At, Customs Excise Service Tax Appellate Tribunal South Zonal Bench At Bangalore
By, THE HONORABLE JUSTICE: S.S. GARG
By, MEMBER AND THE HONORABLE JUSTICE: B. RAVICHANDRAN
For Petitioner: V. Raghuraman, Advocate And For Respondents: Ezhilmathi, Joint Commissioner (AR)
1. The appeal is against order dated 15-3-2006 of Commissioner of Central Excise, Mangalore. The appellant is a licensed Custom House Agent handling import/export cargo for various clients. The issue in the present case relates to valuation of the services rendered by the appellant for Service Tax purpose. The appellants are liable to pay Service Tax on the commission received for their CHA work. However, when they are charging the client on lump sum basis (like Per MT of cargo) they had an option to pay service tax on 15% of such lump sum amount. The dispute in the present case is with reference to the quantification of such lump sum amount. The Revenue has contended that all the amount billed and collected by the appellant from the client should form part of gross amount. Whereas the appellants contended that the gross lump sum amount exclude the expenses incurred by the appellant during the course of their work as a CHA in handling the cargo for the client, the amount which are reimbursed on actual basis by the client. In other words, it is contended by the appellant that charges like customs duty, fees for crane, testing and various other third party services which are billed on actual basis and reimbursed by the client cannot be included in the gross value, for arriving at 15% of taxable value of lump sum amount. The original authority held that in terms of Trade Notice No. 39/97, dated 11-6-1997 of New Delhi Commissionerate all amounts should form part of taxable value. The appellant did not include certain amounts claiming them to be reimbursable amount. He held that when the lump sum includes reimbursable expenses plus commission, then the total gross amount should be considered to arrive at 15% taxable value.
2. The learned counsel contesting findings of the original order submitted that the lump sum amount in terms of para 2.5 of the said Trade Notice cannot include, separately billed reimbursable amounts. These expenses are borne by the appellant on behalf of the clients under agreement, on actual basis which can be proved by documentary evidence. There is no legal basis to include such reimbursable expenditure in the lump sum for arriving at 15%.
3. We have heard both the sides and perused the appeal records. The dispute mainly relates to taxable value for CHA service. Para 2.5 of the Trade Notice dated 11-6-1997 which was followed by the appellant to discharge tax liability, stipulates that when the Custom House Agent undertakes turnkey imports/exports, where a lump sum amount is charged for undertaking various services, such lump sum amount will include not only agency commission but also other expenses where no separate breakup is given in respect of these expenses; they have to form part of lump sum and thereafter 15% of such lump sum will be charged to Service Tax.
4. We note that the findings of the original authority is misplaced in analyzing the scope of reimbursable expenses. He held that all amount received by CHA for rendering services are considered reimbursable, except for commission. We are not dealing with a generic scope of reimbursable amount. For service tax purpose an amount which is sought to be excluded from the taxable consideration on the ground of being reimbursable expenses, should clearly satisfy certain basic requirements. The expenses should be incurred by the service provider on behalf of the service recipient, who would have otherwise incurred such expenses. Further, it should be clearly established by documents that the expenses incurred by the service provider are reimbursed as per the pre-arrangement, on actual basis by the service recipient, with no mark up. The scope of para 2.5 of the Trade Notice is clear to the effect that the lump sum should include all receipts where no separate break up is available for claim from the client. The appellants strongly contended that they have submitted all the supporting documents to claim that the lump sum payment received by them is considered for calculation of 15%. All other amounts which are separately billed or shown towards expenses for obtaining various services or discharging fee/duty in relation to the export/import goods are not to be included in the taxable value. We find that the legal position regarding reimbursable expenses as incurred by CHA during the course of discharging their findings is well settled. The expenses incurred on actual basis with reference to the export or import goods of a particular client and reimbursed by the client on actual basis cannot be added for service tax purpose as the same will be beyond the scope of Section 67 of the Finance Act, 1994.
5. In this connection, we also refer to the decision of the Tribunal in Cargolinks v. CCE, Mangalore : 2010 (19) S.T.R. 548 (Tri.-Bang.). In the said order the Tribunal examined similar set of facts and concluded that the taxable amount should not include the reimbursable expenses which are shown separately and received on actual basis.
6. During the course of hearing, the learned counsel also submitted that there is another issue involved in the present appeal with reference to a short payment of duties of Rs. 46,144/- (Rupees Forty Six Thousand One Hundred and Forty Four only) under the tax entry Steamer Agent Services. He submitted that they are no disputing the tax liability on merit. Further he submitted that the demand is hit by limitation. The consideration received from various steamer lines were discharged on monthly basis resulting in certain short payment/excess payment while discharging the tax liability. This is not a case of willful misstatement etc. This is due to reconciliation issue. He, while not contesting the demand on merit, requested for waiver of penalty invoking the provision of Section 80.
7. We ha
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ve considered the above submissions and we find that the demand is not contested on merit. The penalty imposed equal to the said demand amount is sought to be waived submitting reasonable cause for non-payment. As the amounts were to be reconciled in the accounts and the non-payment in time is attributable to reconciliation of receipt, we find that it is a fit case for invoking Section 80 for waiver of penalty imposed on this tax liability. In view of the above discussion and analysis, the impugned order is set aside with reference to valuation of CHA services and penalty imposed on Steamer Agent Services. The appeal is accordingly disposed of.