ORDER
P.G. Chacko, Member (J)
1. The lower authorities have demanded service tax of Rs. 4,01,767/- from the appellants on certain amounts collected by them from two of their customers viz. M/s. Nestle India Ltd., M/s. Exceltia Foods Ltd. during September’99 to December’03. This demand has been challenged on merits as well as on limitation.
2. After examining the records and hearing both sides, I note that the appellants were paying service tax under Rule 6 of the Service Tax Rules, 1994 on the remuneration which they had been receiving from their principals as acknowledged in the show-cause notice itself. The SCN, however, noted that, apart from the remuneration, certain charges were also received by the appellants from their principals towards freight, labour, electricity, telephone etc. The SCN alleged that, under Section 67 of the Finance Act, 1994 read with Rule 6(8) of the Service Tax Rules, 1994, these charges also required to be added to the taxable value of the service rendered by the appellants as clearing and forwarding agents of their principals. The original authority and the first appellate authority held to the same effect. The appellate authority relied on the Tribunal’s decision in Mett Macdonald Ltd. v. CCE , wherein certain expenses incurred by the assessee and reimbursed to them by their principal towards transportation, communication, stationery etc. were held to be part of the taxable value of Consulting Engineer’s service rendered by the assessee.
3. In the present appeal, it is submitted by the appellants that, under Rule 6(8) of the Service Tax Rules, they were liable to pay service tax only on the gross amount of remuneration or commission paid to them by their principals for the service of clearing and forwarding. Even the SCN admitted that service tax was paid on such basis and, therefore, nothing remains to be paid by the appellants. In this connection, ld.counsel submits that the decision in Mett Macdonald case (supra) relied on by the lower appellate authority is not applicable to C & F agents inasmuch as that decision was exclusively based on the terms of Section 67 of the Finance Act, 1994 in unlike the present case, wherein Rule 6(8) of the Service Tax Rules, which defines the taxable value of Clearing & Forwarding service would, coupled with Section 67 ibid, govern the valuation. It is submitted that none of the expenses incurred by the appellants and reimbursed to them by their principals in connection with the service rendered by the former can enter into the taxable value under Rule 6(8) of the Service Tax Rules read with Section 67 of the Finance Act. It is submitted that there was nothing in the relevant agency agreement to indicate that any such charges formed part of the remuneration/commission payable/paid to the appellants by their principals for the service of clearing and forwarding of excisable goods. Ld.counsel relies on the Trade Notice No. 87/97 dated 14.7.97 of the Madurai-II Commissionerate, wherein the taxability of commission or remuneration received by a C&F agent from their principal was clarified. Reliance has also been placed on the Tribunal’s decision in Sri Sastha Agencies Pvt. Ltd. v. Asst. Commissioner 2007 (6) STR 185 (Tri.-Bang.), wherein no element other than remuneration received by a C&F agent from their principal was held to be includible in the taxable value of the service.
4. Ld. JDR reiterates the findingzs of the original and appellate authorities and also claims support from the above Trade Notice as also from the Tribunal’s decision in Mett Macdonald case.
5. After giving careful consideration to the submissions, I have found substance in the submissions made by ld.counsel with reference to Rule 6(8) of the Service Tax Rules, 1994. This provision reads as under:
The value of the taxable service in relation to the services provided by a Clearing and Forwarding Agent to a client for rendering the services of Clearing and Forwarding operations in any manner shall be deemed to be the gross amount of remuneration or commission (by whatever name called) paid to such agent by the client engaging such agent.
The SCN itself fairly acknowledged the fact that the appellants had been paying service tax regularly as required under Rule 6 on the remuneration/service charges they had been receiving from their principals periodically. If this averment in the SCN is read with the above provision of law, the matter ends there. Nevertheless, the SCN proceeded to frame a case of undervaluation against the party by alleging that charges towards freight, labour, electricity, telephone etc. collected by the appellants from their principals to meet the actual expenses incurred in connection with clearing and forwarding of excisable goods were also to be added to the taxable value of the service. This case of the Revenue was clearly beyond the scope of Rule 6(8) ibid as held by the Tribunal in the case of Sri Sastha Agencies Pvt. Ltd. (supra) and a plethora of other cases considered therein. As rightly pointed out by ld.counsel, in the case of Mett Macdonald (supra), what was considered by the Tribunal was Consulting Engineer’s service, for which there was no specific rule defining taxable value/gross amount. Apparently, in that case, the Bench went by Section 67 and held that certain expenses incurred by the assessee and reimbursed to them by their principal were also to be added to the taxable value. In the present case, it is not in dispute that various charges which were alleged by the Revenue to be includible in the taxable value of C&F service were reimbursed by the principals on the basis of actuals. The amount received by the appellants from the principals as remuneration/commission for the service of clearing and forwarding the goods has been rightly adopted as taxable value and tax paid accordingly. This satisfies the legal requirement.
6. In the result, the impugned order is set aside and this appeal is allowed.
(Dictated and pronounced in open court)