Custom, Excise & Service Tax Tribunal
International Shippers & Traders Pvt ... vs Commissioner Of Central ... on 3 July, 2014
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL SOUTH ZONAL BENCH BANGALORE Final Order. 21060 / 2014 Application(s) Involved: ST/Stay/26789/2013 in ST/26455/2013-DB Appeal(s) Involved: ST/26455/2013-DB [Arising out of 08-2013 dated 08/02/2013 passed by Commissioner of Central Excise , VISAKHAPATNAM-II ] International Shippers & Traders Pvt Ltd Chamber Of Commerce Building, Do.no. 41-8-25, Eastern Block, Commercial Road, KAKINADA - 533001 AP Appellant(s) Versus Commissioner of Central Excise,Service Tax and Customs VISAKHAPATNAM-II NULL CENTRAL EXCISE BUILDING, PORT AREA, VISAKHAPATNAM, - 530035 ANDHRA PRADESH Respondent(s)
Appearance:
Shri HARI RADHAKRISHNAN ADVOCATE 17 1ST CROSS ST, 4TH AVENUE, BESANT NAGAR, CHENNNAI.
CHENNAI - 600090 TN For the Appellant Dr. A.K. Nigam, Addl. Commissioner(AR) For the Respondent CORAM:
HON'BLE SHRI B.S.V.MURTHY, TECHNICAL MEMBER HON'BLE SHRI S.K. MOHANTY, JUDICIAL MEMBER Date of Hearing: 03/07/2014 Date of Decision: 03/07/2014 Order Per : B.S.V.MURTHY The appellant is a CHA who not only undertakes and provides CHA service but also acts as a steamer agent and provides services such as cargo handling and renting of immovable property. The demand for more than R.1.8 crores of service tax with interest and penalties has arisen as a result of the impugned OIO. The issues involved are taken up one by one and dealt with herein below:-
* The first demand is for Rs.1.8 crores on cargo handling service. After hearing both sides for quite some time and going through some sample invoices and sample work orders/letters issued to the appellant and after going through the records, we found * The appellants are undertaking various activities in respect of fertilizers imported by the fertilizer companies which finally results in packed fertilizer suitable for sale in India;
* These activities are covered by one contract/purchase order/work order and a specific amount is fixed as remuneration for all the activities up to packing of fertilizer by the appellant;
* Thereafter in accordance with nature of contract/purchase order/work order, the appellants undertake to transport the fertilizer to the places designated by the customers and for this also remuneration per MT is fixed;
* For the activity prior to loading of the fertilizers in trucks and for the transportation activity after the goods are packed, the appellants pay service tax for cargo handling service in respect of the activities prior to transportation and in respect of transportation, the service tax is indicated but not paid since all the receivers are liable to pay tax in accordance with service tax statute for GTA service.
2. The demand for this service has arisen for the following reasons:
> The GTA service and cargo handling service cannot be segregated in this case since both the activities are composite activities and cannot be segregated;
> Appellants cannot be considered as pure agent since they are not collecting the actual transportation amount from the service receivers but more than the amount which is paid to the transporters;
> Appellants have deliberately not paid the tax on the transportation activity to avoid payment of tax under the category of cargo handling service;
> Since unloading of the goods, packing of the goods have been taken up by the appellants themselves, transportation and other activities have to be treated as a single activity and levied to tax.
3. Learned counsel submitted the following points:
The transportation cost has been added to the service charges for the cargo handling service under Rule 5 and Rule 5 has been struck down by the Honble High Court of Delhi in its decision in the case of Intercontinental Consultants and Technocrats Pvt. Ltd. Vs. UOI {2013(29) STR 9 (Del.)].
4. The points raised by both sides on the above issue and our conclusions are discussed below:
The learned AR would submit that this is not correct and only Rule 5(1) has been struck down and Rule 5(2) of Service Tax (Determination of Value) Rules, 2006 has not been struck down. The learned counsel submits that if the Rule 5(1) only is struck down, Rule 5(2) has no value whatsoever. In our opinion, the question of application of Rule 5 and application of pure agent concept would not arise in this case. This is because, there are two separate contracts as mentioned by us above. The activities are clearly segregated. There is no evidence to show that there is a deliberate intention to do so and no evidence have been put forth to support this. There is no evidence to show that service tax has not been paid treating the activity as transportation by the service receivers. Further it is the intention of the parties to a contract that is important to come to the conclusion about the fact as to whether a contract is a composite contract or not. In this case quite clearly transportation activity can be segregated from the other activities. This is because the activities other than transportation are undertaken by the CHA within the port and for transportation activity, he simply hires the trucks from the Truck Owners Association and engages the trucks and sends them to the parties. The rates are fixed in advance and it was submitted by the learned counsel that in some cases there was short recovery of transportation cost also. We also find from the records that the appellant has charged the customers for transportation service, has indicated the service tax payable thereon and according to the agreement, receivers have agreed to pay the tax. Such being the position, it is very difficult to sustain the stand taken by the Revenue that by invoking provisions of Rule 5, the value of services relating to transportation has to be added to cargo handling service and the activities have to be treated as composite service under a single contract and levied to tax under cargo handling service category. We do not find any merit in the case of the Revenue at this stage. Nevertheless, it was submitted by the learned AR that there is no evidence to show that Commissioner had seen the contracts; Commissioner had seen the invoice and Commissioner had not recorded finding of the facts that which we have found and our observations are based on the records produced before us and it would be more appropriate if the issue is considered in greater detail and in proper perspective and in accordance with law. We find ourselves in agreement with this submission and therefore it may be worthwhile to remand the matter at this stage itself for reconsideration of this issue as regards this portion of the demand.
5. We would not like to go into all issues in view of the fact that we have already decided to remand the matter. We would like to leave open the issues since substantial portion of the demand is covered by the issue which we have discussed above. Nevertheless, since we had heard both sides on all the issues and in respect of one of the issues in our opinion, the Commissioner has been slightly unfair, we should consider the same and record our observations. This relates to the demand of Rs.11,88,348/-. This demand has been made on the ground that the appellants had collected service tax from the customers but did not pay to the Department. The learned counsel drew our attention to the reply to the show-cause notice wherein the submissions had been made by the appellants. For better appreciation, we consider that this paragraph has to be reproduced and the same is reproduced below:-
40. In Para 9 of the show-cause notice, it is alleged that we have collected service tax from parties but paid lesser amount as per ST3 returns submitted by us. It is submitted that the figures taken related to service tax charged as per the invoice and not actually collected. In several cases, the parties reduced the value of service and accordingly they paid service tax relevant to the reduced value. A statement showing the deductions made by the parties are enclosed. It may please be seen that for the year 2008-09 there was a deduction for an amount of Rs.23,07,033/- involving service tax of Rs.2,85,149/-. In the show-cause notice, the differential service tax is shown as Rs.2,85,11/-. For the year 2009-10 the amount actually received after deductions was as shown in our ST3 returns. During this period an amount of Rs.23,05,236/- has been deducted by the parties involving service tax of Rs.2,37,444/-. This figure tallies with the one shown in the show-cause notice. For the year 2010-11, the parties have deducted an amount of Rs.4,19,952/- only. On this amount the service tax involved was Rs.43,255/-. This has been remitted along with interest as per Challan dt. 22/07/2011.
6. As against the above detailed submission, we find that the Commissioner has dealt with this issue in paragraph 17.3 in his order, which is reproduced below:-
17.3. The next issue for consideration is the difference between the service tax collected by the assessees from the service receivers and service tax assessed and paid by them during the period 2008-09 to 2010-11. As per the assessees ledger for the above period, they have collected an amount of Rs.7,46,57,399/- from their customers and at the same time they have paid only an amount of Rs.7,34,69,051/- as per ST3 returns. The assessees have admitted that the difference is as a result of reduction of value of services and consequential service tax by their customers in certain cases and as such there is difference in billed amount and actual amount collected. However, I find that the department has raised the demand only on collected amount and not on billed amount and the result of reduction of value of services by the customers has not resulted any reduction in the service tax amount collected by them, which is more than the service tax assessed and paid by them. Accordingly, I find that the assessees are liable to pay the service tax amount of Rs.11,88,348/- being the difference between the amount of service tax collected and paid by them, in terms of Section 73A of the Finance Act, 1994. They are also liable to pay interest under Section 73B ibid.
7. From the reproduction it can be seen the Commissioners conclusion that the Department has raised the demand only on collected amount and not on billed amount has no basis whatsoever. There is no indication that records of the appellants have once again been verified especially in view of the specific submissions made in the paragraph reproduced above. In such a situation, we find that this finding has no basis and requires a proper reconsideration by the learned Commissioner.
8. In view of the above discussion, we consider it appropriate that at this stage itself, the matter should be remanded. Accordingly the impugned order is set aside and the matter is remanded to the original adjudicating authority for fresh adjudication after giving reasonable opportunity to the appellants to present their case. (Operative portion of the order pronounced in open court) S.K. MOHANTY JUDICIAL MEMBER B.S.V.MURTHY TECHNICAL MEMBER Raja.
5