TMI Blog2023 (8) TMI 852X X X X Extracts X X X X X X X X Extracts X X X X ..... issioner - the order of the learned Commissioner dropping demand sustains. Ld. Commissioner has confirmed the Service tax demand on the ground that, the appellant in addition to the payment of service tax on agency charges was also required to pay service tax on charges for the CHA functions related to the entry or departure of conveyance or the import or exports of goods as well as service tax on the difference between the amount received from the client as reimbursable expenses and the amount spent/incurred - the view taken by the Adjudicating authority that the charges/ expenses recovered by the appellant from their clients towards, Amendment of Bills of Entry, cancellation of document charges, choking of containers, communication charges, conveyance, Craft paper charges, DEEC Charges, Delivery order charges, DEPB Charges, DFRC Charges, EOU Charges, EPCG Charges, Examination charges, Lashing charges, fumigation charges, Opening Repacking/ strap ping charges, Palletisation charges, Repacking charges, release advice charges, sundries charges, loading charges etc. as part of CHA service. There is no dispute on the facts that on agency charges which are related to CHA service ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s value of Service charge of CHA, there is no suppression of fact. Hence, the demand for the extended period is not sustainable on the ground of time bar also. Appeal of Revenue dismissed. - HON'BLE MEMBER (JUDICIAL), MR. RAMESH NAIR And HON'BLE MEMBER (TECHNICAL), MR. C L MAHAR Shri Nilesh V Suchak, Chartered Accountant for the Appellant - Assessee Shri Ajay Kumar Samota, Superintended (AR) for the Respondent - Revenue ORDER RAMESH NAIR There are cross appeals each by the Revenue and the assessee, arising from the common Order-in-Original No. STC/7/COMMR/AHD/2011 dated 15.03.2011 passed by the Commissioner of Service Tax, Ahmedabad dropping the Service tax demand of Rs. 1,08,81,883/- and confirming the Service tax demand of Rs. 52,02,797/- and disallowing Cenvat Credit of Rs. 4,09,526/- with interest and penalties against the assessee. As such both the appeals are taken up together for consideration and disposal. 1.2 The brief facts of the case are that assessee M/s J.B. Shah are engaged in providing services of Customs House Agents (CHA) Services. During the course of search and scrutiny of records of assessee it was revealed that ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rovided by the Appellant. 2.1 He also submits that appellant is a licensed Customs House Agent (CHA) for Ahmedabad and has paid due service tax on agency charges and it did not charge, collect or pay service tax on certain reimbursable expenses incurred on behalf of the clients under a bonafide belief based on CBIC clarification and practice followed by other CHAs. 2.2 He further submits that the impugned order held that in addition to payment of service tax on agency charges appellant was also required to pay service tax on amount received from the clients as reimbursable expenses. This stand of the adjudicating authority in confirming demand of service tax on reimbursable expenses is contrary to the clarification issued by the CBEC under its Letter F. No. B.43/1/97-TRU dated 06.061997. It is settled law that circular/ instructions of CBEC are binding on revenue authorities. He placed reliance on Supreme Court decision is case of Ranadey Micro Nutrients Vs. Commissioner of Central Excise- 1996 (87) ELT 19(SC). 2.3 He also submits that all the reimbursable expenses on which demand of Service tax is confirmed by the Learned Commissioner are for activities which can be carri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... taxed under CHA service by any stretch of imagination. He placed reliance on the following decisions: Sehar Vs. CST, Delhi Appeal No. ST/52708/2016 decided on 13.06.2022. Bax Global India Ltd. Vs. CST, Bangalore 2008(9)STR 412 (Tri. Bang.) Lee Muir Head P. Ltd. Vs CST 2009 (14)STR 348 (Tri. Bang.) S K Enterprises Vs. Commissioner 2008(10)STR 171 (Tri. Bang.) Kin Ship Services (India) Ltd. Vs. CCE 2008(10)STR 331(Tri. Bang.) Cargo Links Vs. CCE 2010(19)STR 548 (Tri. Bang.) Sri Ganesh Shipping Agency Vs. CCE ST 2018 (9) GSTL 293 (Tri. Bang.) Aditya College of Competitive Exam Vs. CCE, Visakhapatnam 2009(16) STR 154 (Tri.- Bang). 2.6 As regard the Cenvat credit demand he submits that credits availed by the appellant are used for providing output services of CHA and hence the same is clearly admissible in terms of provisions of Rule 2 (l) of the Cenvat Credit Rules, 2004. 2.7 He also submits that demands confirmed by Learned Commissioner are barred by limitation. Assessee have filed ST-3 returns and there is not an iota of evidence of any suppression or intent to evade payment of tax on appellant part. Further, the iss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is passed by the adjudicating authority. Therefore demand dropped by the Learned Commissioner is legally correct. 3. Shri Prakash Kumar Singh, Learned Authorized Representative for the Revenue reiterates the findings of impugned orders in respect of party s appeals and grounds of appeal in the Revenue s appeal. 4. Heard both sides, we have carefully considered submissions made by both the sides and perused the records. 4.1 We first deal with the appeal filed by the Revenue. We find that after perusing the appeal memorandum filed by the Revenue only grounds are taken challenging the Commissioner s finding that he has not verified the ledger accounts and journal entries for the entire periods. The Adjudicating authority ought to have verified the records for the entire period of 2006-07 and 2007-08 before concluding that service tax has been paid on examination and miscellaneous charges under the head of agency charges. Dropping the demand of service tax without actual verification of financial records is not legal and proper. However as regard the said dispute we find that CA certified documents are submitted by the assessee before the Ld. Commissioner. The Ld. Commissioner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent/incurred. We do not agree with the view taken by the Adjudicating authority that the charges/ expenses recovered by the appellant from their clients towards, Amendment of Bills of Entry, cancellation of document charges, choking of containers, communication charges, conveyance, Craft paper charges, DEEC Charges, Delivery order charges, DEPB Charges, DFRC Charges, EOU Charges, EPCG Charges, Examination charges, Lashing charges, fumigation charges, Opening Repacking/ strap ping charges, Palletisation charges, Repacking charges, release advice charges, sundries charges, loading charges etc. as part of CHA service. There is no dispute on the facts that on agency charges which are related to CHA services appellant are paying service tax. It is also fact that other than the agency charges other charges and expenses are also collected by the appellant from their clients and paid to the concerned service provider. Appellant not collected any service tax on above reimbursable expenses incurred on behalf their clients/ customers. The appellant has rightly contended that these reimbursable expenses are not in the nature of service and, therefore, no Service Tax could have been le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tutory labour charges, testing fees, drug control formalities, sorting / marking / stamping / sealing on behalf of the exporter / importer. The Custom House Agent also incurs various other expenses such as crane / fork lift charges, taxi charges, photostat and fax charges, bank collection charges, courier service charges, and miscellaneous other expenses on account of the exporter / importer. For all the above charges, the CHA is ordinarily reimbursed by the importer / exporter for whom the above services are rendered. Apart from the above charges, the CHA also charges the client for his service under the head / nomenclature of 'agency and attendance charges' or similar kind of heads which is purported to be his service charge in respect of the services rendered in relation to the import / export goods. 2.4 It is clarified that in relation to Custom House Agent, the service tax is to be computed only on the gross service charges, by whatever head / nomenclature, billed by the Custom House Agent to the client. It is informed that the practice obtaining is to show the charges for services as agency commission , charges , agency and attendance charges , agency charge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le and reimbursable expenses incurred by CHA on account of various other expenses on behalf of the client cannot be part and parcel of the CHA service hence, the same cannot be taxable. Further we also observed that in the present case Learned Commissioner has no where specified that how these expenses/ charges were classified under the category of CHAs services. Hence, demand confirmed by the Learned Adjudicating authority is not legal and proper. 4.6 We also find that the demand confirmed by the Ld. Commissioner on difference between the amounts received from the client as reimbursable expenses and the amount spent/ incurred not sustainable. Once the Ld. Commissioner hold that the reimbursable part of expenses is not taxable, then there is no legal basis to confirmed the service tax on differential amount under CHA services. Further, there is no evidences on records to establish that the said difference amount are pertaining to the agency charges . Therefore the service tax demand confirmed by the Ld. Commissioner on difference amount under CHA services is not sustainable. 4.7 In the present matter Learned Commissioner also upheld the service tax demand on reimbursable exp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... find that in Para 58 of impugned order Ld. Commissioner held that service provider has provided sufficient details of Cenvat Credit availed by them along with their ST-3 returns. Therefore the charges of suppressing the facts cannot sustain. When commissioner himself has held that the charge of suppression of the fact not sustain against the appellant, confirmation of demand of Cenvat credit beyond a normal period of one year by the Ld. Commissioner in the present matter legally not correct. We are of the view that since the Cenvat documents have not been verified by the revenue, nor the longer period of limitation has been invoked specifically in the show cause notice, the proceedings flowing from such a defective show cause notice, are neither legal nor proper. Consequently, we set aside the Cenvat credit demand. 4.10 The appellant have vehemently argued that the demand for the extended period is not sustainable being beyond the limitation of one year. We find that the appellant being CHA had been paying the Service Tax on the CHA charges in terms of a Board Circular read with the judgment of Hon ble Supreme Court in the case of Intercontinental Consultants supra. At the relev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e or cost incurred by the service provider and charged, in the course of providing or agreeing to provide a taxable service. Thus, only with effect from May 14, 2015, by virtue of provisions of Section 67 itself, such reimbursable expenditure or cost would also form part of valuation of taxable services for charging service tax. Though, it was not argued by the Learned Counsel for the Department that Section 67 is a declaratory provision, nor could it be argued so, as we find that this is a substantive change brought about with the amendment to Section 67 and, therefore, has to be prospective in nature. In view of the above decision since the issue was admittedly involved interpretation of valuation provision under Section 67 that whether reimbursement expenses are includible in the gross value of Service charge of CHA, there is no suppression of fact. Hence, the demand for the extended period is not sustainable on the ground of time bar also. 5. In the result, Appeal filed by the assessee M/s. Jasvant B. Shah is allowed with consequential relief, as per law and Revenue s Appeal is dismissed. Miscellaneous application (ORS) is also disposed of. (Pronounced in the open co ..... X X X X Extracts X X X X X X X X Extracts X X X X
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