M/S. Y.N. Warehousing Company vs Commissioner Of Customs & C. Excise

IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL, WEST ZONAL BENCH AT MUMBAI

COURT No. I

Appeal No. ST/133/10

(Arising out of Order-in-Original No. 10/2009/ST/Review dated 31.12.2009 passed by Commissioner of Central Excise & Customs, Nagpur)

For approval and signature:

Honble Mr. M.V. Ravindran, Member (Judicial) Honble Mr. P.S. Pruthi, Member (Technical)

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1. Whether Press Reporters may be allowed to see : No the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?

2. Whether it should be released under Rule 27 of the : No CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?

3. Whether Their Lordships wish to see the fair copy : Seen of the Order?

4. Whether Order is to be circulated to the Departmental : Yes authorities?

M/s. Y.N. Warehousing Company Appellant Vs.

Commissioner of Customs & C. Excise Nagpur Respondent

Appearance:

Ms. Aparna Hirandagi Advocate for appellant Shri A.B. Kulgod, Asst. Commissioner (AR) for respondent

CORAM: Honble Mr. M.V. Ravindran, Member (Judicial) Honble Mr. P.S. Pruthi, Member (Technical)

Date of Hearing: 05.05.2015 Date of Decision: 05.05.2015

ORDER NO

Per: M.V. Ravindran

This appeal is directed against Order-in-Original No. 10/2009/ST/Review dated 31.12.2009.

2. The relevant facts that arise for consideration are during the course of scrutiny of agreement in contract of the appellant, who is registered under service tax registration as clearing and forwarding agent, it was noticed that appellant is collecting fixed computer stationery charges and godown rent which was according to the department ambiguous in nature. It was noticed that they are not discharging the service tax liability on such amount for the period October 2002 to March 2006. Show-cause notice was issued to the appellant invoking the provisions of Rule 5 of Service Tax (Determination of Value) Rules, 2006 read with Section 67 of Finance Act, 1994 for including the expenditure caused in the gross value of the services rendered and demand of service tax liability, interest thereof was proposed along with proposal for imposition of penalties. Appellant contested the show-cause notice on merits. The Asst. Commissioner of Central Excise, Amravati Division, dropped the proceedings initiated by the said show-cause notice holding that the Service Tax (Determination of Value) Rules, 2006 came into effect from 19.04.2006 and cannot be made applicable for the period in question in the case and held that it was governed by Rule 6(8) of Service Tax Rules 1994 which provided for discharge of service tax on an amount which was received in relation to the services provided by clearing and forwarding agent. The Commissioner as a reviewing authority reviewed the said order of the Asst. Commissioner and issued a show-cause notice to the appellant on the very same grounds. The said show-cause notice was also contested by the appellant. The Commissioner as a Reviewing Officer, after following the due process of law, did not agree with the condition registered by the appellant and confirmed the demands along with interest and imposed penalties.

3. Learned Counsel appearing on behalf of the appellant would take us through the case records as also the provisions of Rule 6 (8) of Service Tax Rules, 1994 which were to be considered in the case in hand. She would submit that the services rendered by the appellant (clearing and forwarding agent) have discharged the service tax liability correctly for the compensation received from the service recipient. It is her submission that the amounts which have been received in addition were fixed computer stationery charges, godown rent, establishment charges etc. which are reimbursable expenses as agreed between the appellant and the service recipient. She would submit that an identical issue came up before the Tribunal in the case of Nandini Warehousing  2007 (8) STR 511 (T) wherein the Tribunal relying upon similar case of Sangamitra Services Agency v. CCE  2006 (1) STR 278 (Tri. Chennai) held in favour of the appellant therein. She draws our attention to the said two judgements and also submits that the said decisions of the Tribunal were carried in appeal before the respective Honble High Courts and the said judgements of the Tribunal were upheld.

4. Learned Departmental Representative on the other hand reiterated the findings of the reviewing authority.

5. Heard both sides and perused the records.

6. On perusal of the records, we find that the issue involved is regarding inclusion of actual expenses received by the appellant as per the contract, chargeable of service tax or otherwise. As correctly pointed by the learned Counsel, the period involved in this case is October 2002 to March 2006 wherein the provisions of Service Tax Rules, 1994 were applicable.

6.1 We find that as per Rule 6(8) of Service Tax Rules, 1994, the service tax liability which has to be discharged by service provider was the value received for the taxable service in relation to the services rendered by clearing and forwarding agent. From the perusal of the records, we find that there is no dispute as to the service tax discharged by the appellant on an amount received as compensation for the service rendered as clearing and forwarding agent; the additional amount which are received by the appellant are for computer stationery charges, godown rent and establishment charges is not disputed that the said amounts are paid to the appellant as per the agreement in contract which talks about the reimbursement of expenses to the appellant. In the order-in-Review the learned Commissioner has not controverted the said facts by adducing evidences against the same.

6.2 We find strong force in the contention raised by the learned Counsel that the decision of the Tribunal in the case of Nandini Warehousing Corporation (supra) and Sangamitra Services Agency (supra) having been upheld by the respective High Courts of Karnataka and Madras, the law is well settled which is reimbursable expenses during the material period cannot be included in the gross value for discharge of service tax liability.

6.3 We find that the learned Commissioner in the Review Order relies upon the provisions of Rule 5 of Service Tax (Determination of Value) Rules, 2006 which were not in statute during the material period involved in this case. Suffice to say that the provisions which were not in statute cannot be applied for the demand of tax, the impugned order is on this point non-est. 6.4 We find that the learned Commissioner as a Reviewing Authority erred in coming to such conclusion. Be that as it may. We also find that the provisions of Rule 5(1) of Service Tax (Determination of Value) Rules, 2006 have been struck down by the Honble Delhi High Court in the case of Intercontinental Consultants & Technocrats Pvt. Ltd. 2013 (29) STR 9 (Del).

6.5 In view of the foregoing, we find that the impugned order is unsustainable and liable to be set aside and we do so.

7. The impugned order is set aside and the appeal is allowed with consequential relief, if any.

(Dictated in Court)

(P.S. Pruthi) Member (Technical) (M.V. Ravindran) Member (Judicial)

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