CESTAT, NEW DELHI BENCH
Commissioner of Central Excise, Jaipur-I
Final Order No. ST/A/496 of 2012-CUS
Appeal No. ST/575 of 2007-CUS†
June 14, 2012
Mathew John, Technical Member
The appellants were acting as a clearing and forwarding agent to M/s Chambal Fertilizers & Chemicals Ltd. They were registered with Service Tax Department as clearing and forwarding agent and were paying service tax on commission received for such activity. They had a separate contract with M/s Chambal Fertilizers & Chemicals Ltd. for giving their godown on hire for keeping of the goods for which they were acting as clearing and forwarding agent. On consideration received for such godown rented out to M/s Chambal Fertilizers and Chemicals Ltd., the appellants were not paying service tax.
2. Revenue came to know about the separate contract. Revenue was of the view that the appellants were providing the service of storage and warehousing under the said contract and they should have paid services on godown rent received by them under the entry for “Storage and Warehousing”. Based on such reasoning a demand for service tax was issued which was dropped by the Deputy Commissioner. The Commissioner reviewed the order in exercise of the powers under section 84 of the Finance Act 1994 by issuing a show cause notice to the appellant and after due proceedings he confirmed the demand of Rs.2,63,478/- along with interest and penalties under section 76 and 78 of the Finance Act 1994. Aggrieved by the order of the Commissioner, the appellants have filed this appeal.
3. The counsel for the appellant submits that they were basically providing service of clearing and forwarding agents and for the commission received they were paying service tax at appropriate rates during the relevant time. There were clarifications issued by the CBEC to the effect that reimbursed expenses given by the service receiver did not form part of the assessable value of such service. According to them the expense for the godown is of the nature of reimbursable expenses and therefore they did not include the value in the consideration received for giving godown on hire. It is their contention that giving godown on hire cannot in the normal course be understood to be a part of activity of clearing and forwarding agent and the argument of Revenue that the consideration received as rent for the godwon should be included in the value of services of clearing and forwarding agent, is not maintainable. He relies on the decision of the Tribunal in K.D. Sales Corporation v. CCE  10 STT 284 (Bang-Cestat).
4. The Counsel also submits that the essential nature of the service which they were rendering to M/s Chambal Fertilizers and Chemicals Ltd. was not that of “Storage and Warehousing”, but was that of “Clearing and Forwarding”. Therefore the proposal that their service should be classifiable under “Storage and Warehousing” is not correct. Further he points out that the initial show-cause notice was for classifying the service as “Storage and Warehousing”. But as per the impugned order passed under Section 84 of Finance Act, 1994 the demand is confirmed under the category of service of “Clearing and Forwarding Agents” and thus the impugned order goes beyond the scope of original show-cause notice that was issued to them. For this reasons also he submits that the impugned order is not maintainable.
5. Further the original show-cause notice demanding tax for the period 1999-2000 to 2003-04 was issued on 13.9.2006 invoking extended period of time. Considering that this is a matter involving interpretation of law and in view of the clarifications issued by CBEC in the matter of reimbursable expenses extended period of time could not have been issued for demanding such tax. He pleads that the demand is not maintainable for that reason also.
6. The ld. A.R. for Revenue submits that the service of “Clearing and Forwarding” could not have been done without a storage space. So the cost of storage space formed integral part of the value of service provided. Further he argues that the appellants had entered into a separate contract for leasing out godown with the only intention of showing lesser value of the service of “Clearing and Forwarding” and thus to reduce tax incidence. Since the contract was hidden from the department, this is a case involving suppression and hence extended period for issue of demand for tax short-paid can be invoked in this case.
7. We have considered arguments on both sides. Firstly, there is a legal infirmity that tax is demanded under a category of service different from the one for which demand was initially issued. There is also the issue that Clearing and Forwarding Service could be rendered using a godown made available by the service recipient. In this case the service recipient has taken godown on rent from the service provider itself. So this has to be seen as a case of tax planning rather than tax evasion. So we are of the view that extended period of time could not have been invoked for demanding the impugned tax.
8. In the facts and circumstances of the case, we consider the notice dated 13.9.2006 to be time-barred and hence we set aside the impugned order and allow the appeal.