Cce, Lucknow vs M/S Distributors India

(Arising out of Order-in-Appeal No. 61-CE/LKO/08 dated 28.4.2008 passed by the Commissioner (Appeals), Central Excise & Service Tax, Lucknow)

For Approval & Signature :

Honble Mr. Justice G. Raghuram, President

Honble Mr. R.K. Singh, Member (Technical)

1. Whether Press Reporter may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?

2. Whether it would be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?

3. Whether their Lordships wish to see the fair copy of the order?

4. Whether order is to be circulated to the Department Authorities?

CCE, Lucknow Appellant

Vs.

M/s Distributors India Respondent

Appearance:

Shri Govind Dixit, D.R. - for the Appellant

Shri B.B. Sharma, D.R.

Shri Mayank Garg, Advocate - for the Respondent

Coram : Honble Mr. Justice G. Raghuram, President

Honble Mr. R.K. Singh, Member (Technical)

F. Order No. 51677/2015

Per R.K. Singh :

Revenue has filed appeal against Order-in-Appeal No. 61-CE/LKO/08 dated 28.4.2008 which set aside the order-in-original dated 19.10.2007 [in terms of which service tax demand of Rs. 11,95,553/- for the period September 1999 to March 2004 was confirmed (along with interest and penalties) under clearing and forwarding agents service] on the ground that the respondent had not included the warehousing charges and other reimbursables in the assessable value and thereby short paid the impugned amount of service tax. Revenue has contended that warehousing and other reimbursables were in connection with providing C&F agent service and therefor were includible in the assessable value as the service tax is chargeable on the gross amount charged for the service rendered as per Section 67 of Finance Act, 1994. It also contended that the respondent intentionally suppressed the facts from the department and therefore extended period was invocable and mandatory penalty was leviable. Ld. A.R. cited CESTAT judgment in the case of Shri Bhagavathy Traders Vs. CCE, Cochin  2011 (24) STR 290 (Tri.-LB) which held that concept of reimbursement arises only when service recipient had obligation, legal or contractual, to pay any amount to any third party and the said amount is paid by service provider on behalf of service recipient. In the cross objections, the respondent cited several judgements to assert that warehousing charges and other reimbursables are not includible in the assessable value. It also stated that the other reimbursables were in relation to misc. work they did for the service recipient like advisory work for filing sales tax returns, work relating to payments of bank drafts for tenders being filed by the service recipient, procurements of space for its (i.e. recipients) staff, procurement of drug license for it etc. which were not related to the C&F agent service.

2. We have considered the contentions of both sides. We find that the issue of includibility of warehousing and other reimbursables in the value of C&F agent service has been a subject matter of several judicial pronouncements. In the case of K.D. Sales Corporation Vs. CCE, Belgaum  2007 (6) STR 418 (Tri-Bang.), it was held that godown rent and clerk salary are not includible in the assessable value of C&F agent service. In the case of Nandini Warehousing Corporation Vs. CCE, Belgaum  2007 (8) STR 511 (Tri.-Bang.), it was held that godown rent, establishment expenses, incentives, STD call charges, are excludible from the assessable value of C&F agent service. In the case of Sangamitra Services Agency Vs. CCE, Chennai  2007 (8) STR 233 (Tri.-Chennai), it was held that reimbursement of actuals towards freight, labour, electricity, telephone etc. are not includible in the assessable value of C&F agent service. Appeal against this judgement was filed before Madras High Court. Madras High Court dismissed Revenues appeal CCE, Chennai Vs. Sangamitra Services Agency  2014 (33) STR 137 (Mad.), and held that reimbursable expenses received by the assessee need not be added to the taxable value relating to clearing and forwarding agents service and that the receipt is for reimbursing expenditure incurred for the purpose and the mere act of reimbursement per se would not justify the contention of Revenue that the same was having the character of the remuneration or commission for the purpose of Rule 6(8) of Service Tax Rules, 1994.

It is also seen that the Supreme Court has dismissed the Civil Appeal No. 171/2009 filed by C.C.E. against CESTAT Final Order No. A/1237-1239/2008-WZB/Ahd. dated 23.6.2008 as reported in 2008 (12) STR 345 (Tri.-Ahmd.) in the case of Reliance Industries Ltd. Vs. CCE which allowed assessees appeal and held that expenses incurred on account of reimbursable expenses shall not be includible in the taxable value (Service Tax Review 15 Sept. 2011 page 70). The reimbursable expenses in that case related to travelling expenses of a consulting engineer. In the wake of these judicial pronouncements, the CESTAT Larger Bench judgement in case of Shri Bhagavathy Traders (supra) which had distinguished CESTAT judgement in case of Sangamitra Services Agency (supra) has since been overtaken by Madras High Court judgement in the case of Sangamitra Service Agency (supra) and the judgement in case of Reliance Industries Ltd. (supra).

3. In the light of the analysis above, we do not find any merit in Revenues appeal and the same is therefore dismissed.

(Justice G. Raghuram)

President

(R.K. Singh)

Member (Technical)

RM

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