Customs, Excise and Gold Tribunal - Bangalore
Exel India Pvt. Ltd. vs The Commissioner Of Service Tax on 2 February, 2007
Equivalent citations: [2007]10STJ287(CESTAT-BANGALORE), 2007[7]S.T.R.542, [2007]10STT154
ORDER T.K. Jayaraman, Member (T)
1. This appeal has been filed against the Order-in-Original No. 11/2006 dated 31.01.2006 passed by the Commissioner of Service Tax Bangalore.
2. The appellants are engaged in providing services of Customs House Agent (CHA) and also C&F agent. The Revenue issued show cause notice dated 15.6.2005 on the ground that the appellants had short paid the service tax for the period from 2001 to 2004 in respect of the services rendered as CHA and C&F agent. Interest under Section 75 of the Finance Act was demanded. Penalties were proposed under Sections 76, 77 & 78 ibid. The adjudicating authority confirmed an amount of Rs. 3,96,51,830/- in respect of CHA services. As regards C&F agent services, he demanded a sum of Rs. 28,64,280/-. The extended period was invoked. The following penalties were imposed.
(a) Rs. 200/-per day under Section 76;
(b) Rs. 1000/- under Section 77;
(c) A penalty of Rs. 5,00,000/- under Section 78 The interest under Section 75 was also demanded. The appellants are highly aggrieved over the impugned order.
3. Shri C. Natarajan, learned Sr. Advocate Counsel along with Ms. Sindhu, learned Advocate appeared for the appellants and urged the following points:
(i) The Adjudicating authority has confirmed the demand solely on the ground that the appellants have not produced any evidence confirming the statement/submissions made by them. Neither the show cause notice nor the impugned order gives any reason/grounds to demand Service Tax on various recoveries under CHA services. In order to include any amount as the taxable value of the services rendered as CHA, the burden of proof is on the Department. The following case laws are relied on.
(i) Hindustan Ferodo Ltd. v. Collector of Central Excise, Bombay 1997 (89) E.L.T. 16 (S.C.)
(ii) Union of India v. Garware Nylons Ltd.
(iii) Sterlite Industries (I) Ltd. v. Commissioner of Central Excise, Vapi
(iv) Dasani Electra (P) Ltd. v. CCE 2000 (125) E.L.T. 646 (Tri.)
(ii) The appellants have furnished a detailed reply to the show cause notice explaining the nature of each recovery appearing under various accounts in the Trial Balance. They have distinguished the services which are taxable under CHA. If the Adjudicating Authority had any doubts with regard to the submissions, the appellants should have been granted an opportunity to substantiate their statements. In support of this contention, the learned Sr. Counsel referred to the Tribunal judgment rendered in the case of Sterlite Industries (I) Ltd. (supra) wherein it has been held that additional documents are required, then the same could have been sought in course of hearing.
(iii) The appellants explained in detail the nature of various recoveries such as CCX Fees, Break Bulk fees, Sea Freight/Airline commission, Airline incentive, Freight Rebate, Profit share etc. with reasons as to why they are not connected with the CHA services. The Adjudicating Authority brushed aside the submission by only stating that the appellants failed to produce evidence. He has not given a single reason as to why these recoveries are taxable under the CHA services. The appellants have brought on record erroneous calculation resulting in excess demand of Service Tax of Rs. 1,55,84,283/- in respect of CHA services due to inclusion of the quantum of demand for C & F. services under CHA services thrice. The Adjudicating authority has not considered the above submissions. Therefore the impugned order has been passed with foreclosed and prejudiced mind and such an order is against the principles of natural justice.
(iv) The taxable service under CHA service is any service provided by Customs House Agent in relation to the entry or departure of conveyances or the import or export of the goods. The nature of taxable services has also been elaborately described in the Circular of the Board dated June 6, 1997. Therefore, in order to determine whether a particular service comes under CHA, it is to be examined whether the same is covered under scope of taxable service. It is not the case that once an assessee obtains registration as CHA agent, all the activities in the course of its business are taxable under CHA services.
(v) The adjudicating authority has confirmed the demand of the on the surplus balance appearing in the 'Expense Reimbursement Billing' account. The appellants during the course of providing CHA service incurs various expenses on behalf of its client towards the delivery, priority handling, break bulk and courier charges. These expenses claimed as reimbursement on equalized basis which results in excess or shortfall in recovery of expenses incurred on behalf of the client. The income arising from reimbursable expenses when charged on a notional or equilised basis is not chargeable to service tax in the light of Board's Circular dated June 6, 1997 in the light of the following judicial decisions:
(a) Barod Electric Meters Ltd. v. CCE
(b) Indian Oxygen Ltd. v. CCE
(c) Apollo Tyres Ltd. v. CCE, Cochin
(d) HPL Chemicals v. CCE, Chandigarh
(e) Transpec Industries Ltd v. CCE Baroda
(vi) In respect of C & F agent services, the appellants have discharged the service tax liability on the management and the Adjudicating Authority has raised the demand on the rental income and distribution income. With regard to rental income the appellants had discharged the service tax liability on April 2006 for Rs. 3,89,550/- and Rs. 75,438/- as they are not contesting the demand to the above extend. In connection with transportation and distributing income, no service tax is payable in the light of the Tribunal decision in the case of E.V. Mathai & Co. v. Commissioner of Central Excise, Cochin .
(vii) Show Cause Notice has invoked extended period alleging non-compliance with Section 71 and the same Section was omitted from the act. Therefore in line with decision of the Apex Court in the case of Mysore Rolling Mills Pvt. Ltd. , the proceedings are null and void.
(viii) A penalty of Rs. 5,00,00,000/- under Section 78 for alleged suppression of material facts with intent to evade service tax is unjustified. Non inclusion of value of various services which are distinct from CHA activities cannot be treated as suppression of facts with an intent to evade payment of service tax.
5. The learned JDR reiterated the findings of the Commissioner, recorded in the impugned Order-in-Original.
6. We have gone through the records of the case carefully. The Adjudicating Authority has confirmed the demand on various activities of the appellants on the ground that the appellant did not adduce any documentary evidence to corroborate their contention to the effect that they received payment towards other activities. Thus he has shifted the burden of proof on the appellants. He has not discussed how the following items would come within the scope of CHA services:
(i) CCX Fees
(ii) Expense Reimbursement billing
(iii) Break Bulk Fees
(iv) Sea Freight/Airline Commission
(v) Airline Incentive
(vi) Freight rebate (Air/Sea/Consol)
(vii) Profit share from origin
(viii) Unallocated Income
(ix) System Currency Adjustment Factor Thus the order is not a speaking order and bad in law. It is also seen that the appellants are receiving reimbursement from their clients for various expenses incurred on their behalf. The Department has sought to levy service tax on these receipts. In our view, the Order-in-Original suffers from these defects. In the guise of serving the Revenue, the Adjudicating Authority should not attempt to confirm the demand raised in the Show Cause Notice wily-nily. The appellant challenges the computation of service tax both in respect of CHA services and C & F agents services. There is no justification also for imposing a savage penalty of Rs. 5 Crore. In these circumstances, we set aside the impugned order and remand the matter to the Adjudicating Authority for de novo consideration. The Adjudicating Authority shall scrutinize all the records submitted by the appellants and pass a well reasonable order. If any activity is charged to service tax either under CHA or C&F, the Adjudicating Authority should give proper reasons. The de novo order should be passed within a period of three months from the date of receipt of this order.
(Operative portion of the order has been pronounced on completion of hearing)