1. The appellant is a Clearing and Forwarding Agent, registered under Clearing and Forwarding Agency Service. They are discharging Service Tax on the commission, however they are collecting various expenses such as rent, postage and stationary, telephone charges etc, under claim that these expenses are incurred by them for or on behalf of their principals. On such reimbursement, appellant have not discharged the service tax, accordingly a show cause notice was issued in respect of demand of Rs. 2,03,673/- and also proposed penalties under Section 76, 77 and 78. The adjudicating authority confirmed demand on the ground that so called reimbursement are required for providing service of Clearing and Forwarding Agency service, therefore it is part of the service activity. Accordingly, the same is liable to service tax as part of gross value of Clearing and Forwarding Agency service. The adjudicating authority amongst other decisions relied upon on Larger Bench in case of Sri. Bhagavathy Traders v. Commissioner of Central Excise, Cochin [2011 (24) S.T.R. 290 (Tri. LB.). The appellant being aggrieved by the Order-in-Original filed an appeal before the Commissioner (Appeals), who by upholding the Order-in-original dated 24-9-2012 rejected the appeal filed by the appellant, therefore appellant is before us.
2. Shri. Rajiv Luthia, Ld. C.A. appearing on behalf of the appellant submits that appellant is working purely as a agent and getting the amount spent for or on behalf of principals on actual basis therefore the said reimbursement is not includible in the gross value of service of Clearing and Forwarding Agency. He submits that appellant is discharging the service tax on commission received towards Clearing and Forwarding Agency Service. The amount received towards said service can only be treated as gross value, against the said service and remaining amount of reimbursement, which is not the part and parcel of service charges cannot be charged to service tax. He further submits that penalties under Section 76, 77 and 78 are also not imposable on the ground that issue involved is highly contentious and involved the interpretation of valuation provisions, matter has reached up to the Larger bench of the Tribunal, therefore there was bonafide belief of the appellant that the reimbursement is not chargeable to service tax.
3. On the other hand, Shri. K.M. D souza, Ld. Asstt. Commissioner(A.R.) appearing on behalf of the Revenue reiterates the findings of the impugned order.
4. We have carefully considered the submissions made by both sides and perused the record.
5. We find that appellant is providing service of Clearing and Forwarding Agency for which he has maintained the premises for storage and distribution of the goods. For providing service minimum input services are required such as rent, postage and stationary, telephone charges etc, without these input services, Clearing and Forwarding service cannot be provided, therefore these services are required for providing Clearing and Forwarding service and has to be part and parcel of the gross value of the service i.e. Clearing and Forwarding Agency. In the case of Sri. Bhagavathy Traders (supra) the larger bench of this Tribunal clearly held that expenses, which is required for providing output service is includible in the gross value of the services. In the present case the nature of expenses is such, which is mandatory for carrying out the business of Clearing and Forwarding Agency, therefore in our considered view so called reimbursement escaped from payment of service tax is clearly includible in the gross value of services of Clearing and Forwarding Agency. Accordingly, we hold that service tax is chargeable on such reimbursement. As regard the penalties under Section 76, 77 and 78, we find that reimbursement, particularly in case of Clearing and Forwarding Agency service, the issue was contentious and various decisions were given by this Tribunal, the matter also reached to the Larger Bench. It is also fact that appellant is otherwise discharging the service tax on the commission received towards pro
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viding Clearing and Forwarding Agency service. In these circumstances, it cannot be said that appellant had intention to evade service tax, therefore appellant have made out a fit case for waiver of penalties invoking Section 80 of the Finance Act. We therefore set aside the penalties imposed under Section 76, 77 and 78 invoking provision of Section 80 of the Finance Act. Impugned order stands modified to the above extent. Appeal is partly allowed.