By TIOL News Service

MUMBAI, APR 15, 2015: AGAINST an order passed by the Commissioner of Service Tax, Mumbai dropping the demand of Rs.3,06,21,823/- and confirming the demand of Rs.12,65,105/- with penalties, both, the Revenue and the appellant are before the CESTAT.

But before mentioning as to what transpired in CESTAT, here are the facts -

+ The Assessee BCCL was set up as a joint venture and is primarily a packing station to receive cement in bulk and storing the same and distributing as per instructions of ACC Ltd.

+ BCCL under agreement have acted as a clearing and forwarding (C&F) Agent for ACC Ltd. and carried out its C&F activities at its warehouse at Kalamboli, near Panvel under year-wise agreements. It is registered with Service Tax Department since 18.12.2003.

+ The scope of service includes-

(a) The noticees are providing their special rail wagons for transport of the cement;

(b) the noticee makes available special wagons for transportation in India Railways from M/s Associated Cement Companies Ltd, Wadi Plant located at Wadi (Karnataka) to Kalamboli (Maharashtra);

(c) the noticee makes available its specialist equipment and arranges for unloading cement brought in on account of the client into silos;

(d) the noticee will block silo space for storage of clients cement;

(e) the noticee will load clients cement available in its silos into special tanker trucks for dispatch for its use at the client's project;

(f) the noticee will arrange to unload cement from their tanker trucks using compressor/blower installed at client's site. For this the noticee bulker will also use the compressor shortages in quantities up to clients project in case the shortages are caused by the noticees omissions or commissions;

(h) the noticee is fully responsible to supply required cement at site of client if any shortages due to railway wagons, tanker trucks and silos in time. Losses which will be incurred by client will be borne by the noticee. Client will not be responsible for damages or loss of goods in transit.

+ For the above clearing & forwarding operation the notice received remuneration which they split into heads like "Handling charges", 'freight rebate', 're-imbursement of primary freight, and 're-imbursement of secondary freight'.

+ It is the case of the Revenue that amounts so accounted are nothing but additional consideration flowing from M/s ACC Ltd. to the assessee; that the claim of these being reimbursible expenses is factually incorrect as the assessee had not spent any of these amounts on behalf of their clients.

A SCN was issued to BCCL for the period April 20001 to March 2006 demanding service tax of Rs. 3,18,86,928/-;Rs.3,06,21,823/- towards Freight rebate, Primary Freight reimbursement, Secondary Freight reimbursement and Rs. 12,65,105/- towards recovery of Facility Charges.

The Commissioner of Service Tax, Mumbai dropped the demand of service tax on Freight rebate, Primary & Secondary Freight reimbursement. He, however, upheld the service tax demand in respect of the facility charges under Clearing & Forwarding service. Hence, both the Revenue & the Assessee are in appeal.

The Bench after considering the exhaustive submissions made by both sides, observed -

Revenue appeal:

++ We find that, after perusing the Appeal memorandum filed by the Revenue, no grounds are taken challenging the Commissioner's view for secondary freight reimbursement, hence the order of the learned Commissioner dropping demand on Secondary freight reimbursement sustains.

++ With respect to 'freight rebate' and 'primary freight rebate' received by the Respondent we find that the same is received due to Respondent's investment in 125 wagons and is clearly arising out of their arrangement with Indian Railways. In fact, Indian Railways has issued a circular to this effect entitling Respondent to receive 22.5% of the freight amount as rebate to the Respondent. This amount has not become payable to the Respondent for having provided any service to ACC Ltd or its customers and certainly not for providing any clearing and forwarding agent's service. Merely because the amount is routed or received through ACC Ltd. or its customers, it cannot be linked with clearing and forwarding agent's service. Manner of routing the consideration cannot decide taxability of the transaction. Respondent has paid service tax on consideration received for providing clearing and forwarding agent's service under a separate contract with ACC Ltd or its client for this purpose.

++ We are of the considered view that the Commissioner has rightly dropped the service tax demand on 'freight rebate' and 'primary freight rebate' and we do not find it necessary to interfere in his findings.

Revenue's appeal is rejected.

Assessee appeal:

++ We find that the amount received as facility charges is towards making available certain facilities such as special wagons, specialist equipment for the use of ACC Ltd. The appellant-assessee has not provided any service to receive facility charges but has only made available certain facilities or infrastructure for the use of ACC Ltd. The record of the proceedings before us do not show any material to the effect that the appellant-assessee was engaged in providing any service to entitle them to receive facility charges other than merely making available the specified facilities or equipment to ACC Ltd. We have perused the scope of clearing and forwarding agent's services as clarified in the CBEC Circular and it clearly does not suggest that the tax is to be levied as C&F service for making available any facility but is to be levied only on providing of specified C&F services in which clearing and handling of goods are involved.

++ The consideration received for facility charges is not liable to service tax as clearing and forwarding agent's service and thus the appeal filed by the assessee-appellant succeeds.

In fine, the Revenue appeal was dismissed and that filed by the appellant was allowed with consequential relief.

(See 2015-TIOL-675-CESTAT-MUM)