Customs, Excise and Gold Tribunal - Bangalore
Gac Shipping (India) Pvt. Ltd. vs The Commissioner Of Central Excise And ... on 25 October, 2007
Equivalent citations: [2008]12STJ302(CESTAT-BANGALORE), 2008[9]S.T.R.524, [2008]13STT154
ORDER T.K. Jayaraman, Member (T)
1. This appeal has been filed against Order-in-Original No. 11/2000 ST dated 23.8.2006 passed by the Commissioner of Central Excise and Customs, Cochin.
2. The appellants M/s. GAC Shipping (India) Pvt. Ltd. are engaged in the activity of providing Steamer Agency service and Custom House Agency service, which are liable to Service Tax in terms of Section 65 of the Finance Act, 1994. Revenue proceeded against the appellants on the ground that they had not paid Service Tax due on the value of taxable service amounting to Rs. 34,97,48,507/- received by them for extending services to various clients. Consequently, a show cause notice was issued and the Adjudicating Authority demanded a sum of Rs. 2,61,35,485/- under the provisions of Section 73 of the Finance Act, 1994. In order to demand the above amount, longer period was invoked. Interest was demanded under Section 75 of the Finance Act. Penalty at the rate of Rs. 100/- per day was demanded under Section 76 for failure to pay the above amount. The penalty of Rs. 1000/- was imposed under Section 77 for contravening the provisions of Section 70 of the said Act. Further, the Adjudicating Authority imposed penalty equal to the Service Tax demanded under Section 78 of the Act for suppressing material facts from the department with an intent to evade tax. The appellants are highly aggrieved over the impugned order and hence, they have come before this tribunal for relief.
3. Shri A. Hidayatullah, Sr. Advocate and Shri Joseph Kodianthara, Advocate appeared on behalf of the appellants. Ms. Sudha Koka, learned departmental representative appeared for the Revenue.
4. We heard both sides. The learned Sr. Counsel pointed out that in terms of Section 67 of the Finance Act - For the purpose of this Chapter the value of any taxable service shall be gross amount charged by the service provider for such service. He said an Explanation 3 was introduced in Section 67 on 13.5.2005 which reads as follows:
For removal of doubts it is hereby declared that the gross amount charged for the taxable charge service shall include any amount received towards the taxable service, before, during or after the provision of such service.
According to him, the explanation has the effect of introducing a new levy and this should be effective only with prospective effect and it cannot have retrospective effect. He relied on the decision of the Supreme Court rendered in the case of CCE v. Matsushita TV & Audio India Ltd. 2006 (1) STR 162. Further, the learned Counsel emphasized the point that the Adjudicating Authority has levied Service Tax on "other incomes". He explained that these "other incomes" do not represent the amount received for the services rendered. He pointed out that these amounts are to be refunded to the clients by the appellants and therefore, they cannot be charged to Service Tax. Further, he stated that there is documentary evidence to show that these "other incomes" do not represent the amount received for the services rendered and they are actually the excess payments received from the clients and which have not been returned to them during the year in which they were received. The other incomes are actual (a) write backs - net payments received from clients but excess not paid back in the year when service was rendered, (b) Again there are certain refundable amounts, for example, it was pointed out that the appellants received certain amount which was paid in excess to Kandla port for the period from 1998 to March 2000. These amounts have to be returned to their principals. These are shown as income in one year but they would be shown as expenditure on repatriation when refund claimed. The learned Counsels pointed out that all the details of the incomes received have been shown in their books of Accounts and there is no ground to hold that they had suppressed information with an intent to evade payment of duty. The learned departmental representative reiterated the Order-in-Original and urged the bench to uphold the impugned order.
4.1 On a very careful consideration of the issue, we find that in Para 13 of impugned order, the Commissioner has stated "Coming to the next point of argument that the "other income" being actual reimbursement of charges is out of the ambit of Service tax, it is agreed that the actual expenses reimbursed (i.e., where they are acting as pure agents of the principals) is eligible to be exempted from the taxable value provided proper documentary evidence for maintained and produced. In the instant case, the assessee had not produced any documentary evidence at any point of time such as during investigation, or while filing written submission or during the personal hearing to prove their claim. Similar is the position with the argument regarding the amount under the head "write backs". Under the circumstances, I am unable to accept the contention of the assessee on this point."
4.2 In our view, Service Tax can be charged only on the amount received for the services rendered. If the appellants had received amounts in connection with various expenditure incurred on behalf of their clients which are not directly relatable to the service rendered, then no Service Tax can be levied on them. The Commissioner did not give the benefit on the ground that no documentary evidence was produced. However, during the course of personal hearing, the learned advocates produced certain documents which indicated the amounts to be refunded to their clients. In our view, the Commissioner has not examined the factual information provided by the appellants. Moreover, all the details of the expenditure incurred have been mentioned in their books of accounts. Under these circumstances, there is no justification to hold that the appellants had suppressed facts with an intent to evade Service Tax. There is also enough justification in the argument of the appellants that they are not liable to Service Tax for the amounts charged as reimbursement and also the amount collected in excess of the reimbursable expenses. Further, the appellants have pointed out various defects in the impugned order, which are as follows:
i. The impugned order also suffers from various factual and calculation errors which are detailed in a note annexed hereto. The main points however are.
a. Calculation error with respect to the amounts on which service tax was paid for the year 2003-04 and 2004-05 with respect to tramp agency income.
b. Similar calculation error with respect to line agency income for the years 2003-04 and 2004-05.
c. With respect to forwarding agency income, an amount of Rs. 6,28,946/- for the year 2004-05 on which service tax was actually paid has not been given credit for in Annexure-A to the SCN.
d. Omission to give credit for forwarding income at Chennai and Delhi on which service tax was in fact paid.
e. Omission to give credit for foreign currency income falling during the period of exemption.
f. Inclusion of documentation and administration charges prior to 10th September 2004 since even assuming without admitting that the same are taxable, the appropriate heading would be under "business auxiliary services".
g. Non-exclusion of income earned from the World Food Programme at Mumbai and Kochi, which is otherwise exempt from payment of service tax.
h. Inclusion of refund received from Kandla Port for the year 2000-01 to 2002-03 which payments were received in convertible foreign exchange and therefore exempt.
5. In view of the above defects in the impugned order, we have no other option but to set aside the impugned order and remand the case for de novo adjudication. All the issues are kept open. The de novo order should be passed within three months from the date of receipt of this order.
(Operative portion of this Order was pronounced in open court on conclusion of hearing)