice as well commissioner has chosen to provide deduction of the duty paid value from the gross amount charged, which is clearly determined as the cost plus compensation received ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assess the tax in accordance with the provisions of the Act or rules made thereunder. They have not paid tax on the Unbilled transactions in respect of provision of service to the DHLI. Thus it is possible to determine the assessable value on the best judgement method by virtue of clause (b) of the section 72 of the Act. The appellants have clearly adjusted the payables against receivables in the figures given in the return in respect of services. The law requires them to declare the Gross amount charged for services. They have instead declared the net amount in the returns. They have adjusted the amount payable for the services received against the amount receivable for services provided to arrive at assessable value. Not only that they have adjusted even costs and incentives against these values. Thus it is clear that they have failed to assess the tax in accordance with the provisions of the Act or rules made thereunder. 2.11.3 An argument has been made that to adopt the best judgement method the material on record can only be relied. For this the appellant have relied on the following decisions i) CIT vs Laxminarain Badridas 1979 (005) ITR 0170 PC ii) State of Oris ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Indian organisation in foreign exchange for the entire activity being undertaken in India. The departmental officers seem to have taken a view in such cases that since the activities pertaining to provision of service are undertaken in India, it cannot be said that the use of the service has been outside India. 2. The matter has been examined. Sub-rule (1) of rule 3 of the Export of Services Rule, 2005 categorizes the services into three categories: (i) Category (I) [Rule 3(1)(i)] : For services (such as Architect service, General Insurance service, Construction service, Site Preparation service) that have some nexus with immovable property, it is provided that the provision of such service would be 'export' if they are provided in relation to an immovable property situated outside India. (ii) Category (II) [Rule 3(1)(ii)] : For services (such as Rent-a-Cab operator, Market Research Agency service, Survey and Exploration of Minerals service, Convention service, Security Agency service, Storage and Warehousing service) where the place of performance of service can be established, it is provided that provision of such services would be 'export' if the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ening paragraph, what is accruing outside India is the benefit in terms of promotion of business of a foreign company. Similar would be the treatment for other Category III [Rule 3(1)(iii)] services as well. It is seen that the service provide by the appellants is courier service specified under clause 105(f) of section 65 of the Act. This falls under the category under clause (ii) of sub-rule (1) of rule 3 of the Export of Services Rules, 2005. In respect of this category the place of performance is critical in determining the factum of export. In the instant case the entire courier service provide by appellants to DHLI was performed in India. The documents to be couriered are delivered in India and the same are received in India. It is immaterial if the payment of the same is received in Foreign Currency. 2.12.1 The appellants have also relied on the decision of Tribunal in the case of Paul Merchant vs CCE Chandigarh - 2012-TIOL-1877 CESTAT DEL. In the said case the service under consideration was Business Auxiliary Service (BAS). BAS falls under clause (iii) of Sub-rule (1) of rule 3 of the Export of Services Rule, 2005 where the location of service receiver or provider ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ps. - As the hubs, DHL Ops carried out the activities of sorting the shipments and ultimately delivering the same to final destinations. The network fee is paid to DHL Ops for carrying the above activity of delivering the shipments to the final destination. The said activity undertaken by DHL Ops to facilitate the business undertaken by DHL India. In our view the service provided by DHL Ops would qualify as service provided by co loader.' Thus clearly implying that the Network fee is a fee of co-loader. They have not mentioned that the network fee is not fee for the services of DHLI but the calculation of net amount payable/receivable from DHLI after adjusting the not only service charges but also costs. They have not informed that the amounts receivable for service provided are getting adjusted for the amounts payable for services availed for arriving at network fee. Co-loaders is paid form out of revenue collected by service provider. Since service provider pays tax on entire revenue collected, the co-loader was not levied service tax since his revenue is part of tax paid revenue. However the operations of DHLI are not of co-loader in respect of Unbilled consign ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ented the Network Fee as a co-loading fee. 2.13.3 The appellants have relied on following decisions in support of their claim on limitation. I) SDL Auto Pvt Ltd vs CCE Delhi 2013 (294) ELT 577 where it has been held that when audit is conducted the audit officers are required to examine every issue in relation to audit period. The audit conducted in the instant case was for the period 2002-03 to 2006-07. This is beyond the audit period. Furthermore the explanation given by the appellants in respect of billed export consignments. In respect of these consignments the DHLI qualify as co-loader. They have not disclosed that Network fee is not for Co-loading operations, but the net amount received after adjusting co-loading fee with the amounts receivable from DHLI on account of services provided for Unbilled consignments. The assessable values in the service tax returns have been declared after netting payables against receivables as against the requirement of declaring the Gross amounts charged. II) Indian Hume Pipe Co ltd. vs. CCE 2004 (163) ELT 273 where tribunal observed sufficient documents have been given to indicate the fact that no tax on freight is being paid. In t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i) Hindustan Steel vs State of Orissa 1978 (2) ELT J159 (SC) and Akbar Badrudin vs CC 1990 (47) ELT 161 (SC) . They argued that penalty can be imposed only in cases of deliberate acts. They argued that they were not receiving any consideration and therefore the question of paying service tax does not arise. ii) They argued that it was a question of interpretation and therefore penalty cannot be imposed. They relied on the decision of Tribunal in case of Zee Telefilms vs CCE 2004 (166) ELT 34 wherein the Tribunal held if the dispute related to interpretation of statute and appellants had obtained service tax registration and filed returns, penalty cannot be impose. The Section 67 reads as under SECTION [67. Valuation of taxable services for charging service tax.- (1) Subject to the provisions of this Chapter, where service tax is chargeable on any taxable service with reference to its value, then such value shall - (i) in a case where the provision of service is for a consideration in money, be the gross amount charged by the service provider for such service provided or to be provided by him; (ii) in a case where the provision of service is for a considera ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... following decisions in this regard. i) Aurobindo Pharma v CCE 2007 (216) ELT 389 ii) Sundaram Fastners vs CCE 2009 (237) ELT 55 iii) PR rolling vs CCE 2010 (249) ELT 232 (maintained by Hon SC) There is a certain part of demand in which pertains to services provided by DHLI to appellants in respect of Billed transactions. The service tax in that case was paid by appellants on reverse charge basis. The appellants themselves were entitled to get the benefit of CENVAT credit for such duty paid, since these services were received by appellants for provision for services provided to retail customers in respect of billed transactions. Therefore the liability created under this notice on account of the services received, on reverse charge basis, would be revenue neutral. This argument will, however, not apply to the services provided by the appellants to the DHLI in respect of unbilled shipments. 2.15 The appellants also claimed that penalty under Section 77 of the Act cannot be imposed on the appellant for not filing proper service tax returns. They claimed that no grounds have been specified for imposing penalty under section 77. It is seen that there is a specific ..... X X X X Extracts X X X X X X X X Extracts X X X X
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