Customs, Excise and Gold Tribunal - Bangalore
International Shippers And Traders ... vs The Commissioner Of Customs And Central ... on 15 November, 2007
Equivalent citations: [2008]13STJ212(CESTAT-BANGALORE), 2008[10]S.T.R.47, [2008]13STT86
ORDER T.K. Jayaraman, Member (T)
1. This appeal and application for stay have been filed in respect of the Order-in-Original No. 16/2007(VR) dated 21.05.2007 passed by the Commissioner of Central Excise & Customs, Visakhapatnam-II Commissionerate.
2. In terms of the impugned order, the appellants are required to deposit Service Tax amounting to Rs. 2,56,63,251/- along with Education Cess for an amount of Rs. 1,68,246/-. Penalty of Rs. 2,58,31,497/- has been imposed under Section 78; Rs. 100/- per day under Section 76 and Rs. 1000/- under Section 77.
3. Shri M. Balagopal, the learned Advocate, appeared on behalf of the appellants and Shri K. Sambi Reddy, the learned JDR, for the Revenue.
4. We heard both sides. The learned Advocate informed the Bench that the appellants are actually Custom House Agent and they have been registered with the Department w.e.f. 15.06.1997 and they have been regularly paying the Service Tax on the Agency Commission received by them. They have been filing periodical returns and they have been paying the Service Tax on the Agency Commission in accordance with the circular F.No. B.43/1/97-TRU dated 06.06.1997. They have been maintaining all the records and filing the ST3 returns regularly. The learned Advocate urged that Revenue proceeded against them on the ground that they have been rendering services of Clearing & Forwarding Agents and they had suppressed the facts from the department. The learned Advocate explained that the service which they have been rendering is actually not Clearing & Forwarding Agent service. He clarified that the activities of the appellant company related to loading, unloading of import and export goods from storing at the premises of the exporter/importer, packing, weighment, measurement of the goods, transportation of the goods from the exporter's premises to the Customs station or from the Customs station to the importer's premises, carrying out various statutory and other formalities connected with the clearance relating to the Customs and the Port. Therefore, in accordance with the Circular dated 06.06.1997 issued by the Board, he argued that the service rendered by the appellants was nothing but services of a Custom House Agent, and therefore, the proposed reclassification of the appellant's service as one of Clearing & Forwarding Agent is erroneous.
4.1 Further, he pointed out that with regard to the valuation of the service, the Commissioner has rejected the submission of the appellant that the expenses incurred on behalf of the principal should not be included in the value of service for the purpose of assessment in terms of the Board's Circular on the ground that the Board's Circular was applicable to Custom House Agent service and not to the Clearing & Forwarding Agent service. He further submitted that the observation of the Commissioner in this regard is erroneous. He said that the Commissioner has included in the value the amounts paid for hiring the barge, godown rent, lorry freight and railway freight incurred for transportation of the goods to the principal's premises, which were expenses incurred on behalf of the principal, which the principal could have incurred but for the engagement of the appellants as CHA. He also invited our attention to para 2.4 of the Board's Circular dated 06.06.1997, which reads as under:
It is clarified that in relation to Custom House Agents the Service Tax is to be computed only on the gross service charges, by whatever head/nomenclature billed by the Customs House Agent to the client. It is informed that the practice obtaining is to show the charges for service as "agency commission", "charges", "agency and attendance charges", "agency charges" and some similar descriptions. The Service Tax will be computed only with reference to such charges. In other words, payments made by CHA on behalf of the client, such as statutory levies (cess, customs duties, port dues etc.) and various other reimbursable expenses incurred are not to be included for computing the Service Tax.
In view of the above, the learned Advocate prayed that complete waiver of the pre-deposit of the Service Tax amount and penalties imposed may be granted. He also pointed out that the appellant's only income is the Agency Commission received for the services of Custom House Agent and they are not in a position to pre-deposit the amount demanded and pleaded severe financial hardship.
5. The learned JDR pointed out that when we go through the Agreements entered into by the appellant with the various parties, it is very clear that they had rendered the services of Clearing & Forwarding Agent. On this basis only, the learned Commissioner had confirmed the demands. The fact that they have been rendering Clearing & Forwarding Agency Service has not been brought to the notice of the Department. Therefore, the longer period is justified. In view of the above, the learned JDR prayed that at this stage, the appellants may be put to terms.
6. On a very careful consideration of the issue, we find that the Commissioner has merely gone by the nomenclature of the Agreement entered by the appellants with their customers. The learned Advocate, in his appeal, has clearly distinguished between the activities of the Clearing & Forwarding Agent and the Custom House Agent. He also relied on the Board's Circular dated 06.06.1997, which explains the scope of the activities of the Custom House Agent. In this particular case, it is seen that the appellants do not engage in the activity of clearing & forwarding of the goods from the premises of the manufacturer to the premises of the buyer, which is normally the activity of a Clearing & Forwarding Agent as generally understood. In this case, they are actually carrying out their activity within the Customs area. For example, they are unloading the goods from the ship to the barge and from the barge, they are taken to the wharf, and from the wharf, they are unloaded, from the wharf after customs clearance, they are taken to the godowns and in the godowns after packing the material, they are transported. For the various expenses incurred by them which are reimbursable, they are receiving certain amounts, which are incurred on behalf of the principal. Their income is actually only Agency Commission on which they had been paying Service Tax regularly. They had also been filing the ST-3 returns regularly. Prima facie, the appellants have a strong case on merits. They have also pleaded financial hardship. Hence, we are inclined to grant full waiver of the Service Tax demanded along with interest and penalties till the disposal of the case. As huge amount is involved, the case is posted for final hearing on 24th January. 2008.
(Pronounced in open Court on 15.11.2007)