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2019 (11) TMI 304

..... eight - Secondary Freight - Service charges - whether the appellant is liable to pay service tax on various amounts enumerated at Sl No 3 to 11 in the table above on which they had not discharged service tax? - extended period of limitation. Handling expenses - HELD THAT:- Revenue wanted to treat mere loading of sugar in the factory and unloading it into railway wagons as clearing and forwarding agency service. In the present case, handling is done in course of CFA operations - demand to this extent has to be confirmed. Miscellaneous expenses towards electricity, telephone, electrical maintenance etc. of the depots - HELD THAT:- The service rendered by the appellant is only the operation of such godowns. Electricity, electrical maintenance sweeping etc. of the godowns are directly relatable to the maintenance of such premises which belong to M/s HLL. Instead of M/s HLL undertaking these activities, the appellant is doing these jobs and claiming reimbursement from M/s HLL. In our considered view, these cannot form part of the taxable services rendered by the appellant in this factual matrix - demand do not sustain. Restacking, reconditioning expenses - HELD THAT:- These pertain to a .....

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..... nvoking this provision, the penalties are set aside. The demand on handling expenses, restacking/reconditioning expenses, EDP expenses within the normal period of limitation made in the impugned order are upheld and the remaining demands are set aside - the matter is remanded to the original authority only for the purpose of calculation. - Service Tax Appeal No. 385 of 2010, 517 of 2010 - Final Order No: 31013-31014/2019 - 5-11-2019 - Hon'ble Mr. P. Venkata Subba Rao, Member (Technical) And Hon'ble Mr. P. Dinesha, Member (Judicial) Ms L. Maithili, Adv for the Assessee. Mr V.R. Pavan Kumar, A.R. for the Respondent. ORDER PER:P.VENKATA SUBBA RAO Heard both sides and perused the records. Appeal No. ST/385/2010 is filed by the appellant while ST/517/2010 is filed by the department against the same impugned order. Hence both appeals are being disposed of together. The assessee appellant, M/s Ram Mohan Rao are clearing and forwarding agents for M/s Hindustan Lever Ltd (HLL) and are discharging service tax. Revenue has received intelligence that the appellant was not paying service tax on the entire consideration for the service received by them and accordingly summoned officials .....

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..... held in Shri Chatrpati SSK Ltd [2016(46) STR 410(Tri-Mum). With respect to Sl No.4 above, it is the case of the assessee that these expenses were incurred by them on electricity, telephone, electrical maintenance, sweeping charges etc at the godowns belonging to M/s HLL. It is their contention that as per the CFA agreement they have with M/s HLL, they are not required to maintain any godowns, but are required to operate from the godowns owned by M/s HLL. Therefore the entire responsibility for the godown including the rent etc. rests on M/s HLL. However, since it is not practical for M/s HLL to pay the electricity bills etc. they pay these amounts and get the same reimbursed from M/s HLL. In terms of the judgement of the Hon ble Apex Court in the case of Intercontinental Consultants and Technocrats Pvt Ltd [2018(10)GSTL 401 (SC)], no service tax can be levied on reimbursable expenses because they are not related to service provided and cannot form part of the gross amount received for such service. The demand on the amounts received under this head needs to fail for this reason alone. Similarly, with respect to restacking or reconditioning expenses (Sl No.5 of the table) it is the .....

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..... agreement as it reads as follows: 4) The company shall consign from time to time its products to the godown manned by the C&F Agent by air, road or rail which the C&F Agents shall receive, stock and hold on behalf of the Company, at its godown/s situated at Vijayawada. 5) The C&F Agent shall service the market requirements in thefollowing enumerated areas: Nellore, Prakasam, Guntur, Krishna, West Godavari, Visakhapatnam, Srikakulam, East Godavari. However nothing said in this clause shall prejudice the right of the Company to directly effect supply in the area or cause other agencies to effect such supplies within the area earmarked to the C&F Agent. 6) The goods shall be despatched by the Company directly to the C&F Agent freight paid, booked for delivery at the godown or to the nearest railway, shipyard, ferry airport or lorry service. Expenses incurred by the C&F Agents towards freight inwards from such place of clearance, other than cases of delivery at the godown, shall be borne by the Company at actuals. 7) The goods received by the C&F Agents from the Company shall be stored by them in a godown or godowns separately and shall not be mixed with any .....

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..... &F Agent will be paid service charges on mutually agreed rates as may be communicated by exchange of letters between the parties hereto from time to time for services rendered under this Agreement. He would draw a distinction between reimbursable expenses and expenses which are incurred by the appellant which are essential to perform their activity as a CFA. He would argue that as far as the handling expenses are concerned, the appellant themselves have started paying service tax from 01.04.2005 and there is no reason for them to not pay service tax for the period prior to this date. As far as miscellaneous expenses namely electricity, telephone, sweeping charges etc. are concerned he would urge that all these expenses are incurred in the depot where the assessee operates. Without incurring these expenses, it is impossible for the assessee to perform their functions as a CFA. Simply because these expenses are paid separately by M/s HLL they do not become reimbursable expenses but are part of the consideration for the services rendered by the appellant. Similarly restacking or reconditioning of the goods at the depot is an essential part of the functions of the CFA. Although the .....

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..... from such places of clearance other than godown. Except for these freight charges, all the freight charges are incurred by the appellant assessee in respect of provision of CFA services to M/s HLL and therefore they are liable to be included in the assessable value. Regarding the departmental appeal, he would submit that this is in respect of a demand of ₹ 2805/- which was confirmed in the impugned order but the demand of interest therein has been missed out. Secondly, in the second show-cause notice which was issued for the normal period, though the service tax demand was confirmed in the impugned order, the adjudicating authority has failed to impose penalty under Section 76 which is a natural corrollary to the confirmed demand. 8. On the question of limitation, he would argue that appellant is registered under the service tax but has failed to reflect the total value of taxable services rendered. The under-valuation of the taxable services was noticed only after detailed verification of records of the asessee. Show-cause notice is based on balance-sheets of the assessee and other books of accounts which were not available to the department in the normal course. The assess .....

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..... , no rent is being paid by or to M/s HLL on such godowns. The service rendered by the appellant is only the operation of such godowns. Electricity, electrical maintenance sweeping etc. of the godowns are directly relatable to the maintenance of such premises which belong to M/s HLL. Instead of M/s HLL undertaking these activities, the appellant is doing these jobs and claiming reimbursement from M/s HLL. In our considered view, these cannot form part of the taxable services rendered by the appellant in this factual matrix. Therefore, the demand on this account must fail. (3) Restacking, reconditioning expenses: These pertain to arrangement and rearrangement of the goods in the depot which lie at the heart of the C&F Agent s activity and do not pertain to maintenance of the premises belonging to M/s HLL although this amount is paid separately to HLL. In our considered view this forms part of the assessable value for the CFA services. (4) EDP expenses:- The computer stationery, cartridges and computer maintenance are used in the godown as is evident from the agreement for the given activities of the appellant as C&F Agent such as generation of invoices. Hence, in our consider .....

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