SANGAMITRA SERVICES AGENCY Vs. COMMR. OF C. EX.

JUDGEMENT

(1.) THE lower authorities have demanded service tax of Rs. 4,01,767/ - from the assessee on certain amounts collected by them from two of their customers namely M/s. Nestle India Ltd. and Exceltia Foods Ltd. during September 1999 to December 2003. The assessee has challenged this demand on merits as well as on limitation. After examining the records and hearing both sides, I find that, under agreements with the above customers, the assessee collected payments from the said customers during the above period towards freight, courier and levies [applicable to both customers], electricity, telephone and maintenance [applicable to Nestle only]. In respect of the total amount of Rs. 27,30,750/ - collected by the assessee as clearing and forwarding agent of M/s. Nestle India Ltd., the former paid service tax. Similarly, in respect of an amount of Rs. 40,000/ - collected by them as clearing and forwarding agent of M/s. Exceltia Foods Ltd., they paid tax likewise. The department wanted to levy service tax on the entire corpus of amounts collected by the assessee from the above customers during the above period. Hence the demand of differential tax. It is the assessee's argument that the differential amounts on which tax is sought to be levied by the Revenue are actual expenses incurred by them for their customers towards freight, labour, electricity, etc. and such amounts would not come within the ambit of 'remuneration' or 'commission' or the like envisaged under Rule 6(8) of the Service Tax Rules, 1994. Their Counsel has endeavoured to draw support from the Tribunal's decision in E.V. Mathai and Co. v. Commissioner . Ld. SDR, apart from reiterating the findings of the lower authorities, submits that the taxable amount for a clearing and forwarding agent is the gross amount of remuneration or commission [by whatever name called] paid to such agent by the client who engages such agent. It is pointed out that, in the agreements entered into between the assessee and their clients, there is nothing to indicate that the amounts payable to the assessee by the client on account of freight, labour, electricity, etc. comprised only actual expenses towards these items. A distinction is sought to be brought out between the instant case and that of E.V. Mathai and Co. (supra). It is pointed out that, in the cited case, there were separate agreements between the assessee and each client, one covering the actual expense and the other covering remuneration, unlike the instant case.

(2.) AFTER giving careful consideration to the submissions and perusal of Rule 6(8) ibid, I find that what is sought to be taxed under the said rule is the service rendered by a C and F Agent to his client and the amount on which tax is leviable is the gross amount of remuneration or commission [by whatever name called] paid to such agent by the client. Prima facie, this amount does not include the actual expenses incurred by the C and F Agent for and on behalf of his client and service tax is not leviable on such expenses. The test appears to be whether the amount spent for the clearing and forwarding operation would have been spent by the principal, had he not engaged a C and F Agent. It appears to me that the amounts on which the above differential tax is sought to be levied from the assessee are amounts spent by them for and on behalf of their clients and not any remuneration or commission. Nothing has been brought on record to indicate that the assessee collected these amounts from their clients as remuneration or commission.

(3.) THE appellants have made out a prima facie case. Accordingly there will be waiver of pre -deposit and stay of recovery in respect of the amounts of tax and penalty.