Customs, Excise and Gold Tribunal - Bangalore
Rolex Logistics Pvt. Limited vs The Commissioner Of Service Tax on 7 February, 2008
ORDER S.L. Peeran, Member (J)
1. The appellants are required to pre-deposit Service Tax of Rs. 77,39,016/- and penalty of Rs. 1.24 croes under Section 78, besides penalties under various Sections. They were covered under the category of 'Management Consultancy Services' and 'Repair and Maintenance'. They were paying Service Tax on the services provided by them. The Revenue Intelligence carried out search and found from the Balance Sheet that the assessee did not pay Service Tax on charges realised from the customers and accounted for under the head "Reimbursements" in their Balance Sheet. Hence, differential Service Tax was demanded for the period from 01.04.2001 to 31.03.2006 in terms of the Show Cause Notice dated 08.05.2006.
2. The appellant's defence is that the reimbursement pertains to rent of the godown, salary of their employees and incentives given to such employees. However, the Revenue has considered these payments also to be covered under the category of Management Consultancy Services and have demanded Service Tax on these amounts. The appellants relied on a large number of judgments on this point to say that these heads are not part of the services rendered by them and the charges received by them cannot include these heads. They have also relied on the following judgments.
Sl. No. Documents/Citation Gist/Summary of content
1. Scott Wilson Kirkpatric (I) Pvt. Ltd. v. CST, Bangalore 2007 (5) STR 118 (Tri-Bang.) Held, reimbursements of expenses are not subject of service tax.
2. B.S. Refrigeration Ltd. v. CST, Bangalore 2006 (1) STR 103(Tri.-bang.) Held, demand of service tax on entire amount reimbursed not sustainable.
3. Glaxo Smithkline Pharmaceuticals Ltd. v. CCE, Mumbai-IV Held, service tax not leviable on expenses recovered.
4. Malabar Management Services Pvt. Ltd. v. CST, Chenai 2008 (12) VST 133 (CESTAT-Chennai) Held, amount received as reimbursement of staff salaries and infrastructural expenses not includible in value of taxable services.
5. Copy of the clarification issued by DGST in October 2003
- published in R.K. Jain's Central Excise Manual Reimbursement of actual expenses are not subject to service tax.
6. Trade Notice No. 53-CE (Service Tax)/97 dt. 04.07.1997 issued by the New Delhi Commissionerate Service Tax is not chargeable on reimbursements - Para 4.5
7. Basti Sugar Mills Co. Ltd. v. CCE, Allahabad 2007 (7) STR 431(Tri.-Del.) Held, the definition of 'Management Consultant' makes it clear that what was envisaged from a consultant is advisory service and not actual performance of management function and that an ocean separates a Manager from a Management Consultant, a performer from an advisor or a coach.
8. Jindal Vijayanagar Steel Ltd. v. CCE, Belgaum 2005 (192) ELT 415 (Tri.-Bang.) Held that 'extended period was not invokable especially as fact of giving of advance was declared in Balance Sheet of the Company.
9. Kirloskar Oil Engines Ltd. v. CCE, Nasik 2004 (178) ELT 998(Tri.-Mumbai) Held that 'demand raised on the basis of information appearing in the balance sheet is not sustainable by invoking extended period of limitation since balance sheet of the company is a publicly available document and suppression of such information cannot be alleged.
They also contended that all the facts were known to the Department and hence the demands were barred by time. They also relied on the following citations on time bar.
(i) T.N. Dadha Pharmaceuticals v. CCE
(ii) Tamil Nadu Housing Board v. CCE
(iii) CCE v. Chemphar Drugs & Liniments
(iv) Padmini Products v. Collector
(v) Pushpam Pharmaceuticals v. Collector
(vi) Cosmic Dye Chemical v. CCE
(vii) CCE v. Vineet Electrical Industries Pvt. Ltd. 2002 (144) ELT A292(SC)
3. The Commissioner has noted that the assessee collected amounts from the customers towards rent of godown, salaries of their employees and incentives given to such employees. They had not discharged Service Tax on these amounts and that was also required to be added in the assessable value and hence confirmed the demands. He noted that these details had not been informed to the Department and hence larger period was invocable.
4. We have heard both sides in the matter. Both sides argued at length and have reiterated their points in terms of the pleas raised by the respective sides in their appeal memos and the impugned order. We have carefully considered the submissions. We notice that the order passed by the Commissioner is not a speaking order. He does not refer to the judgments, which deal on this point both on merits and on limitation. He does not give any reasons as to why the ratio of these judgments are not applicable. Neither he discusses these case-laws except to say that they are not applicable. Prima facie, in the cited judgments on merits, a view has been expressed that the appellants are not required to pay Service Tax on these ingredients like rent, salary of employees, etc. on which service tax is being claimed. The appellants have been filing their returns and the records have been checked and scrutinized from time to time. Therefore, to allege suppression, prima facie, it does not appear to be correct in the light of the judgments of the Supreme Court cited by the appellants.
5. The appellants have a very strong case on merits. The Stay application is allowed granting waiver of pre-deposit and staying the recovery till the disposal of the appeals. There shall be no recovery even after expiry of 180 days of the Stay Order in view of the judgments of Supreme Court, High Court and the Tribunal. As the revenue involved is more than Rs. 2 crores including penalties, the matter is required to be heard out of turn. Matter to come up for hearing on 10th June, 2008.
(Pronounced and dictated in open Court)