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BRIEF FACTS OF THE CASE :-

An Intelligence was received that majority of the Custom House Agents (hereinafter referred to as the “CHA”) had been raising two sets of invoices for so called reimbursement of various expenses incurred by them at the time of providing services to their clients viz. importer / exporter; that one invoice was raised towards the Services / Agency charges and the second for the so called reimbursement of other charges/ expenses so incurred; that the invoice issued for Services/ Agency Charges was used for payment of Service Tax by CHA whereas the second invoice was raised only for so called re-imbursement of expenses incurred by them; that the invoice Serial Numbers were identical except minor difference being an addition of an alphabet or a number to the existing invoice serial number of the invoices issued for the so called reimbursement of other charges/expenses incurred by them during the course of services provided by them to the importer / exporter. The said procedure of issuing two sets of invoices to exporter / importer by CHA started after introduction of service tax on CHAs. The same was done to suppress the actual service / agency charges and thereby paying less service tax.

2. Intelligence further revealed that the CHAs were taking advantage of the following clause of Circular F.No.B43/1/97-TRU dated 06.06.1997 which envisages “payments made by CHA on behalf of the client, such as so called reimbursement expenses incurred are not to be included for computing the Service Tax”. Accordingly, the procedure of issuing another set of invoice was initiated. The genuine expenses shown in the invoices were accompanied by documentary evidences, whereas the other expenses shown in the invoices being nothing but a part of the total service / agency charges had been incorporated to disguise a part of service / agency charges. Thus, the intelligence indicated that the CHAs were suppressing the actual service / agency charges and thereby paying less Service Tax in respect of the following expenses.

(i) Customs Examination Charges. (ii) Miscellaneous Expenses. (iii) Sundry Expenses. (iv) Strapping and re-strapping charges. (v) Documentation Charges etc.

3. Value of the taxable service shall be the gross amount charged to the client. Thus, no deduction was available for various expenses incurred while providing the taxable service. The Service Tax (Determination of Value) Rules, 2006 have been prescribed with effect from 19.04.2006. These Rules very clearly enunciate situations in which an assessee may claim the exclusion of expense recoveries on the grounds of so called reimbursement of expenses. Primarily, the expenses are to be incurred by the service provider as an agent of the service recipient. The service provider has to fulfill eight conditions specified in Rule 5(2).

4. The claim of various so called reimbursement of expenses also needed to be governed by Rule 5(2). For example, the various so called reimbursable expenditures claimed by the service provider were not covered under the ambit of Pure Agent category.

5. Acting on the said intelligence, a letter dated 10.10.2008 bearing. F.No.STC/04-62/Gr.II/Prev/2008-09 was issued to M/s. Agility Logistics Pvt. Ltd., located at 3 floor, Suncity House, Near Pantaloon, Nr. Mithakali Six Road, Ellisbridge, Ahmedabad (hereinafter referred to as ‘the said service provider’) asking them to furnish copies of ST-3 returns, Balance Sheets, etc. for the last five years and also details of method and manner of invoices raised during the last 5 years along with specimen copies of invoices. They were also asked to provide relevant information/documents with regard to any other associated firms functioning from the above said premises or elsewhere and providing the service of 3

Freight Forwarding, Cargo Handling, etc. The said service provider furnished copies of ST-3 returns for the period from 2004-05 to 2008-09, sample invoices raised by them, Profit and Loss Account for the period from 2004-05 to 2007-08; Profit and Loss Account Grouping for the period from 2005-06 to 2008-09; Cost details i.e. expense details for the period from 2005-06 to 2008-09 etc.

6. The said service provider submitted the aforesaid details/documents from time to time, after being constantly persuaded, in writing, telephonically and verbally. They were not found to be fully cooperative as they invariably delayed submission of requisite details/documents correctly & promptly. In wake of the circumstances the investigating officer accompanied by the Assistant Commissioner (Preventive), Service Tax, Ahmedabad, visited the office premises of the said service provider on 01.04.2009, when they had shown their inability to extend co-operation, stating that the quantum of information was high and the same needed referring of voluminous documents. Even they failed to provide certain documents such as invoices pertaining to the period from 2004-05 to February’2007 issued in respect of CHA service, wherein they had charged the service tax from their clients under the guise of “Service Charges” but had not deposited the same with the government exchequer. Also they did not provide details of Cenvat Credit availed and utilized.

7. During the course of investigation it was observed that they were issuing single invoice wherein Agency charges as well as so called ‘Reimbursement charges’ were shown in one invoice only. For instance - Invoices No. 34003603 dated 02.09.2005; 34006242 dated 06.09.2006 issued by M/s Geologistics Private Limited to M/s Radiant Trading Corporation & M/s Electronics & Quality Development respectively in which various charges under the head of Agency Charges; Documentation Charges; Examination; Loading/Unloading; Misc. Charges; GESC Charges; Service Charges; Delivery Order (DO) Fees; etc were shown to have been collected. It was observed that no service tax had been paid on all such charges till February’2007. In this regard, it was found pertinent to mention that the service tax collected/claimed under the guise of “Service Charges” was not paid at the relevant period of time but subsequently, in the year 2007, they realized their service tax liability and started discharging the same. It was also observed that though they had started providing the “Business Auxiliary Service” from October’2004, “Business Support Service” from May’2006 and “Clearing & Forwarding Agent Service” from April’2006, they obtained service tax registration in March-2007 and filed ST-3 returns for the past period. First ST-3 Return i.e. for the 2nd half of the year (Oct’2004 to March’2005), for the category of “Business Auxiliary Service”, was filed on 19.11.2007, either through hand delivery or through post. The authenticity of filing of said ST-3 Returns as well as acknowledgement of the same could not be justified or verified due to time constraint.

8. A statement of Shri Tripati Balaji Patro, General Manager (Finance), Western Region in M/s. Agility Logistics Pvt. Ltd., was recorded on 05.10.2009 under Section 14 of the Central Excise Act, 1944 read with Section 83 of the Finance Act, 1994 wherein he inter alia submitted that he was working in M/s Agility Logistics Private Limited as General Manager (Finance), Western Region, since February’2009 and joined the company 5 years back and also well conversant with Accounts maintained at their branch office at Ahmedabad; that he had been duly authorized by the Vice President (HR) of the company to deal with certain matters related to Service Tax.

8.1 He stated that M/s Agility Logistics Private Limited (formerly known as M/s Geologistics Private Limited) having Head Quarter office at Mumbai, was engaged in business as “Freight Forwarding Agent” and “Third Party Logistics”. They were also registered as IATA Agents for the transportation of goods by Air. They were registered with Service Tax department for the following services, the details of which are given as under: 4

Sl. Category Date from Registration No. Date *Remarks No. of Service which started Date on paying which ST- Service Tax 3 Return (After shown to obtaining ST have been Registration filed 1 Business October’2004 AAACL3717AST017 10.03.2007 19.11.2007 Auxiliary Service 2 Clearing April’2006 AAACL3717AST017 10.03.2007 Sent by and post on Forwarding 18.03.2009 Service 3 Business May’2006 AAACL3717AST017 10.03.2007 Sent by Support post on Service 24.04.2009 4 Custom February’2007 AAACL3717AST017 10.03.2007 26.06.2007 House Agent Service

8.2 He stated that the name of M/s Geologistics Private Limited which was originally incorporated on 13.01.1998 as LEP International (I) Private Limited had been changed to M/s Agility Logistics Private Limited, and produced a letter dated 15.01.2007 issued by the Registrar of Companies, Mumbai, Maharashtra, in this regard.

8.3 He further stated that M/s Agility Logistics Private Limited was an IATA approved “Cargo Agent’. Airlines provide them their Air Way Bill so as to book cargo from clients (shipper). Thus they book cargo using the air way bill on behalf of airlines. Airway Bill contains various details which include the name of the shipper, name of the IATA Agent, destination airport, gross weight of the cargo, chargeable weight, rate/charge and total freight charges. The Airlines pay them, a consideration in the form of Commission & incentive. Every fortnight the respective Airlines raise invoice on Agility showing the details of cargo loaded along with the freight rate, freight amount due, commission due etc. Airlines may give consideration as commission, discount/incentive and some treat them as market price adjustments. The airlines also furnish them the published tariff circular showing rates for various destinations. On getting an order from the customer, Agility enquires/floats multiple enquiries with various Airlines regarding availability of space & rate and the Airlines which gives the least rate was selected.

8.4 He further stated that such commission or Incentive was adjusted in the Freight cost and was not separately shown under Revenue heads/codes. The invoice raised by Airlines indicate the commission payable which was deducted from the total Air freight payable to the said Airline and net amount was only booked as Freight Charges. Therefore, the commission amount was not reflected under Revenue/Income heads in the Profit & Loss account, separately.

8.5 He further stated that they had been paying service tax regularly on such commission earned from airlines under the category of “Business Auxiliary Service” from October2004 i.e. when they started providing the said service. The income figures reflected in ST-3 returns, for the category of “Business Auxiliary Service” for the years 2004-05, 2005-06, 2006-07, 2007-08 & 2008-09 was the amount of Airline Commission received by them which was not reflected in the P&L heads/codes due to netting of income. 5

8.6 He also stated that apart from the above said Commission from Airlines as IATA agent they were also engaged in the business wherein they rendered import & export service and the nature of service rendered depended on the requirement of the customers.

In respect of logistics relating to export of goods: > Laising with the Shipping/Airline in respect of the space and in forming the same to customer. > Arranging pick up of the consignment from the Customer’s premises. > Transportation of the same to the port/Airport. > Ensuring consignment is loaded on the Ship & delivering documentary proof of the same. > Tracking the consignment.

In respect of logistics relating to import cargo: > Laising with the Shipping/Airline in respect of the space and informing the same to customer. > Tracking the same. > After the goods arrive, giving the DO to the customer, if the customer desires to clear the goods on his own. > Transportation of the consignment from port/Airport to the customer’s premises.

The customer may avail of all or only part of the aforesaid services.

He stated that therefore, as Freight forwarders / Third Party Logistics they were engaged in the activities of arranging of all facilities such as handling, loading and unloading, transportation, warehousing, stuffing and destuffing etc. and also compliance of statutory formalities with Customs and other Container Terminals. For the above said activities they charge their clients :- a. towards various expenses incurred on behalf of their clients which are accounted on various revenue heads such as Handling fees, Warehousing Rent, Warehousing charges, Terminal Handling charges, DO Charges, LCL charges etc. b. towards the freight charges for the movement of the cargo from the premises to the required destination and vice versa.

On behalf of the clients, they undertake loading of goods, storing the same in the concerned Container Freight Stations/Airport, filing of Shipping Bills with the Customs, processing the shipping bills, stuffing the cargo in the concerned containers, presenting the cargo for inspection/examination by the Customs authorities, attending to the customs clearance, repacking and restuffing of the cargo opened during inspection by the Customs, documentation work, attending to the work relating to port/Airport formalities, filing Bills of Entry with the Customs, processing the Bills of Entry, attending to the clearance of import consignment from customs, processing the Bills of Entry, attending to the clearance of import consignment from the CFS/Airport after fulfilling all the formalities including, customs/ examination / Inspection.

He further clarified that they were collecting from their customers an amount towards the cost of Freight which was nothing but the charges for transportation of cargo from the customers premises to the desired destinations or vice versa. They undertake to transport the said cargo as per the directions of the customers. For executing the said job, they identify the suitable mode of transport, timely supply of transport vehicle, managing and distributing the logistics etc. The freight charges were collectable from the customers for movement of goods from one place to another place and that there could be a mark-up of freight (profit element) or in some cases there can be loss also. He could not provide one to one co-relation in respect of freight collected vis-à-vis freight expense incurred. 6

8.7 He further stated that they have their own transport department which looks after the business of transportation of goods. They have not taken registration under the category of GTA as the liability of service tax was either on consignee or consignor.

8.8 Further, on being asked to describe the nature of services so provided to their customers as well as composition of various heads/codes of “Income” shown in Profit & Loss Account Grouping for various years, as mentioned in column No. 2 below, he submitted his specific replies in Column No. 3, corresponding to the various heads/codes of income, shown in column No. 2 below:

SI. No Heads of Income Nature of service/composition . the income in the said head is the freight charges collected from various clients for movement of goods form one place 1 Freight Income to another and same are not collected on actual basis but we may keep a markup (profit element). Inland Haulage Charges & Ex Work Charges are charges Inland Haulage for container movement from factory to Charges & Ex 2 the Port of Loading and vice versa. These charges/income Work are grouped under Freight income in ‘P&L heads’ but Charges shown separately in P&L grouping. Currency Currency Adjustment Factor (CAF) is the income from 3 Adjustment Factor fluctuation of the rate of Dollar or other foreign currency (CAF) vis-à-vis Indian Rupees. Custom Income indicates the charges towards the documentation charges from various clients, for 4 Custom Income Customs Clearance, which does not include Customs Duty. Octroi Income is amount recovered towards the octroi paid on behalf of various clients. The amount of Octroi charged 5 Octroi Income could be on actual basis or there could be gain or loss. The same is reflected in the Profit & Loss Account under the head of Income. This is the amount recovered towards the duty and taxes paid on behalf of the various clients. The 6 Duty/Taxes Income amount of Duty/taxes charged could be on actual basis or there could be gain or loss. The same is reflected in the Profit & Loss Account under the head of Income. Trucking is done for support to imported or export goods, 7 Trucking Income this is freight charged for transportation of goods from factory to the Port of Loading and vice versa. Insurance charges is the amount recovered from the clients towards the insurance taken for safeguarding the containers. The amount of Insurance charged could be on 8 Insurance Income actual basis or there could be gain or loss. The same is reflected in the Profit & Loss Account under the head of Income. Ware housingWarehousing income is the charges collected, from various 9 Income clients, for warehousing imported or export goods. Handling Fees is the charges recovered from the clients Handling Fees 10 towards Terminal Handling Charges, Bill of Lading Income Charges etc. Reimbursements These are reimbursement charges relating to support 11 Income services provided to the various clients. 7

Handling FeesHandling Fees Agency Income is Agency Fee charged in 12 Agency Income respect of CHA service provided to various clients. Warehouse Rent,Warehouse Rent, W&D Income are the charges collected 13 W&D Income for warehousing goods in relation to providing C&F seivice. Transportation Income, W&D are the charges collected for transporting goods in relation to. providing C&F. service and transportation business. We have our own transport Transportation 14 department also which looks after the business of Income, W&D transportation of goods. We have not taken registration under the category of GTA as the liability of service tax is either on consignee or consignor. Octroi/duties, W&D is amount recovered form from various Octroi/duties, W&D 15 clients, for paying Octroi on behalf of customers and is in Income relation to providing C&F service. Reimbursement Reimbursement Warehousing Income is the 16 Warehousing reimbursement charge collected in relation to providing Income, W&D C&F service. Other Warehousing Income is the charge collected as out Other Warehousing 17 of pocket and other expense incurred on behalf of the Income customer. Other Charge Income is the charge collected as out of Other Charge 18 pocket expense in relation to various services & the Income service provided for support of business. Labour Charges WH Income is the charges levied Labour Charges 19 towards Labour income for C&F, to be included in WH Income taxable value. Other, DO Fees Other, DO Fees Income are the charges collected in 20 Income relation to pro viding Delivery Orders to the customer. Freight Freight Transhipment Income is collected for transporting 21 Transhipment consignment from place of arrival to the place where Income customer is located. Brokerage Brokerage Income is commission income received from 22 Income the Shipping Line. Foreign Agents Foreign Agents (Actual) Freight Income, are charges 23 (Actual) Freight billed to the overseas counterparts for expenses incurred Income by us.

8.9 He stated that they started giving the service of “Custom House Agent” from February’2007 and were collecting the charges under the various heads of Income viz. Custom; Octroi; Handling Fees Agency & Others DO Fees etc. Before Februaty’2007 they were procuring the said service of Custom clearance from M/s Dawn India, by using their license. He was shown invoice No. 34003603 dated 02.09.2005 and 34006242 dated 06.09.2006 issued by M/s Geologistics Private Limited to M/s Radiant Trading Corporation & M/s Electronics & Quality Development respectively in which various charges under the head of Agency Charges; Documentation Charges; Examination; Loading/Unloading; Misc. Charges; GESC Charges; Service Charges; Delivery Order (DO) Fees; etc had been collected. He stated that no service tax had been paid on the above mentioned charges collected from the client as they have been providing these services to their clients and using M/s Dawn India’s licence. He was also confronted with Service Charges shown to be collected at the rate of approximately 10.2 % and 12.24% respectively, he specifically stated that no service tax had been paid on these service charges collected by them till February’2007, since they were not registered under CHA. They had already submitted sample invoices for the year 2005-06 & 2006-07 vide their letter dated 02.09.2009.

8.10 He further stated that during their visits to office on various occasion they had been invariably asked to provide the Audited copies of P&L Accounts for 8 the period under reference but despite being repeatedly reminded they were not in a position to furnish the same as their Accounts were Audited at All India level. However the same were being signed by him in token of its correctness. As regards other information pertaining to the year 2008-09 with respect to various services they submitted the Sales Register and P&L Grouping (Revised) vide letter dated 05.10.2009.

8.11 He stated that they were unable to provide date-wise bifurcation of figures in respect of change in applicability of rate of service tax at the relevant point of time since the figures run into crores and the said bifurcation was not possible. However, they provided the break-up for the financial year 2008-09.

9. From the facts revealed in the statement of Shri Tripati Balaji Patro, General Manager (Finance), Western Region in M/s. Agility Logistics Pvt. Ltd., and on scrutiny of their records, it was observed that they were engaged in the activities as described below:

10. Income earned as IATA agent: M/s Agility Logistics Private Limited (formerly known as Geologistics Private Limited) is an IATA approved “Cargo Agent”. Airlines provide them their Air Way Bill so as to book cargo from clients (shipper). Thus they book cargo using the air way bill on behalf of airlines. Airway Bill contains various details which includes the name of the shipper, name of the IATA Agent, destination airport, gross weight of the cargo, chargeable weight, rate/charge and total freight charges. The Airlines pay M/s Agility Logistics Private Limited, a consideration in the form of commission & incentive. Every fortnight the respective Airlines raise invoice on Agility showing the details of cargo loaded along with the freight rate, freight amount due, commission due etc. Airlines may give consideration as commission, discount/incentive and some treat them as market price adjustments.

10.1 As per section Section 65(19)(ii) of the Finance Act, 1994 “Business Auxiliary Service means any service in relation to promotion or marketing of service provided by the client and also include a service incidental or auxiliary to any activity specified in sub-clauses (i) to (v), such as billing, issue or collection or recovery of cheques, payments, maintenance or accounts and remittance, inventory management, evaluation or development of prospective customer or vendor, public relation services, management or supervision, and includes services as a commission agent.”

10.2 In the instant case, (a) M/s Agility Logistics Private Limited are an IATA agent employed by the members of IATA (airlines) for supporting in their professional line of work (service) relating to booking and transportation of cargo, preparing bills, collecting them and realizing payment etc. which otherwise would have been carried out by the airlines concerned and M/s Agility Logistics Private Limited get paid for such services. The amount is being paid in the name of commission. At times, they render this service through their sub agents also. (b) The airway bill is the document which mentions the freight charges to the customer who books the cargo and appears to be the only connecting document between the airlines and the ultimate customer.

10.3 Thus the income earned by M/s Agility Logistics Private Limited as an IATA agent from airlines are only towards the service rendered in connection with marketing and selling of their (Airlines) cargo space and thus it appears that the said service is liable to be classified under Business Auxiliary Service under the category of promotion or marketing of services provided by client under section 65(19)(ii) of Finance Act, 1994. Further as per section 67 of the Act, the value of taxable service shall be the gross amounts received from their clients (that is cumulative of commission and incentive) namely the Airlines. 9

10.4 In his statement dated 05.10.2009 Shri Tripati Balaji Patro, General Manager (Finance), Western Region in M/s. Agility Logistics Pvt. Ltd., had stated that such commission or incentive are being adjusted in the Freight cost and are not separately shown under Revenue heads/codes. The invoice raised by Airlines indicate the commission payable which is deducted from the total Air freight payable to the said Airline and net amount is only booked as Fright Charges. Therefore, the commission amount is not reflected under Revenue/Income heads in the Profit & Loss account, separately. He further stated that they have been paying service tax regularly on such commission earned from airlines under the category of “Business Auxiliary Service” from October’2004 i.e. when they started providing the said service. The income figures reflected in ST-3 returns, for the category of “Business Auxiliary Service” for the years 2004-05, 2005-06, 2006-07, 2007-08 & 2008-09 is the amount of Airline Commission received by them which is not reflected in the P&L heads/codes due to netting of income.

11. Operations Undertaken:

Apart from the above said Commission from Airlines as IATA agent, M/s. Agility Logistics Pvt. Ltd. are also engaged in the business wherein they render import & export service and the nature or service rendered depends on the requirement of the customers.

For Import and Export of goods: > Liaising with the Shipping/Airline in respect of the space and informing the same to customer. Arranging pick up of the consignment from the Customer’s premises. > Transportation of the same to the port/Airport. > Ensuring consignment is loaded on the Ship & delivering documentary proof of the same. > Tracking the consignment. > Liaising with the Shipping/Airline in respect of the space and informing the same to customer. > Tracking the same. > After the goods arrive, giving the DO to the customer, if the customer desires to clear the goods on his own. > Transportation of the consignment from port/Airport to the customer’s premises. > handling, > loading and unloading, > transportation, > warehousing, > stuffing and destuffing etc. and > also compliance of statutory formalities with Customs and other Container Terminals. loading of goods, storing the same in the concerned Container Freight Stations/Airport, filing of Shipping Bills with the Customs, > processing the shipping bills, > stuffing the cargo in the concerned containers, > presenting the cargo for inspection/examination by the Customs authorities, > attend to the customs clearance, > repacking and restuffing of the cargo opened during inspection by the Customs, > documentation work, > attend to the work relating to port/Airport formalities, > filing Bills of Entry with the Customs, > process the Bills of Entry, > attend to the clearance of import consignment from customs, > process the Bills of Entry, attend to the clearance of import consignment from the CFS/Airport after fulfilling all the formalities including, customs! examination! Inspection 10

11.1 As the said service provider failed to provide invoices pertaining to the period from 2004-05 to 2008-09 issued in respect of various services, bifurcation of various services provided by them was not possible.

11.2 As per section 65(25) of the Act, “Clearing and forwarding agent” means any person who is engaged in providing any service, either directly or indirectly, connected with the clearing and forwarding operations in any manner to any other person and includes a consignment agent. As per section 65(1 05)(j) of the Act the taxable service of clearing and forwarding agents has been defined as “Taxable service means any service provided or to be provided to any person, by a clearing and forwarding agent in relation to clearing and forwarding operations, in any manner.”

11 .3 It appeared that on behalf of the clients, M/s. Agility Logistics Pvt. Ltd. undertook loading of goods, storing the same in the concerned Container Freight Stations/Airport, filing of Shipping Bills with the Customs, processing the shipping bills, stuffing the cargo in the concerned containers, presenting the cargo for inspection/examination by the Customs authorities, attending to the customs clearance, repacking and restuffing of the cargo opened during inspection by the Customs, documentation work, attending to the work relating to port/Airport formalities, filing Bills of Entry with the Customs, processing the Bills of Entry, attending to the clearance of import consignment from customs, processing the Bills of Entry, attending to the clearance of import consignment from the CFS/Airport after fulfilling all the formalities including, customs/ examination / Inspection.

11.4 M/s. Agility Logistics Pvt. Ltd., were collecting from their customers an amount towards the cost of Freight which was nothing but the charges for transportation of cargo from the customers premises to the desired destinations or vice versa. M/s. Agility Logistics Pvt. Ltd. undertook to transport the said cargo as per the directions of the customers. For executing the said job, M/s. Agility Logistics Pvt. Ltd., identified the suitable mode of transport, timely supply of transport vehicle, etc. The freight charges were collectable from the customers for movement of goods from one place to another place and that there was a mark-up of freight (profit element). In some cases there could be loss also but on scrutinizing the freight income & expense heads it was observed that overall there was always a profit margin and therefore the freight was not collected on actuals. They could not provide one to one co-relation in respect of freight collected vis-à- vis freight expense incurred.

11.5 The above said services of M/s. Agility Logistics Pvt. Ltd., for which they collect charges under various heads viz. Freight Income; Inland Haulage Charges & Ex Work Charges; Insurance; Currency Adjustment Factor; Duty/taxes; Trucking; reimbursements; Others; Others charge collect; Freight Transhipment; Foreign Agents (Actuals); etc., appeared to be sub-activities to the main activity of “Clearing & Forwarding Service” and was provided while providing the main service of “Clearing & Forwarding Service” or “Custom House Agent’s Service” whichever applicable depending upon the nature of transaction, and hence would be classifiable under the said category of service.

11.6 M/s. Agility Logistics Pvt. Ltd., were charging their customers/clients under the above mentioned various heads and were showing expenses in year- wise Cost details provided by them, deductions of expenses incurred by them, on behalf of their clients, under the heads of Duty/Taxes; which is allowable to them as the same is statutory levy incurred on behalf of their customers as Pure Agent.

11.7 As per section 67, “where service tax is chargeable on any taxable service with reference to its value, then such value shall in a case where the provision of service is for consideration in money, be the gross amount charged by the service provider for such service provided or to be provided”. Since M/s Agility 11

Logistics Pvt. Ltd., was charging their customer as a gross value without showing the breakup of actual freight as well as their service charges, the total amount charged should be taken as the taxable value for the purpose of payment of service tax in terms of section 67 of the Act.

11.8 During the course of scrutiny of the records it revealed that M/s Agility Logistics Pvt. Ltd. was raising invoices for getting the so called reimbursement of various expenses incurred by them while providing services to the importer / exporter. They were confronted with Invoices No. 34003603 dated 02.09.2005; 34006242 dated 06.09.2006 issued by M/s Geologistics Private Limited to M/s Radiant Trading Corporation & M/s Electronics & Quality Development respectively in which various charges under the head of Agency Charges; Documentation Charges; Examination; Loading/Unloading; Misc. Charges; GESC Charges; Service Charges; Delivery Order (DO) Fees; etc had been collected. In his statement dated 05.10.2009 Shri Tripati Balaji Patro, General Manager (Finance), Western Region in M/s. Agility Logistics Pvt. Ltd., stated that no service tax had been paid on the above mentioned charges collected from the clients as they had been providing these services to their clients by using M/s Dawn India’s licence. He was also confronted with Service Charges shown to be collected at the rate of approximately 10.2 % and 12.24% respectively, to which he stated that no service tax was paid on the said “service charges” collected by them till February’2007, since they were not registered under CHA (Custom House Agent).

11.9 Apart from the aforesaid two invoices, M/s Agility Logistics Pvt. Ltd., vide letter dated 29.05.2009 submitted a list of similar invoices showing service charges during the period 2005-06 & 2006-07. In the said list details in respect of Name of the party, Invoice No., Agency Charge as well as Service charges (purported to have been collected at the applicable rate of service tax at the relevant time) had been shown. Since they had not furnished the relevant invoices, despite the fact they were repeatedly asked to do so, through various summons issued on them as well as during their personal visits before the investigating officer, the exact amount of taxable value required to be calculated and bifurcated for the purpose of charging service tax, under section 11D was practically not possible.

11.10 The basic function of the CHA Services, defined under Section 65(105)(h) of the Finance Act, 1994 is: “the taxable service means any service provided or to be provided to a client, by a custom House Agent in relation to the entry or departure of conveyances or the import or export of goods”.

11.11 The Service of CHA has been brought under the Service Tax Net with effect from 15.06.1997 vide Notification No. 17/97-ST dated 06.06.1997. The definition of Custom House Agent provided under Section 65(35) of the Finance Act, 1994 reads as under:

“custom house agent” means a person licensed, temporarily or otherwise, under the regulations made under sub-section (2) of section 146 of the Customs Act, 1962.

11.12 It appeared that the services rendered by the Custom House Agent were not merely limited to the clearing of the import and export consignment. The CHA also renders the service of loading/ unloading of import or export goods from/ at the premises of the exporter / importer, the packing, weighment, measurement of the export goods, the transportation of the export goods to the customs station or the import goods from the custom station to the importer’s premises, carrying out of various statutory and other formalities such as payment of expenses on account of octroi, destuffing / pelletisation terminal handling, fumigation, drawback/ DEEC processing, survey / amendment fees, dock fees, repairing and examination 12 charges, landing and container charges, statutory labour charges, testing fees, drug control formalities, sorting/ marking / stamping/ sealing on behalf of the exporter / importer. The Custom House Agent also incurs various other expenses such as crane / fork lift charges, taxi charges, Photostat and fax charges, bank collection charges, courier service charges, and miscellaneous other expenses on account of the exporter/ importer. For all the above charges, the CHA was ordinarily reimbursed by the importer/ exporter for whom the above services were rendered. Apart from the above charges, the CHA also charges the client for his services under the head/ nomenclature of ‘Agency and Attendance Charges’ or similar kind of heads which was purported to be his Service Charges in respect of the service rendered in relation to the import/ export of goods. Such Agency Charges appeared liable to Service Tax.

11.13 Further, on going through the Books of Accounts, it was observed that M/s Agility Logistics Pvt. Ltd. had recovered and collected certain excess amounts as so called reimbursement expenses under the guise of various heads, than the actual expenses incurred by them on behalf of their clients. This clearly indicated that these were mere paper transactions, systematic adjustments and modus-operandi adopted by the said service provider to settle the Agency Charges on which they were paying Service Tax. Part of these Agency Charges were reflected in the actual head of income, wherein the same was taken on the lower side to avoid payment of Service Tax. The remaining part of the so called Agency Charges was collected disguising the other expenses towards various heads. The said service provider [CHA] took advantage of Board’s Circular, Public Notice, by mis-interpreting the clause which envisages ‘payments made by CHA on behalf of the client, such as so called reimbursement expenses incurred were not to be included for computing the Service Tax’. Accordingly, while misusing the wordings of the said instruction/ directions, by misinterpreting the same in their own way and interest to avoid payment of Service Tax, they adopted and invented the procedure of issuing another set of invoices immediately after introduction of service tax on CHAs.

11.14 In view of the above discussion, it appeared that in no way, the aforesaid transactions could be treated and termed as “Transactions toward so called reimbursable expenses” since the same had been generated merely with an intention to adjust and settle their Agency Commission charges which they were settling with their client by adjusting the same on the lower side, in order to pay less service tax. Since the said service provider failed to produce any supporting document, evidencing the actual expenses incurred and as such these expenses could no more be treated as actual, genuine expenses and therefore it appeared that most of these transactions were dummy or dubious.

11.15 On examination of the Books of Accounts of M/s Agility Logistics Pvt. Ltd., it appeared that they had shown their expenses in the following ways: (i) Expenses charged but no expenses actually incurred on various headings. (ii) Expenses charged and part of expenses shown as incurred on various headings. (iii) Expenses charged and shown as incurred expenses on various headings.

11.16 In his statement dated 05.10.2009 Shri Tripati Balaji Patro, General Manager (Finance), Western Region in M/s, Agility Logistics Pvt. Ltd., stated that they started giving the service of “Custom House Agent” from February’2007 and collect charges under the various heads of income viz. Custom; Octroi; Handling Fees Agency & Others DO Fees etc. Before February’2007 they were procuring the said service of Custom clearance from M/s Dawn India, by using their license. However, it was observed that before February’2007 also they were issuing invoices for the said services and collecting charges under the heads of Agency Charges, Documentation Charges, Examination, Loading/Unloading, Misc charges, GSEC charges, Delivery Order Charges etc. which showed that though they were using Dawn India’s CHA license but never-the-less they were procuring 13 the same which were inputs to their clients (importer/exporter). As an illustration it was observed that in Invoice No. 34003603 dated 02.09.2005; issued by M/s Geologistics Private Limited to M/s Radiant Trading Corporation various charges under the head of Agency Charges; Documentation Charges; Examination; Loading/Unloading; Misc. Charges; GESC Charges; Service Charges; Delivery Order (DO) Fees; etc had been collected. An amount of Rs. 1800/- had been claimed towards “Agency charges” and Rs. 183/- had been claimed as “Service Charges” which approximately comes to 10.2 % of the “Agency Charges”. They have stated that they had not paid any service tax on the amount collected till February’2007 under the said heads. It was further observed that they had distributed the amount collected under “Agency Charges” into various heads viz. Documentation Charges, Examination, Loading/Unloading, Misc charges, GSEC charges, Delivery Order Charges etc. thereby lowering the taxable value of the service.

11.17 As per section 65(19) of the Finance Act, 1994, Business Auxiliary Service means (iv) any service in relation to procurement of goods or services, which are inputs for the clients;

Explanation : For the removal of doubts, it is hereby declared that for the purposes of this sub-clause “inputs” means all goods or services intended for use by the clients.

The above said service is liable for service tax with effect from 10.09.2004. Thus the service procured for their customers appears to be taxable under “Business Auxiliary Services” under the category of Service in relation to procurement of goods or services, which are inputs for the client, under section 65(19)(iv) of the above said Act, w.e.f.10.09.2004.

12. Income earned for providing Support Services:

12.1 As per section 65(104c) of Finance Act, 1994 : “support services of business or commerce” means services provided in relation to business or commerce and includes evaluation of prospective customers, telemarketing, processing of purchase orders and fulfillment services, information and tracking of delivery schedules, managing distribution and logistics, customer relationship management services, accounting and processing of transactions, operational assistance for marketing, formulation of customer service and pricing policies, infrastructural support services and other transaction processing. Explanation.—For the purposes of this clause, the expression “infrastructural support services” includes pro viding office along with office utilities, lounge, reception with competent personnel to handle messages, secretarial services, Internet and telecom facilities, pantry and security;

As per section 65(105)(zzzq) of Finance Act, 1994 : “taxable service” means any service provided or to be provided - to any person, by any other person, in relation to support services of business or commerce, in any manner;

12.2 As discussed earlier, M/s Agility Logistics Pvt. Ltd. is engaged in the activities of:

> Liaising with the Shipping/Airline in respect of the space and informing the same to customer. > Arranging pick up of the consignment from the Customer’s premises. > Transportation of the same to the port/Airport. > Ensuring consignment is loaded on the Ship & delivering documentary proof of the same. > Tracking the consignment. > Liaising with the Shipping/Airline in respect of the space and informing the same to customer. 14

> Tracking the same. > After the goods arrive, giving the DO to the customer, if the customer desires to clear the goods on his own. > Transportation of the consignment from port/Airport to the customer’s premises. > handling, > loading and unloading, > transportation, > warehousing, > stuffing and destuffing etc. and > also compliance of statutory formalities with Customs and other Container Terminals. >loading of goods, >storing the same in the concerned Container Freight Stations/Airport, >filing of Shipping Bills with the Customs, > processing the shipping bills, >stuffing the cargo in the concerned containers, > presenting the cargo for inspection/examination by the Customs authorities, > attend to the customs clearance, > repacking and restuffing of the cargo opened during inspection by the Customs, > documentation work, > attend to the work relating to port/Airport formalities, >filing Bills of Entry with the Customs, >process the Bills of Entry, > attend to the clearance of import consignment from customs, > process the Bills of Entry, > attend to the clearance of import consignment from the CFS/Airport after fulfilling all the formalities including, customs/ examination/ Inspection

12.3 It was observed that M/s Agility Logistics Pvt. Ltd., had taken service tax registration under the category of “Business Support Service” also. But from the activities as explained by Shri Tripati Balaji Patro, General Manager (Finance), Western Region in M/s. Agility Logistics Pvt. Ltd., in his statement dated 5.10.2009 , it appeared that the said service provider was mainly providing three services i.e. “Business Auxiliary Service”, “Clearing & Forwarding Agent’s Service” & “Custom House Agent’s Service”. The activities of (importers / exporters) were ancillary to the main activities of “Clearing & Forwarding Agent’s Service” and hence cannot appropriately be classified under the individual category of “Business Support Service”. It is a settled norm that various sub-activities of a single composite service cannot be vivisected for classification under different heads of Service and shall only be classified under the main category of service. As the said service provider failed to provide invoices pertaining to the period from 2004-05 to 2008-09 issued in respect of various services bifurcation of various services provided by them was not possible. As the said service provider was unable to provide any justification / details which could satisfactorily indicate that any activity/services so provided fall under the ambit of “Business Support Service”, therefore each activity cannot be judged independently and collective service is to be taken as bouquet service on the whole. Hence the various activities had been taken to be part of the main activity of “Clearing & Forwarding Agent’s Service” or “Custom House Agent’s Service” and as such needed to be classified under the said head.

13. On scrutiny of ST-3 returns under the category of “Business Support Service” & “Clearing & Forwarding Agent’s Service” it was observed that there was no acknowledgement of ST-3 returns related to the above said services and the same found to have been sent through post. As such the veracity of the same can not be relied upon. Further, on scrutiny of the ST-3 Return certain discrepancies with respect to Cenvat availed and utilized were noticed in respect of figures reflecting in 15

Opening Balance did not match with Closing Balance. Also the details of input invoices on the basis of which Cenvat Credit so availed was not furnished under the relevant ST-3 Returns for the purpose of necessary scrutiny and verification. It is pertinent to mention that the details regarding availment and utilization of the Cenvat credit, as well as year-wise/ service-wise details of service tax paid by the company, were called for from the inception of the subject enquiry, which the said service provider failed to provide till the finalization of the investigation despite the fact the same were repeatedly called for, in writing, verbally/ telephonically. A final letter F.No.STC/4-11/Prev/Gr.ll/2008-09 dated 21.10.2009 was issued to M/s Agility Logistics Private Ltd. calling for various Cenvat details and other pending details which the party had not provided. As per Rule 9(5) Cenvat Credit Rules

“The manufacturer of final products or the provider of output service shall maintain proper records for the receipt, disposal, consumption and inventory of the input and capital goods in which the relevant in formation regarding the value, duty paid, CENVAT credit taken and utilized, the person from whom the input or capital goods have been procured is recorded and the burden to proof regarding the admissibility of the CENVAT credit shall lie upon the manufacturer or provider of output service taking such credit.”

14. In absence of verification of Cenvat availment & utilization details, as well as the event of non/proper acknowledgement of ST-3 returns for the said services, the Cenvat credit availed and utilized by M/s Agility Logistics Pvt. Ltd., for the services of “Business Support Service” & “Clearing & Forwarding Agent’s Service” needs to be disallowed and recovered.

15. From the scrutiny of ST-3 returns it was observed that M/s Agility Logistics Pvt. Ltd., had utilized Cenvat credit of Rs. 30,49,433/- & Rs. 62,06,377/- under the category of “Business Support Service” & “Clearing & ForwardingAgent’s Service”, respectively for the period from 01.04.2006 to 31.03.2009. In absence of non verification of Cenvat availment & utilization details the entire Cenvat credit totally amounting to Rs. 92,55,8101-, utilized by M/s Agility Logistics Pvt. Ltd., on the input services needs to be rejected and disallowed, as M/s Agility Logistics Pvt. Ltd., has failed to provide necessary details/documents for verification of Cenvat credit availed and utilized, necessary under Rule 9(5) of Cenvat Credit Rules, 2004.

16. Based on the facts as stated in the statement dated 05.10.2009 of Shri Tripati Balaji Patro, General Manager (Finance), Western Region in M/s. Agility Logistics Pvt. Ltd., a consolidated worksheet had been prepared as per Annexure-A. The said work-sheet depicts the actual taxable value vis-à-vis taxable value as shown in ST-3 Returns, the differential taxable value and the net service tax liability thereof. The said work-sheets annexed as Annexure-A, to the Show Cause Notice, prepared for the purpose of calculation of service tax liability is duly relied upon in list of documents relied upon to the subject Show Cause Notice.

17. M/s Agility Logistics Pvt. Ltd., appeared to have evaded service tax to the tune of Rs. 8,04,10,242/- calculated on the basis of difference of total taxable value calculated as per P&L Account/P&L Grouping and the taxable value shown as per ST-3 Returns, for various years, filed by the service provider.

18. M/s Agility Logistics Pvt. Ltd., had shown their inability to provide the detailed break-up based on the period of effective change in rate of service tax, hence they had admitted to the applicable rate of service tax in the relevant year, as per statement dated 05.10.2009 of Shri Tripati Balaji Patro, General Manager (Finance), Weste.rn Region in M/s. Agility Logistics Pvt. Ltd.

19. As the said service provider failed to provide invoices pertaining to the period from 2004-05 to 2008-09 issued in respect of various services, bifurcation of various services provided by them was not possible. As the said 16 service provider was unable to provide any justification / details which could satisfactorily indicate that any activity/services so provided fall under the ambit of particular service specifically, therefore, each activity cannot be judged independently / separately and collective service ought to be taken as bouquet service on the whole.

20. On scrutiny of the documents/financial statements viz. Balance Sheet, P&L Account, P&L Grouping etc. submitted by the said service provider, it appeared that the said service provider had received income of Rs. 80,86,92,431/- under the categories of “Business Auxiliary Service”; “Clearing & Forwarding Agent’s Service” and “Custom House Agent’s Service” during the period from 2004-05 to 2008-09, while they have paid service tax on Rs. 12,33,08,251/- (Rs. 38,42,398/-; 5,91,75,278/-; 5,73,46,405/-; & 29,44,170/- under “Business Auxiliary Service”; “Business Support Service”; “Clearing & Forwarding Agent’s Service” & “Custom House Agent’s Service”, respectively) during the period from 2004-05 to 2008-09 (as per ST-3 Return). Therefore, they had failed to discharge service tax liability on the differential taxable value of Rs. 68,53,84,180/- amounting to Rs. 8,04,10,242/-. The details of the calculation of service tax liability have been shown in Annexure-”A” to the Show Cause Notice.

21. From the above, it also appeared that the said service provider was charging and collecting service tax from their customers but had not deposited the same with the Government account.

22. From the evidence, it appeared that the said assessee has not taken into account all the incomes received by them for rendering taxable services for the purpose of payment of service tax and thereby minimize their tax liabilities. The deliberate efforts to mis-declare the value of taxable service in ST-3 returns and not paying the correct amount of service tax in utter disregard to the requirements of law and breach of trust deposed on them such outright act in defiance of law appears to have rendered them liable for stringent penal action as per the provisions of Section 78 of Finance Act 1994 for suppression or concealment or furnishing inaccurate value of taxable service with intent to evade payment of service tax.

23. All the above acts of contravention on the part of M/s Agility Logistics Pvt. Ltd., appeared to have been committed by way of suppression of facts with an intend to evade payment of Service Tax and therefore, the said Service Tax not paid was required to be demanded and recovered from them under the proviso to Section 73(1) of the Finance Act, 1994 by invoking extended period of five years. All these acts of contravention of the provisions of Section 66, 67, 68, 69 & 70 of the Finance Act, 1994 read with Rules 4, 5, 6 and 7 of the Service Tax Rules, 1994 appeared to be punishable under the provisions of Section 76 & 77 of the Finance Act, 1994.

24. Moreover, in addition to the contravention, omission and commissions on the part of M/s Agility Logistics Pvt. Ltd., as stated in the foregoing paras, it appeared that, they had willfully suppressed the facts, nature and value of service provided by them with an intent to evade the payment of Service Tax, rendering themselves liable for penalty under Section 78 of the Finance Act, 1994.

25. Thus, it appeared that the said M/s. Agility Logistics (P) Ltd., had contravened the provisions of:

(a) Section 66, 67 & 68 of the Finance Act, 1994 read with Rule 5 read with Rule 6 of the Service Tax Rules, 1994, in as much as that they failed to ascertain taxable value properly and make payment of Service Tax amounting Rs.8,04,10,242/- (As per Annexure A) as mentioned in the foregoing paras for the period from 01 . 04.2004 to 31 .03.2009 within the statutory time limit prescribed; 17

(b) Section 69 of the Finance Act, 1994 read with Rule 4 of the Service Tax Rules, 1994, in as much as they failed to obtain Service Tax Registration for providing services under the category of Business Auxiliary Service; Business Support Service; Clearing & Forwarding Agent’s Service; and Custom House Agent’s Service.

(c) Section 70 of the Finance Act, 1994 read with Rule 7 of the Service Tax Rules, 1994, in as much as that they have failed to file prescribed Service Tax returns in form ST-3 properly;

(d) Section l1D of the Central Excise Act, 1944, made applicable under Section 83 of the Finance Act, 1994, in as much as they have failed to deposit the service tax collected by them to the credit of Central Government.

26. A Show Cause Notice bearing F.No.STC/4-58/O&A/Prev-II/09 dated 23.10.2009 was issued to M/s. Agility Logistics (P) Ltd., located at 3rd floor, Sun City House, Mithakali Six Road, Ahmedabad calling upon them to show cause to the Commissioner, Service Tax, Ahmedabad as to why: (i) Services rendered by them should not be considered as taxable services under the categories of Business Auxiliary Service, Business Support Service, Clearing & Forwarding Agent’s Service & Custom House Agent Service as defined under Section 65 of the Finance Act, 1994, as amended, and the amount of taxable value of Rs. 68,53,84,180/- (as per Annexure A) in respect of payment received/recovered by them from their clients should not be considered as taxable value under Section 67 of the Finance Act 1994 and service tax amounting to Rs.8,04,10,242/- (as per Annexure A) for the period from 01.04.2004 to 31.03.2009 should not be demanded and recovered from them under Section 73(1) of the Finance Act, 1994, invoking the larger period of five years;

(ii) Interest as applicable on the amount of service tax liability of Rs. 8,04,10,242/- (as per Annexure A) should not be recovered from them for the delay in making the payment, under Section 75 of the Finance Act,1994;

(iii) Service tax amount, as above, charged under the guise of “Service Charges” but not paid to the Government Exchequer, as seen from the sample invoices submitted by them, should not be demanded and recovered under Section 11D of the Central Excise Act, 1944, made applicable under Section 83 of the Finance Act, 1994, and section 73(A) of the Finance Act, I 994. (iv) Interest as applicable on the above amount of service tax should not be recovered from them under section 11DD of Central Excise Act, 1944 made applicable under Section 83 of the Finance Act, 1994, and section 73(B) in as much as they have failed to deposit the service tax collected by them to the credit of Central Government account.

(v) Cenvat Credit of Rs. 92,55,810/- (amount as shown in ST-3 returns pertaining to the period from 01.04.2006 to 31.03.2009) wrongly availed by the service provider should not be disallowed and recovered under rule 14 of Cenvat Credit Rules, 2004 read with Section 73 of the Finance Act, 1994, as M/s Agility Logistics Pvt. Ltd., has failed to provide necessary details/documents for verification of Cenvat credit availed and utilized necessary under Rule 9(5) of Cenvat Credit Rules, 2004. 18

(vi) Interest as applicable on service tax amounting to Rs. 92,55,810/-, should not be recovered from them for the delay in making the payment, under section 75 of the Finance Act, 1994, read with Rule 14 of Cenvat Credit Rules, 2004,.

(vii) Penalty should not be imposed upon them under Section 76 of the Finance Act, 1994 for the failure to make the payment of Service Tax payable by them.

(viii) Penalty should not be imposed upon them under Section 77 of the Finance Act, 1994 for the failure to file prescribed Service Tax return properly and for not obtaining Service Tax Registration under the category of Business Auxiliary Service, Business Support Service, Clearing & Forwarding Agent’s Service & Custom House Agent Service.

(ix) Penalty should not be imposed upon them under Section 78 of the Finance Act, 1994 for suppressing the value of taxable services provided by them before the Department with intent to evade payment of Service Tax.

(x) Penalty should not be imposed upon them under Rule 15 (iv) of the Cenvat Credit Rules, 2004, read with section 78 of the Finance Act, 1994, for wrongly availing Cenvat Credit of input services.

Defence Reply & Personal Hearing:

27. M/s Agility Logistics P. Ltd. vide their letter dated 22.01.2010 submitted their reply to the above mentioned Show Cause Notice dated 23.10.2009. They submitted that the aforesaid demand has been raised based on the figures as accounted for in the audited books of the Company. The entire demand has been raised merely by taking figures from the various accounting heads, accounting codes and summarily raising demand on the same.

28. Before making their submission they brought to the notice the following facts: a) They are engaged in providing four distinct types of services and are registered and paying service tax for all these services. The details in respect of the same are given below:

Service categor Nature of service Approx. annua y l /classification Service tax payment (Rs. In lakhs) Business Auxiliary Commission received 1.20 Service from airlines Customs House Customs clearance 1.75 Agent Support services Logistics services for 23.00 for business & import and export commerce Clearing Storage and 32.00 & Forwarding Warehousing 19

Agency

28.1 They submitted that each of the aforesaid service category is a separate and distinct service by itself, which is explained below:

BUSINESS AUXILIARY SERVICE - Commission received from Airlines

They render services on behalf of airlines in as much as placing of the cargo on the airline and the documentation part in respect of the same is carried out by them. For this service rendered by them on behalf of the airlines, they receive commission from airlines and this is liable to service tax under the category "Business Auxiliary Service". They are paying service tax in respect of the commission received.

CUSTOMS HOUSE AGENTS - CHA services under the CHA Licensing Regulations, 2004

They were registered under the category "Customs House Agents" and were rendering service in terms of the Customs House Agents Licensing Regulations, 2004. Under the Customs Act, 1962 only licensed customs house agents were permitted to deal with the customs authorities in respect of matters pertaining to import and export of goods. Consequently, as they have been issued a license under the CHA Regulations they operate as a licensed customs house agent. This license was issued in February 2007. Therefore, till February 2007 they were not rendering-any service as a customs house agent. Till February 2007, they were availing the services of a customs house agent, Dawn India. Since the CHA service was rendered by Dawn India, they used to charge them service tax on the same. From February 2007 since they have registered as a CHA under the CHA regulations, they were registered for service tax and were charging and paying service tax on the same. Hence, currently they were paying service tax on the charges received by them as a CHA.

BUSINESS SUPPORT SERVICE - Managing logistics in respect of export and import .' . . They render service in relation to import/export. The nature of service rendered depends on the requirement of the customer. Stated below is an illustrative list of services rendered in case of exports and imports.

In respect of logistics relating to export of goods:

 Liasing with the shipping line/airline in respect of the space and informing the same to the customer;

 Arranging to pick up the consignment from the customer's premises;

 Transportation of the same to the port/airport;

 Ensuring consignment is loaded on the ship and delivering documentary proof of the same;

• Tracking the consignment

In respect of logistics relating to import of goods:

 Liasing with the shipping line/airline in respect of the space and informing the same to the customer; 20

 Tracking the same;

 After the goods arrive, giving the Delivery Order to the customer if the customer desires to clear the goods on his own;

 Transportation of the consignment from the port/airport to the customers premises

They submitted that a customer may avail of all or only part of the aforesaid services.

They submitted that in respect of this service, they were registered under service tax w.e.f. May 1, 2006 under the category "Support Services for Business or Commerce" and had paid service tax.

CLEARING AND FORWARDING -- services relating to warehousing and distribution They also provide services relating to warehousing and distribution. Under this activity they have various warehouses wherein goods of clients were warehoused and then from there the same were cleared to destinations as indicated by the client. This activity sometimes involves picking up the goods from the premises of the client and bringing the same to the warehouse. They were registered for this service under the category "clearing and forwarding" and have been charging and paying service tax. They submitted that the aforesaid four services are different and distinct services and are not inter-connected.

29. In light of the aforesaid facts, they made the following submissions as to why service tax demand raised in the show cause notice was not sustainable.

29.1 Notice contradictory and vague - demand bad The show cause notice does not accept the submission that they were rendering, inter alia, services which were taxable under the category "business support services". The notice is contradictory and vague 'as was obvious from the following:  Para 11.5 of the show cause notice after examining the activity carried out by them in respect of logistics pertaining to import and export alleges that services rendered by them appeared to be sub-activity to the main activity of "clearing and forwarding" and is provided while providing the main service of "clearing and forwarding service" or "customs house agent's service" whichever is applicable depending upon the nature of transaction and hence will be classifiable under the said category of service;  Para 12.3 of the show cause notice after examining the activity carried out by them in respect of logistics pertaining to import and export alleges that the activities were ancillary to the main activities of "clearing and forwarding" and hence cannot be appropriately classified under "business support service". The notice further alleges that various activities had to be taken to be part of the main activity of "clearing and forwarding agent's service" or "customs house agents" service and as such needs to be classified under the said head;

Therefore, the notice basically alleges that classification under "Support Services for Business or Commerce" was not acceptable and the said service has to be classified under either "Clearing and Forwarding" or "Customs House Agent". But the show cause notice does not propose classification under a specific heading. In order to meet the allegations made in the show cause notice which proposes to reject the classification made by them, they have to be put on notice specifying the exact category under which the department proposes to classify the services of managing logistics pertaining to import/export. The Company has been categorical in its stand that the services pertaining to 21 managing logistics of import/export are classifiable under the category "Business Support Service" and no other heading. Therefore, if this stand of theirs was not acceptable to the department then the show cause notice has to inform them under which heading the department proposes to classify the services of managing logistics of import/export so that they can make good their defence. The show cause notice is vague as it does not specify the category under which the services of managing logistics of import/export are classifiable but alleges it can be classified either under "clearing and forwarding" or "customs house agent" category.

Further, the basis of raising the demand and classification of the demand, category wise has not been given. Annexure A to the show cause notice which raises the demand of Rs.8.04 crores on the alleged taxable value of Rs.68.53 crores does not give the break up of the taxable value alleged. What the notice does is that revenue account heads as reflected in the books of accounts had been assumed to be the taxable value of the services and from this figure the taxable value offered for service tax in the service tax returns has been reduced and on the balance service tax has been demanded. A perusal of Annexure A to the notice indicates as follows:

Particulars Amount (Rs.) Amount (Rs.)

Total taxable value (total of revenue 80,86,92,431 heads as per books of accounts) Value of taxable services Less: offered for tax during the period as per ST3 . returns Business Auxiliary Service 38,42,938 (Commission -v Particulars Amount (Rs.) Amount (Rs.) from airlines)

Business Support Service (Income from 5,91,75,278

managing logistics relating to import/export) Clearing and Forwarding Agent 5,73,46,405 Service

Custom House Agent service 29,44,170 12,33,08,251

Differential value on which service tax 68,53,84,180

demanded They submitted that it was clear from the aforesaid that the demand had been raised only with the objective of raising a demand. The show cause notice while raising the demand has raised demand on the revenue heads as 22 appearing in the books of accounts when in fact many revenue heads reflect the accrued income and not the income received. In accordance with the provisions of the Act and the Rules, service tax is payable on the value of the taxable service received by the service provider. Therefore, no service tax was payable unless the value of taxable service was received.

They submitted that in the absence of a meaningful show cause notice, they were not in a position to reply to the allegations made and hence the demand raised on this count is bad. That the notice is vague and issued without application of mind was evident from the fact that the notice 'while proposing to reject the classification under "business support service" requires them to show cause at para 26 as to why the services rendered by them should not be classified under categories of "business auxiliary service", "business support service", "clearing and forwarding agents" service" and "customs house agent"s service". Therefore, on one hand the show cause notice proposes to reject the classification under "business support service" whereas on the other hand the notice proposes to classify the service under "business support service". They submitted that the show cause notice, is vague as the allegations made therein were contradictory.

29.2 Notice based on incorrect understanding of facts - basis of demand wrong The show cause notice proceeds on the basis that they were rendering three category of services:  Services of assisting the airlines in their line of work - classifiable under "Business Auxiliary Service";  CHA work for which we have been granted license under the CHA Regulations, 2004 - classifiable under "Customs House Agents"; and o Clearing and forwarding work - classifiable under "Clearing and Forwarding"; and  Managing Logistics relating to import and export - Classifiable either under "clearing and forwarding" or "customs house agents".

This was evident on perusal of paras 11.5 and 12.3 of the show cause notice where the notice alleges that the activity of managing logistics relating to import/export cannot be classified under "business support services". They reproduced below relevant part of paras 11.5 and 12.3 for ease of reference: " Para 11.5 The above said services of M/s. Agility Logistics Pvt. Ltd. for which they collect charges under various head viz. Freight Income, Inland Haulage Charges & Ex Work Charges, Insurance, Currency Adjustment factor, duty/taxes, trucking, re-imbursements, others, other charges collect etc appears to be sub-activities to the main activity of "Clearing & Forwarding Service" and is provided while providing the main service of "Clearing & Forwarding Service" or "Custom House Agent's Service" whichever is applicable depending upon the nature of transaction and hence will be classifiable under the said category of service

Para 12.3 It is observed. that M/s. Agility Logistics Pvt. Ltd. has taken service tax registration under the category of "Business Support Service" also. But from the activities as explained by Shri. Tripati Balaji PAtro, General Manager (Finance), Western region in M/s. Agility Logistics Pvt. Ltd, in his statement dated 05.10.2009, it appears that the said service provider is mainly providing three services i.e. "Business Auxiliary Service", "Clearing and Forwarding Agent's Service" & "Custom House Agent's Service". 'The activities are ancillary to the main activities of "Clearing and Forwarding Agent's Service and hence cannot be appropriately classified under the individual category of 23

"Business Support Service". It is a settled norm that various sub- activities of a single composite service cannot be vivisected for classification under different heads of Service and shall only be classified under the main category of service"

Therefore, the basis of the show cause notice proposing to reject the classification under the category "support services for business or commerce" is that they were providing a single composite service. They submitted that the notice proceeds on an incorrect assumption that they were providing one 'consolidated service and consequently demanding service tax in respect of the same. They once again drew attention to the paras above where they have specified that they were engaged in providing four distinct and separate services. These services were provided separately and were not part of one service. Further, they were registered and paying service tax under each of the aforesaid four separate and distinct service category which has been accepted by the service tax department. Consequently, there was no question of application of different service category "business auxiliary service" .

The notice was based on incorrect appreciation of facts. In order to appreciate that they were not rendering any service in relation to procurement of goods or services, which are inputs for the clients, at the cost of repetition, they invited attention to the fact that they render these four distinct and separate services:  Logistics services related to import and export of goods;  Warehousing and distribution;  Rendering service on behalf of airlines; and  Customs house agents.

The client was free to avail any service as per the clients requirement. It was not mandatory for a client to avail all the four services. For instance, they had agreements with various companies for warehousing and distribution; this was taxable under the category "clearing and. forwarding". This was local and had got nothing to do with import and export and consequently, in this there were no logistic' services related to import/export or CHA involved. Again in respect of logistic services pertaining to import/export, the client had the option to decide on the CHA and they do not in such cases render the CHA services. It may be noted that they were not registered as a CHA till February 2007 even though they were always rendering the logistic services in respect of import/export. Therefore, it was clear that even the CHA services and the logistic service pertaining to import/export were distinct and separate. Further, as submitted above, they were registered separately under each of the four categories and were paying service tax.

From the above, it was clear that they were not rendering a composite whole service but were rendering four different and distinct services. Activity/ Service Category under which Sub-category registere d Service rendered on Business Auxiliary Section 65(19)(iv)

behalf of airline Service

Logistics to Business Support .Section 65( 1 04c) pertaining import and export Service

Logistics to Clearing and Section 65(25) pertaining 24

warehousing , and Forwarding . distribution

Customs Customs house Agent Section 65(35) clearance

They submitted that since the basis of the show cause notice was incorrect the notice be dropped on this ground alone.

29.3 Valuation under section 67 - Re-imbursement not part of valuation in respect of CHA services

The show cause notice alleges that in respect of services rendered as a CHA they were liable to pay service tax on re-imbursement of expenses. Consequently, what requires consideration is whether the re-imbursement of expenses in respect 'of CHA services forms part of the valuation of the taxable service?

They drew attention to, section 67 of the Act which deals with valuation of taxable services which is dealt in two parts: i) Till 17.4.2006 when there were no Service Tax Valuation Rules; and ii) From 18.4.2006 when Service Tax Valuation Rules, 2006 came into force.

Valuation of taxable service till 17.4. 2006

Section 67 of the Act deals with valuation of taxable services. It provides that value. of any taxable service shall be the gross amount charged by the service provider for such services provided or to be provided. A perusal of section 67 of the Act indicates that the value is the gross amount charged by the service provider for the services provided. Consequently, any amount which the service provider receives as a charge for providing service will form part of the value of taxable service. Reference to the term "gross" indicates that no deduction is to be allowed from the amount charged for providing services.

They submitted that what requires examination is whether the re-imbursement of expenses can be said to be an amount charged for the service provided by them. They submitted that the expenses re-imbursed were not charges for providing the service by them. The amount charged by them for rendering the CHA services were liable to service tax and it was an undisputed fact that service tax was being paid on the same. The re-imbursement of expenses was not a charge for the service provided and cannot form part of the valuation.

Valuation with effect from 18''' April. 2006 From 18th April, 2006, section 67 of the Act has been amended. Section 67(1) of the Act provides that value, in a case where provision of service is for consideration in money, shall be the gross amount charged by the service provider for such service provided or to be provided. The Explanation to section 67 provides that consideration .includes any amount payable for the taxable service provided or to be provided. Section 67(1) (iii) of the Act provides that where the provision of service is for a consideration which is not ascertainable, the value shall be the amount as may be determined in the prescribed manner. Further, Section 67(4) of the Act provides that subject to the provisions of sub-sections (1), (2) and (3), the value shall be determined as may be prescribed. 25

Therefore, from 18th April, 2006 where the consideration for the service provided is in money, the value is the gross amount charged for the service provided. Therefore, even though the section-has been amended yet when the consideration is in money, the value still remains the gross amount charged for the service provided. Therefore, even from April 18, 2006 the position remains unchanged. The same issue will require consideration even after April 18, 2006, as to whether re-imbursement of expenses can be said to be an amount charged for the service provided by them.

They reiterated that re-imbursement of expenses is not a charge for the service rendered by them. Consequently, it cannot be part of the valuation of taxable service in respect of "CHA service".

They relied upon the following judgments:  Bax Global India Ltd v. CST (Tribunal) reported in 2008 (9) STR  B.S. Refrigeration Ltd. v. Commissioner of Service tax, Bangalore (Tribunal) reported in 2006 (4) STR 103  S & K Enterprises v. CCE (Tribunal) reported in 2008 (10) STR 171  Sri Sastha Agencies Pvt. Ltd v. ACCE (Tribunal) reported in 2007 (6) STR 185  S. Jayashree v. CCE (Tribunal) reported in 2007 (6) STR 389  Keralam Enterprises v. CCE (Tribunal) reported in 2008 (9) STR 503  Malabar Management Services Pvt. Ltd. v. Commissioner of Service tax (Tribunal) reported in 2008 (9) STR 483

In light of the aforesaid submissions, they reiterated that the demand was not sustainable.

29.4 They further submitted that they had obtained registration as a customs house agent- from February 2007 under the, CHA Regulations, 2004. Therefore, they were liable to pay service tax under the category "CHA" w.e.f February 2007. It is an undisputed fact that from February 2007 they had registered themselves and paid service tax under the category "CHA". ` Till February 2007, they were availing the services of a customs house agent, Dawn India who used to charge service tax to them for the services rendered by them. However, they used to recover from the customers various charges. The notice alleges that though the CHA service till February 2007 was rendered by Dawn India on which service tax has been charged by Dawn India and paid by them, they were liable to pay service tax on the amount recovered by them from the customer. The notice alleges that the amount recovered by them from the customer was liable to tax under "business auxiliary service" on the ground that it is a service in relation to procurement of goods or services which are inputs for the clients.

They submitted that as they were registered and paying service tax on each activity/service as indicated above, it is clear that they were not rendering any service in relation to procurement of goods or services which are inputs for the clients. Demanding service tax on all the above activities again, under the category "business auxiliary service", amounts to double taxation.

They submitted that the aforesaid submission is supported on analysis of the demand raised in the show cause notice which does not give any break up but merely raises demand of the differential value taken from the books of accounts. Therefore, without appreciating the nature of activities carried on by them, the service tax demand has been raised.

29.5 They submitted that demand has been raised for the period April 2004 to March 2009 by issuance of a show cause notice dated October 23,2009. The 26 notice invokes the extended period of limitation by alleging suppression of facts by us. In this respect, they wish to submit that there has been no suppression of facts by them. They were registered under service tax in respect of all the services for which demand has been raised. The dispute basically pertains to classification of taxable services Further; the demand has been raised based on the figures as. contained in the audited accounts. Therefore, it was clear that the entire dispute pertains to an interpretation issue regarding section 67 of the Act. Further, they bonafidely believed that service of managing logistics in relation to import/export was taxable under "business support service". This was evident from the fact that they applied for registration under this category and accepted their liability to service tax under this category.

29.6 As regards, not charging service tax on the re-imbursement part in respect of CHA services, their bona fide belief was evident from the fact that the CBEC itself had issued a circular that service tax was not payable on re-imbursement of expenses and various Tribunal decisions substantiate the basis of out bona fide belief. In fact the show cause notice itself refers to the CBEC Circular and accepts that on the basis of this circular, service tax has not been paid on the re- imbursement of expenses. Further, the re-imbursement of expenses were charged on an invoice raised by the Company.

29.7 Consequently, in light of the aforesaid' it was submitted that the extended period of limitation was not invokable in the facts of this case. They drew attention to the following decisions where it has been held that in cases of bona fide belief and interpretation issues, the extended period of limitation is not invokable: Gopal Zarda Udyog v. CCE (S.C.) reported in 188 ELT 215  CDAC v. CCE (S.c.) reported in 141 ELT 6  Shri Shakti LPG v. CCE (Tribunal) reported in 187 ELT 487 • . Jaiprakash Industries Ltd. v. CCE (S.C.) reported in 146 ELT 481

29.8 They further submitted that notice proposes denial of credit of Rs.92,55,810/- on the ground that details called for were not submitted and the ST- 3 returns containing details' of the same are not acknowledged. In this respect, they submitted that the letter asking for Cenvat details was given to them on October 21, 2009. It would be appreciated that giving information in respect of Cenvat credit for a period of five years will take time. However, without giving them time to submit details, the captioned show cause notice has been issued on October 23, 2009. In other words only a period of one day was given to them submit details of Cenvat credit availment and utilization. Therefore, it was clear from the above that the allegation that details in respect of Cenvat credit have not been submitted is incorrect. They have with them complete details with invoices in support of the submission that credit has been correctly availed and utilized and the same can be verified at any time. As regards the allegation that the ST-3 returns were not acknowledged, they submitted that the same were sent by post since the department did not accept submission of the returns and hence the same were not acknowledged. However, the notice does not deny the fact that the ST -3 returns were sent by post and received by the department. Further, though the show cause notice denies credit on the ground that the ST were not acknowledged yet the same notice relies on the ST -3 figures to deny credit. In other words, the notice relies on the ST-3 returns only to the extent it is convenient to the revenue. This indicates that denial of credit is only for the sake of denying the same and without any basis. Since the credit has been availed and utilized in accordance with the provisions of the Credit Rules, demand in respect of the same was not sustainable.

29.9 They submitted that as no service tax was payable for the reasons stated above, no penalty was imposable since penalty follows the service tax. They relied upon the following judgments in support of the same: 27

• CCE v. HMM Ltd. (S.C.) reported in 1995 (76)ELT 497

• H.Guru Investment v. CEGAT (All. H.C.) reported in 1998 (104) ELT 8

29.10 They submitted that in any event no penalty is imposable under Section 78 of the Act inasmuch as penalty is imposable under this section where service tax has not been paid by reason of fraud, collusion, willful mis-statement, suppression of facts or contravention of provisions with intend to evade payment of service tax. Since in their case, the entire demand is based on interpretation of the provisions of the Act, namely classification of the services and further the demand is based on the figures taken from the audited accounts, section 78 of the Act has no applicability as they bonafidely believed that service of managing logistics pertaining to import/export is classifiable under "business support service" and service tax is payable on the value' as determined. Therefore, in terms of section 80 of the Act, no penalty was imposable in the facts of the case as held in the following cases:

• ETA Engineering LKtd. V. CCE (Tri-L.Bench) reported in 2006 (3) STR 429;

• Star Neon Sign v. CCE (Tribunal) reported in 2006 (2) STR 588

* CCE v. GMTD reported in 2006 (2) STR 206

30. In light of the aforesaid submissions, they prayed that the show cause notice be dropped. They wished to be heard in person in the matter before the show cause notice was adjudicated.

31. Personal hearing was fixed for 19.10.2010, 15.11.2010, 28.12.2010 which were not attended by the service provider on various grounds. A personal hearing was held on 22.2.2011 which was attended by Shri Yogesh S. Patki, Advocate, Shri Ritesh Dattani, Manager Agility Logistics Pvt Ltd, Mumbai and Shri Kahyap Belani, Deputy Manager, Agility Logistics Pvt Ltd, Ahmedabad. The learned advocate explained the details of the case and filed an affidavit dated 2.2.2011 of Shri. Jignesh Brahmbhatt, General Manager of M/s Agility Logistics Pvt Ltd, Ahmedabad alongwith photocopies of the supporting exhibits. On law point it was submitted that SCN itself was vague and liable to be set aside on this ground. He also gave a bunch of judgments passed by various judicial authorities. On being specifically asked to provide activity wise details of the total amount of Rs. 68,53,84,180/- (Annexure-A to the SCN), he desired some more time as the same involved scrutiny of a very large amount of data. He had been advised to provide the same within a month’s time along with their written defence. He was informed that if necessary, further personal hearing would be held thereafter. He was also told that the data provided should be duly certified by their statutory Chartered Accountant and details of cenvat credit should also be provided by them.

32. The said service provider vide their letter dated 20.4.2011 submitted photocopies of some sample invoices of input credit availed alongwith their written submission.

32.1 Along with their said written submission, they enclosed a statement showing details of the cenvat credit. They also enclosed 100 sample invoices in respect of amounts on which credit has been taken by them and assured to provide further invoices if required for verification.

32.2 As regards, break-up of the value of Rs.80,86,92,431/-, they submitted that the same is part of the show cause notice and is part of Annexure A to the show cause notice. 28

32.3 They submitted that they are rendering four different and distinct services of the following nature which are briefly described below:

Clearing and forwarding

They enter into agreements with various persons in terms of which they render services of clearing goods, storing them, maintaining detailed inventory and forwarding the goods to the specified destination. As a charge for rendering these services of clearing and forwarding, they receive an agreed upon amount. They are registered for this service under the category of "clearing and forwarding" which is taxable under section 65(105)(j) of the Finance Act, 1994 (the Act). They are paying service tax to the credit of the Government in respect of this clearing and forwarding service and are also regularly filing service tax returns with the Department. They had obtained registration under the Act in March 2007 and had paid service tax to the credit of the Government.

Services on behalf of the airlines

A person proposing to import or export cargo by air approaches them and they give the person freight quotation available at that point in time and cargo is placed on the airlines as agreed upon. It may happen that for one consignment the cargo of the customer may be booked on airline 'A' whereas for the next consignment for the same customer, the cargo is booked on airline 'B'. This is on account of available freight quotations given by the airlines. They do not market services of any airline but basically render services on behalf of the airlines like placing cargo on the airlines, carrying out documentation on behalf of airlines, receiving freight on behalf of airlines, remitting freight to the airlines after retaining the commission due to us. For rendering this service on behalf of the airline, they are registered under the category of "business of auxiliary services" which is taxable under section 65(105)(zzb) of the Act. They had obtained registration in March 2007 but had accepted their liability to pay service tax from September, 2004 onwards and tax along with interest has been paid to the credit of the Government.

Services in respect of import and export of goods

They render services pertaining to logistics of import and export of goods. Customer has the option of choosing to avail all the services or even part of the services. In respect of services relating to export of goods following services are offered: (i) Liaising with the shipping lines in respect of spaces and informing of the same to the customer. (ii) Arrange to book consignment from the customers' premises. (iii) Ensuring that consignment is loaded on the ship and deliver documentary proof of the same. (iv) Tracking the consignment. In respect of services relating to import of goods, the following services are offered: (i) Liaising with the shipping lines in respect of spaces and informing of the same to the customer (ii) Tracking the same (iii) After arrival of goods giving delivery order to the customer if the customer desires to clear the goods on its own. (iv) Clearing goods from the customs if so desired by the customer. 29

In case of both import as well as export, apart from doing liaising and documentation, customer may also require their services of customs clearance. In such scenario, they also render services of the Customs House Agent. They recover freight from the customer and pay the same to the shipping lines. The freight component is always separately disclosed in the invoice when there is recovery from the customer of the freight amount which is in turn remitted to the shipping line. There is a mark-up (positive or negative) involved in respect of the freight element. They got registered for this service in March 2007 under the category of "business support service" which is taxable under section 65(105)(zzzq) with effect from May, 2006. They had paid tax along with interest in respect of this service.

Customs House Agent

They have obtained registration as a Custom House Agent under the Customs House Regulation, 2004 with effect from February, 2007. Consequently liability to pay service tax under the category of "Customs House Agent" has arisen only from February, 2007. Till February, 2007, they were availing the services of another customs house agent who was charging service tax to them. Under the Act only registered custom house agent has to register and pay service tax, and hence, it is only from February, 2007 that they got registered and paid service tax under this category. They had paid service tax to the credit of the Government under this category and also filed returns to this effect.

32.4 They do not render one consolidated service. This is evident from the fact that services rendered on behalf of airlines has no connection whatsoever with the "business support services" or the "clearing and forwarding services". Similarly, the "clearing and forwarding services" rendered by them are in terms of the agreement entered into with various persons. The scope of services rendered under this "clearing and forwarding" agreement is well defined. They do not render any "custom house agent" or "business support services" or "business auxiliary service" type of service in terms of this clearing and forwarding agreement. They are also rendering pure customs house agent services i.e. pure custom clearance as authorized by the Customs Act, 1962. This Custom House Agent service is in no way connected with the other three categories of services viz. clearing and forwarding or business auxiliary services or business support services. This is evident from the fact that registration under Custom House Agent services was obtained only in February, 2007 whereas other services are being rendered and liability in respect of those services has been accepted prior to February, 2007. In this respect, they invited attention to the affidavit dated February 2, 2011 of Mr. Jignesh Brahmbhatt, the General Manager, in charge of activities of their Company's Ahmedabad branch wherein the aforesaid facts have been stated on oath. It was pointed out that various invoices were raised by them under different categories of services and the service tax returns had also been filed by them under different categories of services which had been enclosed along with the affidavit.

32.5 It was submitted that sometime in October 2008 an inquiry was initiated in respect of service tax matters against them. Numerous details were asked for and the same were provided by them. In fact when the investigation commenced, they handed over sample copies of certain invoices which were basically in the nature of local transportation carried out by them where liability to pay service tax is that of the consignor. They also gave list of various revenue heads as per profit and loss statement and the summary of revenue earned for the period 2005-06 to 2008-09. Copies of balance sheet for the year March, 2007 and sample 30 invoices raised under the different service categories were also submitted. They have drawn attention to the affidavit dated February 2, 2011 of Mr. Jignesh Brahmbhatt, the General Manager, in charge of activities of their Company's Ahmedabad branch wherein these facts have been stated on oath. They submitted that they had co-operated with the investigation thoroughly in as much as whatever documents were required by the Department were submitted. During the course of investigation they categorically pointed out that they are rendering the aforesaid different and distinct services and sample invoices, registration certificate issued by the Service Tax Department for the aforesaid service categories and service tax returns in respect of the four categories were filed. Various documents pertaining to financial details like profit and loss statement, revenue heads along with explanation were also submitted to the Department. They drew attention to the affidavit dated February 2, 2011 of Mr. Jignesh Brahmbhatt, the General Manager, in charge of activities of their Company's Ahmedabad branch wherein the fact that they have completely cooperated during the course of investigation and have submitted voluminous data has been stated on oath.

32.6 They submitted that demand has been raised for each year based on the income figure as appearing in the revenue figures for their Ahmedabad Branch. These figures reflect the gross revenue for the Ahmedabad branch including freight which is major part of the gross revenue. The freight recovered from customer is shown as revenue and freight remitted to the line is shown as expenditure as detailed in the following chart:

Year Gross Freight Gross revenue Percentage

2004-05 7,14,97,180/- 8,62,35,286/- 83%

2005-06 10,13,06,408/- 12,79,56,450/- 79%

2006-07 14,83,65,986/- 19,48,73,60-2/ - 76%

2007-08 15,24,49,009/- 21,32,25,592/ - 70%

2008-09 7,57,36,598/- 18,64,01,501/- 52%

32.6 They further submitted that the show cause notice demands service tax without verifying whether the alleged value of taxable service has been received by them or not. This is because the service tax is payable only on receipt of value and not otherwise.

32.7 They submitted that the show cause notice proceeds on the basis that they are rendering two types of services, viz: (i) Service due to which we earn commission from airlines (service rendered on behalf of airlines) which is registered under the category business auxiliary service. There is no dispute on this aspect as far as the Department is concerned. This is evident from paragraph 10 of the show cause notice. (ii) One Consolidated service relating to import and export goods. Your Honour's attention was invited to paragraph 11 of the show cause notice which lists out various services which according to the notice comprises the one consolidated service alleged to be rendered by us. Paragraphs 11. 1 to 11.5 of the notice then proceed to 31

allege that the aforesaid one consolidated service listed at paragraph 11 represents basically activities of either "clearing and forwarding" or "custom house agent" services whichever is applicable depending upon the nature of transaction. However, the notice does not specify the category but leaves it to the imagination of the noticee under which service category the one consolidated service is to be classified.

They submitted that the show cause notice at paragraphs 11.1, 12.3 and 19 incorrectly records that they have failed to provide invoices pertaining to the period 2004-05 to 2008 to 09 in respect of various services due to which bifurcation of various services provided by them is not possible. The notice at paragraph 11.5 then goes on to hold that services, other than those where they have received commission from airlines, are classifiable either under clearing and forwarding or under Custom House Agent, whichever is applicable. However, as stated above while raising demand the notice does not inform them as to the exact service category under which classification is proposed.

They submitted that the notice from paragraph 11.7 to 11.16 alleges undervaluation on the ground that reimbursement of expenses have not been taken as part of valuation under the category "customs house agent". Further, the notice also alleges that prior to 2007, they have not got themselves registered under the category "Custom House Agent" though they were required to do so.

Further, once again at paragraph 11.17 the show cause notice refers to the so called one consolidated service rendered by them and alleges that it is liable to be classified under the category "business auxiliary services" on the ground that it is in the nature of "procurement of goods or services, which are inputs for the clients". At paragraph 12.2 of the notice, the so called "one consolidated service" alleged to be rendered by them is reproduced and this is that same service listed at paragraph 11 of the notice. In other words, the show cause notice alleges that the so. called one consolidated service rendered by them is classifiable under "clearing and forwarding or custom house agent" and also under "business auxiliary service". The show notice then goes on to reject their classification under "business support service".

32.8 The notice also proposes to deny cenvat credit of Rs.92,55,810/- on the ground that they had not given any details to the Department even though they were asked to provide details of the same by letter dated 21 st October, 2010.

32.9 They submitted that Notice is bad, since it is vague and contradictory as at paragraph 12.3, the show cause notice rejects their classification under the category of business support services but does not put them on notice under which category of taxable service, the alleged one consolidated service is proposed to be classified but leaves it to the imagination of the noticee. The show cause notice is also contradictory in nature inasmuch as for the same one consolidated service, the show cause notice at paragraph 11..5 alleges this one consolidated service is either classifiable under "clearing and forwarding" or under "Custom House Agent" category and at paragraph 11.17 proposes classification under "business auxiliary services". They submitted that it is obvious that the department itself is unsure as regards the category under which the alleged one consolidated service is to be classified. They relied on the following judgments in this regard: CCE V Is. Brindavan Beverages Pvt. Ltd. (Supreme Court) 32

reported in 213 ELT 487 Royal Oil Fields Pvt. Ltd. V ls. DOl (Bombay High Court) reported in 194 ELT 385 BHEL V Is. CCE{Tribunal) reported in 245 ELT 201 BSNL V Is. CCE (Tribunal) reported in 214 ELT 306 Vinayak Enterprises V Is. CCE (Tribunal) reported in 201 ELT 99 InterChrome Pvt. Ltd. V Is. CCE (Tribunal) reported in 160 ELT 570 Hagel Capsultes Industries V Is. CCE (Tribunal) reported in 150 ELT 1148

32.10 They submitted that the show cause notice reflects complete non application of mind inasmuch as various facts have been incorrectly recorded and voluminous data which has been given by them during the course of investigation has been conveniently ignored while raising this demand. Attention was drawn to paragraph 6 of the notice which alleges that they were not fully cooperative during the course of investigation and to paragraph 11.1, 12.3 and 19 of the notice which alleges that they have failed to provide invoices pertaining to the period 200405 to 2008-09 issued in respect of various services on account which it was not possible for the Department to bifurcate various services provided by them.

They pointed out that this is incorrect recording of facts inasmuch as voluminous data was provided to the Department during the course of investigation. This is evident on perusal of the affidavit dated December 27,2010 of Mr. Kashyap Belani, the Deputy Manager, in charge of activities of their Company's Ahmedabad branch wherein on oath it has been sworn that all data including invoices in respect of various services were submitted during the course of investigation. Further, the affidavit shows that they had submitted balance sheet for the period involved, copies of balance sheet and profit and loss account, summary of revenue heads, explanation as to the nature of the revenue heads, sample copy of invoice for each of the different categories, service tax returns filed in respect of all the categories, service tax registration certificate issued, explanation as to the nature of service rendered by them and various other information. However, the show cause notice conveniently ignores this voluminous data given by them and alleges that there has been non cooperation from their side. Consequently, the demand in the notice is based on assumptions/presumptions and reflects complete non application of mind. The demand has been raised for the sake of raising the demand. It is settled law that a demand based on assumptions/presumptions and without application of mind is bad. Attention was drawn to paragraph 11.5 where after analyzing the alleged one consolidated service purported to be rendered by them, the notice alleges that this one consolidated service is either classifiable under "clearing and forwarding" or under "Custom House Agent" category. There is no definite category under which the classification is proposed. Therefore, it is clear that the demand is based on "ifs" and "buts" and there is no basis for raising the demand. Further, the so called one consolidated service listed at paragraph 11 of the notice is also listed at paragraph 12.2 where the notice then alleges is classifiable under the category of "business auxiliary service”. They relied on the following case laws:  Gujarat State Petronet Ltd V / s. CST, Ahmedabad (Tribunal) reported in 20 STR 502  Canny Detective V / s. CCE, Ahmedabad (Tribunal) reported in 20 STR 695  Vasavadatta Cement V Is. CCE (Tribunal) reported in 206 ELT 592 confirmed by the Hon 'ble High Court in 249 ELT 498 and by the Hon'ble Supreme Court 33

The show cause notice has been issued for the period 2004-05 to 2008-09 invoking the extended period of limitation alleging suppression of facts with intent to evade payment of service tax. It was submitted that since the show cause notice itself is vague and contradictory inasmuch as the Department itself is not sure of the classification under which· the alleged one consolidated service has to be categorized, the extended period of limitation cannot be invoked. When a notice is vague and contradictory, it is the settled law that extended period of limitation cannot be invoked as held by the Hon'ble Supreme Court in the case of CCE V / s. Mysore Kirloskar Limited reported in 226 ELT 161. Therefore, it was submitted that the demand is barred by limitation.

32.11 They submitted that the demand in the show cause notice is based on interpretation of the provisions of the Act. The entire dispute revolves around classification of the services. They bonafidely believed that the services which they rendering are classifiable under four different and distinct categories of the Act. This is evident from the fact that way back in 2007 i.e. before the investigations had commenced, they had obtained registration under these four different categories. They have paid service tax along with interest wherever applicable in respect of all these four service categories. The service tax returns have been filed under these four different and distinct categories and invoices are being raised under these four categories. Consequently, they believed and do believe that the services which they were rendering are not in the nature of one consolidated service as alleged in the show cause notice. Consequently, extended period of limitation is not invokable since there is no suppression of facts or malafide intent on their part. It is a settled law that in case of bonafide belief, extended period of limitation is not invokable. Reliance was placed on the following case laws:  Binlas Duplex V Is. CCE (Tribunal) reported in 7 STR 561  NRC Ltd. V / s. CCE (Tribunal) reported in 5 STR 308 as confirmed by the Hon'ble High Court  CCE V Is. Asian Cranes (Tribunal) reported in 18 STR 60  Phase 1 Events & Entertainment V Is. CST (Tribunal) reported in 12 STR 174

32.12 They have submitted that the major part of the demand, nearly 70%, is on the freight element. The freight recovered from the customer is remitted to the shipping line with a difference. This freight is not a charge for the service rendered by them. The service in respect of freight is provided by the shipping line and not by them. Consequently, freight which is not in respect of the service rendered by them cannot be part of the valuation under section 67 of the Act. The liability to pay service tax, if any, on freight is not their’s but that of the shipping line and in fact this very issue has been considered by the Hon’ble Tribunal in the case of Bax Global India Ltd. reported in 9 STR 412 where the Tribunal held that freight is not a service rendered by the customs house agent and cannot form part of valuation under section 67 of the Act.

32.13They submitted that no service tax is to be paid on reimbursements and explained the valuation of taxable services till 17th April, 2006 when there were no Service Tax Valuation Rules and valuation with effect from 18th April, 2006 when Service Tax (Determination Of Value) Rules, 2006 came into force. He brought attention towards following departmental clarifications in this regard. Consulting Engineers -- Trade Notice No.7 /97 dated 4th July, 1997 issued by Mumbai-I Commissionerate.  Custom House Agent -- Trade Notice No.5/97 dated 12 th June, 1997 issued by Mumbai Commissionerate 34

Manpower Recruitment -- Trade Notice No.7 /97 dated 4th July, 1997 issued by the Mumbai I Commissionerate.  Marketing Research Agency -- Trade Notice No.7/98 dated 13th October, 1998 issued by the Mumbai Commissionerate.  Steamer Agent -- Trade Notice No.5/97 dated 12th June, 2007 issued by the Mumbai I Commissionerate. They also relied on the following judgments:  B.S.Refrigeration v. CST (Tribunal) reported in 4 STR 103 - (please refer pages 128 to 132 of the Case Law Compilation) S&K Enterprises v. CCE (Tribunal) reported in 10 STR 171- (please refer pages 133 to 135 of the Case Law Compilation)  Sri Sastha Agencies Pvt. Ltd. v. ACCE (Tribunal) reported in 6 STR 185 (please refer pages 136 to 137 of the Case Law Compilation)  S.Jayashree v. CCE (Tribunal) reported in 6 STR 389 - (please refer pages 138 to 139 of the Case Law Compilation)  Kerelam Enterprises v. CCE (Tribunal) reported in 9 STR 503 - (please refer pages 140 to 142 of the Case Law Compilation)  Malabar Management v. CCE (Tribunal) reported in 9 STR 483 - (please refer pages 143 to 146 of the Case Law Compilation)  Reliance Industries Limited v. CCE (Tribunal) reported in 12 STR 345 (please refer pages 147 to 148 of the Case Law Compilation)  Aurobindo Pharma v. CCE (Tribunal) reported in 10 STR 611 - (please refer pages 149 to 151 of the Case Law Compilation)  Rolex Logistics Pvt. Ltd. v. CCE (Tribunal) reported in 13 STR 147 (please refer pages 152 to 155 of the Case Law Compilation)

32.14They submitted that it is a settled law that the rules are subservient to the provisions of the Act and therefore cannot override the provisions of the Act. They relied on the following decisions: Laghu Udyog Bharati v. UOI (S.C.) reported in 112 ELT 365 Indian National Shipowners Association v. UOI (Bombay H.C.) reported in 13 STR 235 They submitted that applying the ratio of the aforesaid decisions, rule 5 of the Valuation Rules cannot be interpreted to bring within the purview of valuation an amount which section 67 does not envisage. Therefore, the provisions of rule 5 of the Valuation Rules have to be harmoniously interpreted so that any amount which is not a charge for the service provided is not termed as part of the value of taxable service, otherwise it would amount to overriding the provisions of section 67 of the Act. Therefore, the re-imbursement of expenses cannot form part of value of taxable service.

32.15 They have submitted that liability to pay service tax under the category "customs house agent" arises only where the person is licensed under the Customs House Agents Licensing Regulations, 2004 ("the CHA Regulations"). They obtained license under the CHA Regulations in February 2007 and from that day onwards they are registered and are paying service tax to the Government. As a result, prior to February 2007 they were not liable to pay service tax under the category "customs house agent" since they were not licensed under the CHA Regulations. 32.16 The show cause notice relies on section 11D of the Central Excise Act, 1944 as made applicable to service tax till April 17, 2006 and section 73A of the Act from April 18, 2006 to allege that the service charges recovered by them have to be deposited with the government. They submitted that Section 11D(1) of CEA, 1944 reads as follows: “Notwithstanding anything to the contrary contained in any order or direction of the Appellate Tribunal or any Court or in any other provision of this Act or 35 the rules made thereunder, every person who is liable to pay duty under this Act or Rules made thereunder and has collected any amount in excess of the duty assessed or determined and paid on any excisable goods under this Act from the buyer of such goods in any manner representing duty of excise, shall forthwith pay the amount so collected to the credit of the Central Government” The relevant part of Section 73A of the Act reads as under: “ (1) Any person who is liable to pay service tax under the provisions of this Chapter and has collected any amount in excess of the service tax assessed or determined and paid on any taxable service under, this Act from the recipient of taxable service in any manner repres'enting service tax, shall forthwith pay the amount so co'llected to the credit of the Central Government (2) Where any person who has collected any amount, which is not required to be collected, from any other person, in any manner as representing service tax, such person shall forthwith pay the amount so collected to the credit of the Central Government”.

They submitted that for both these sections to be made applicable, the pre-requisite is that the person has to be liable to pay service tax. In the facts of their case, till February 2007 they were not liable to pay service tax under the category "Customs house agent" since they were not registered under the CHA Regulations. Hence, the provisions of these sections are not applicable. Further, section 73A(2) applies when any amount is collected as representing service tax. It is an undisputed fact that they have collected service charges and not service tax and hence sub-section (2) is also not applicable. They submitted that there has been no violation of section 11D of the Central Excise Act, 1944 or of section 73A of the Finance Act,1994.

32.17 They submitted that since service tax is not payable for the reasons stated above, no penalty is imposable since penalty follows the tax as held in the following cases:  CCE v. HMM Ltd. (S.C.) reported in 76 ELT 497  H.Guru Investment Pvt. Ltd. (All.H.C.) reported in 104 ELT 8

32.18 They submitted that penalty is imposable under section 78 of the Act for non payment of service tax on account of suppression of facts with intent to evade payment of service tax. As explained above, they bonafidely believed and do believe that the services rendered by them are classifiable under four different and distinct headings. Consequently, the allegation of suppression of facts is not sustainable and as a result penalty under section 78 of the Act is not imposable in the facts of their case. They requested to invoke Section 80 of the Act and relied on the following case laws:  CCE v. Jivanbhai Makwana (Guj.H.C.) reported in 20 STR 605  Prodorite Anticorrosive v. CCE (Tribunal) reported in 12 STR 618  CCE v. Tyazhpromexport (Tribunal) reported in 3 STR 137  Cosmos Detective v. CCE (Tribunal) reported in 19 STR 414  Rajhari Carrier & Finance Pvt. Ltd. v. CCE (Tribunal) reported in 20 STR 629

32.19 In the light of the aforesaid submissions, they prayed to drop the notice.

33. A personal hearing was then fixed on 23.5.2011. Shri Yogesh S. Patki, Advocate appeared for the hearing. He explained the written submission made vide letter dated 20.4.2011 and accordingly requested to drop the proceedings.

Discussion and Findings: 36

34. I have carefully gone through the records of the case, related CBEC circulars, written submissions made by the said service provider in their defence replies to the show cause notice as well as during the course of personal hearings, Affidavit of Shri Jignesh Brahmbhatt and the records/documents produced by them. I find that short payment of service tax is alleged on the basis of difference between the income shown in the P&L account and the taxable value shown in the ST-3 returns. I observe that the said service provider could not provide the activity wise details of the total amount of Rs. 68,53,84,180/- given in Annexure-A to the show cause notice as specifically asked during the course of Personal Hearing dated 22.2.2011 to provide the same duly certified by their statutory Chartered Accountants. Therefore, I am unable to quantify the activity wise tax liability. I find that the primary issues to be decided in the case are: i) Whether, for the period prior to February-2007 when the said service provider was using the CHA licence of M/s Dawn India, the charges collected under the head of Agency charges and various other charges such as Documentation charges, Examination charges, Loading/unloading charges, Misc. charges, GSEC charges, Delivery order charges etc. are taxable amounts under the category of ‘Business Auxiliary Service’? ii) Whether, for the period after February-2007, the amounts excluded by the said service provider from the taxable value are in relation to the CHA service and liable to service tax or the same are in the nature of reimbursable expenses incurred by the said service provider on behalf of the exporter/importer and liable to be excluded from the taxable value? iii) Whether, Commission income earned by the said service provider from various airlines as an IATA approved ‘Cargo Agent’ falls within the ambit of the taxable category of ‘Business Auxiliary Service’ under Section 65(19)(ii) of Finance Act, 1994? iv) Whether, transportation of cargo from the customers premises to the desired destinations or vice versa in respect of export and import would be taxable under the category of either “Clearing and Forwarding Service” or “Custom House Agent Service” and the charges collected under various heads viz. Freight Income; Inland Haulage Charges & Ex Work Charges; Insurance; Currency Adjustment Factor; Duty/taxes; Trucking; reimbursements; Others; Others charge collect; Freight Transhipment; Foreign Agents (Actuals); etc. are chargeable to service tax as alleged in the show cause notice or the said service is chargeable to service tax under the category of “Business Support Service” as claimed by the service provider? v) Whether, the ‘services charges’ collected by the said service provider is actually the amount representing service tax which is liable to be paid to the credit of the Central Government under Section 73(A) of the Finance Act, 1994 read with Section 11D of the Central Excise Act,1944? vi) Whether, Cenvat credit has been wrongly availed by the said service provider as alleged in the show cause notice?

35. I take up the above issues sequentially.

36.1 I find that as per Section 65(19)(iv) of Finance Act, 1994, Business Auxiliary Service “means any service in relation to procurement of goods or services, which are inputs for the client; Explanation: For the removal of doubts, it is hereby declared that for the purposes of this sub-clause, “inputs” means all goods or services intended for use by the client.” 37

I observe that the said activity was brought under the definition of ‘Business Auxiliary Service’ w.e.f 10.9.2004. I find that the clients of the said service provider are mainly exporters and importers who require various types of services for accomplishment of export and import work. These services are nothing but ‘inputs’ within the meaning of Section 65(19)(iv) of Finance Act, 1994. An importer or an exporter may himself arrange such ‘inputs’ or get it outsourced. In absence of such ‘inputs’, the activity of export or import would not get completed. I find that there is no dispute that the said service provider has provided services in relation to procurement of various services, which are inputs for their clients and received charges such as Documentation charges, Examination charges, Loading/unloading charges, Misc. charges, GSEC charges, Delivery order charges etc. Therefore, the services provided by the said service provider are squarely covered under the taxable category of ‘Business Auxiliary Service’ under Section 65(19)(iv) of Finance Act, 1994 for the period from 10.9.2004 to February-2007. Therefore, service tax on charges collected by the said service provider for providing the said service is recoverable under proviso to Section 73(1) of the Finance Act, 1994 along with interest under Section 75 ibid.

36.2 Now, I come to the issue of taxability of reimbursable charges for the period from February-2007 onwards under the category of ‘CHA Service’.

I find that the definition of Custom House Agent provided under Section 65(35) of the Finance Act, 1994 reads as under:

“custom house agent” means a person licensed, temporarily or otherwise, under the regulations made under sub-section (2) of section 146 of the Customs Act, 1962.

I also find that the definition of a custom house agent as per Regulation 2( c ) of the Custom House Agents Licensing Regulations, 2004 defines custom house agent as under:

“ (c) “Custom House Agent” means a person licensed under these regulations to act as agent for the transaction of any business relating to the entry or departure of conveyance or the import or export of goods at any Customs Station.”

I further find that the definition of taxable service of custom house agent under Section 65(105)(h) of the Finance Act, 1994 reads as :

“ the taxable service means any service provided or to be provided to a client, by a Custom House Agent in relation to the entry or departure of conveyances or the import or export of goods”.

I find that the above said definition of taxable service does not restrict the activity of a Custom House Agent to a Customs Station as far as taxability of the services provided by him is concerned.

Therefore, in view of the above definition, I find that a service would become taxable as custom house agent’s service, when:

a. the service is provided by a custom house agent; b. the service is provided in relation to the entry or departure of conveyances or the import or export of goods; c. the service is provided to any client/person. 38

36.2.1 I observe that Section 67 of the Finance Act, 1994, has been amended w.e.f 18.4.2006 which is reproduced below and the Service Tax (Determination of Value ) Rules, 2006 were enacted w.e.f 19.4.2006.

“Section 67 of the Finance Act,1994:

(1)Subject to the provisions of this chapter, “service tax chargeable on any taxable service with reference to its value shall,---

(i) In a case where the provision of service is for a consideration in money, be the gross amount charged by the service provider for such service provided or to be provided by him; (ii) In a case where the provision of service is for a consideration not wholly or partly consisting of money, be such amount in money, with the addition of service tax charged, is equivalent to the consideration; (iii) In a case where the provision of service is for a consideration which is not ascertainable, be the amount as may be determined in the prescribed manner;

(2) Where the gross amount charged by a service provider, for the service provided or to be provided is inclusive of service tax payable, the value of such taxable service shall be such amount as, with the addition of tax payable is equal to the gross amount charged.

(3) The gross amount charged for the taxable service shall include any amount received towards the taxable service before, during or after provision of such service.

(4) Subject to the provisions of sub-sections (1), (2) and (3), the value shall be determined in such manner as may be prescribed.”

36.2.2 On plain reading of Section 67, I observe that the service tax liability is on the gross amount received towards the services rendered. Thus, the gross receipts would include the amounts which are recovered towards provision of services. I find from the combined reading of section 67 and the definition of taxable service of a Custom house Agent under section 65(105)(h) of the Finance Act, 1994 that any amount to be made taxable must have nexus with the CHA services. It is explicitly clear that the taxable services rendered by a Custom house agent means any service provided to a client/person by a custom house agent in relation to the entry or departure of conveyance or the import or export of goods. Thus, all amounts received by the Custom house agent in relation to the entry or departure of conveyance or the import or export of goods would be includible in the gross receipts as per section 67 and chargeable to service tax.

36.2.3 I find that Shri Tripati Balaji Patro, General Manager of the said service provider in his statement dated 5.10.2009 has interalia described various heads of income and the nature of service provided under the respective head as detailed below:

SI. No Heads of Income Nature of service/composition . the income in the said head is the freight charges collected from various clients for movement of goods form one place 1 Freight Income to another and same are not collected on actual basis but we may keep a markup (profit element). 2 Inland Haulage Inland Haulage Charges & Ex Work Charges are charges Charges & Exfor container movement from factory to 39

the Port of Loading and vice versa. These charges/income Work are grouped under Freight income in ‘P&L heads’ but Charges shown separately in P&L grouping. Currency Currency Adjustment Factor (CAF) is the income from 3 Adjustment Factor fluctuation of the rate of Dollar or other foreign currency (CAF) vis-à-vis Indian Rupees. Custom Income indicates the charges towards the documentation charges from various clients, for 4 Custom Income Customs Clearance, which does not include Customs Duty. Octroi Income is amount recovered towards the octroi paid on behalf of various clients. The amount of Octroi charged 5 Octroi Income could be on actual basis or there could be gain or loss. The same is reflected in the Profit & Loss Account under the head of Income. This is the amount recovered towards the duty and taxes paid on behalf of the various clients. The 6 Duty/Taxes Income amount of Duty/taxes charged could be on actual basis or there could be gain or loss. The same is reflected in the Profit & Loss Account under the head of Income. Trucking is done for support to imported or export goods, 7 Trucking Income this is freight charged for transportation of goods from factory to the Port of Loading and vice versa. Insurance charges is the amount recovered from the clients towards the insurance taken for safeguarding the containers. The amount of Insurance charged could be on 8 Insurance Income actual basis or there could be gain or loss. The same is reflected in the Profit & Loss Account under the head of Income. Ware housingWarehousing income is the charges collected, from various 9 Income clients, for warehousing imported or export goods. Handling Fees is the charges recovered from the clients Handling Fees 10 towards Terminal Handling Charges, Bill of Lading Income Charges etc. Reimbursements These are reimbursement charges relating to support 11 Income services provided to the various clients. Handling FeesHandling Fees Agency Income is Agency Fee charged in 12 Agency Income respect of CHA service provided to various clients. Warehouse Rent,Warehouse Rent, W&D Income are the charges collected 13 W&D Income for warehousing goods in relation to providing C&F seivice. Transportation Income, W&D are the charges collected for transporting goods in relation to. providing C&F. service and transportation business. We have our own transport Transportation 14 department also which looks after the business of Income, W&D transportation of goods. We have not taken registration under the category of GTA as the liability of service tax is either on consignee or consignor. Octroi/duties, W&D is amount recovered form from various Octroi/duties, W&D 15 clients, for paying Octroi on behalf of customers and is in Income relation to providing C&F service. Reimbursement Reimbursement Warehousing Income is the 16 Warehousing reimbursement charge collected in relation to providing Income, W&D C&F service. Other Warehousing Income is the charge collected as out Other Warehousing 17 of pocket and other expense incurred on behalf of the Income customer. 40

Other Charge Income is the charge collected as out of Other Charge 18 pocket expense in relation to various services & the Income service provided for support of business. Labour Charges WH Income is the charges levied Labour Charges 19 towards Labour income for C&F, to be included in WH Income taxable value. Other, DO Fees Other, DO Fees Income are the charges collected in 20 Income relation to pro viding Delivery Orders to the customer. Freight Freight Transhipment Income is collected for transporting 21 Transhipment consignment from place of arrival to the place where Income customer is located. Brokerage Brokerage Income is commission income received from 22 Income the Shipping Line. Foreign Agents Foreign Agents (Actual) Freight Income, are charges 23 (Actual) Freight billed to the overseas counterparts for expenses incurred Income by us.

36.2.4 On a careful study of the description of the nature of services provided as specified in the above table, I find that the following charges shown under Point “A” below can be directly related to the provision of CHA services as per Section 65(105)(h) of the Finance Act, 1994 and thus chargeable to service tax under Section 67 of the Finance Act, 1994.

Point:A I) Custom income. II) Handling Fees income. III) Handling Fees Agency income. IV) Other, DO Fees income.

Therefore, service tax on all the above charges and all other similar charges which are in direct relation to the provision of ‘Custom house Agent’ service, collected by the said service provider is recoverable under proviso to Section 73(1) of the Finance Act, 1994 along with interest under Section 75 ibid for the period after February-2007. 36.2.5 I further find that the following charges shown under Point “B” below are in the nature of reimbursable expenses for which services are also provided by the CHA.

Point:B I) Freight income. II) Inland Haulage Charges & Ex. Work Charges. III) Currency Adjustment Factor. IV) Octroi income. V) Duty/Taxes income. VI) Trucking income. vii) Insurance income. viii) Warehousing income. ix) Reimbursements income. x) Warehouse Rent income. xi) Transportation income, W&D. xii) Octroi/duties, W&D income. xiii) Reimbursement Warehousing income W&D xiv) Other Warehousing income. xv) Other Charges income. xvi) Labour Charges WH income xvii) Freight Transhipment income. xviii) Foreign Agents (Actual) Freight income. 36.2.6 As regards the taxability of reimbursable expenses, I find from Section 67 sub-section (4) that the value of taxable service shall be determined in 41 such manner as may be prescribed. Thus during the period of the show cause notice i.e. from February-2007, the said service provider must qualify as a “Pure Agent” in terms of Rule 5(2) of Service Tax (Determination of Value ) Rules, 2006, effective from 19.4.2006 as also clarified in CBEC Circular No. 119/13/2009-ST dated 21.12.2009 so as to claim exclusion of expenses from the taxable value. The basic principle is that the service tax liability is on the gross amount received towards the services rendered. Thus, all amounts received by the Custom house agent for services provided in relation to the entry or departure of conveyance or the import or export of goods would be includible in the gross receipt and chargeable to service tax. Whereas, for non inclusion of reimbursable expenses, for the period from 19.4.2006, the said service provider has to satisfy the conditions specified in Rule 5(2) of Service Tax (Determination of Value ) Rules, 2006 and CBEC Circular No. 119/13/2009-ST dated 21.12.2009 for each service charge.

36.2.7 The said service provider has placed reliance on various circulars and case laws for exclusion of reimbursable expenses from the taxable value. However, I find that it has been amply clarified by the Board in the said circulars that expenses which are reimbursed on actual basis are deductible from the taxable value. There is no blanket exclusion provided for reimbursable expenses. The said service provider’s reliance on the judgment of Bax Global India Ltd. v. CST, Bangalore [2008 (9) STR 412 (Tri.-Bang.)] is also misplaced as the said order of the Hon’ble Tribunal was not accepted by the department and an appeal bearing No. C.E.A. No. 43/2008 dated 17.4.2008 has been preferred before the Hon’ble High Court of Karnataka as informed by the Service tax Commissionerate Bangalore vide letter F.No. IV/03/532/2006 Rev/Appl. Dated 21.2.2011. I also find that judgment of Hon’ble Tribunal in the case of S & K Enterprises Vs Commissioner of Customs & C.Ex. (Appeals), Calicut, reported at 2008(10) S.T.R. 171 (Tri.-Bang.), relied upon by the service provider can not be applied in the case before me as it pertains to the Clearing & Forwarding Agent’s services. I find that Hon’ble Tribunal in the cases cited by the said service provider has clearly held that there should be nexus between the amount collected and the services rendered. The same principle has been followed while adjudicating this case and the services having direct nexus with the provision of CHA services have been held to be taxable, whereas, with regard to taxability of reimbursable charges, qualification of the said service provider as a “Pure Agent” in terms of Rule 5(2) of Service Tax (Determination of Value ) Rules, 2006, effective from 19.4.2006 and CBEC Circular No. 119/13/2009-ST dated 21.12.2009 has been looked into.

36.2.8 The said service provider has failed to give invoice wise details of the amount collected and amount expended. It is apparent that the said service provider has less expended the amount. As per condition d) of CBEC Circular No. 119/13/2009-ST dated 21.12.2009 and Rule 5(2) of the Service Tax (Determination of Value) Rules, 2006, the reimbursements shall be on ‘actual basis’ i.e. without any mark-up or margin and in case CHA includes any mark-up or profit margin on any service, then the entire charge (and not the mark-up alone) for that particular activity/service shall be included in the taxable value. The said service provider has failed to satisfy the said condition, hence I take the entire amount collected from the clients as chargeable to service tax. The said service provider has not submitted any record to enable the verification of fulfillment of other conditions as laid down in Rule 5(2) ibid. Thus during the period of the show cause notice i.e. from February-2007, the said service provider has failed to qualify as a “Pure Agent” in terms of Rule 5(2) of Service Tax (Determination of Value ) Rules, 2006, effective from 19.4.2006 and CBEC Circular No. 119/13/2009-ST dated 21.12.2009 so as to claim exclusion of expenses from the taxable value. Therefore, service tax on the entire amount of reimbursable charges collected by the said service provider is recoverable under proviso to Section 73(1) of the Finance Act, 1994 along with interest under Section 75 ibid for the period after February-2007. 42

36.2.9 The ‘Brokerage Income’ mentioned at Sl.No. 23 of the Table at Para 36.2.3 above would get categorized under the head ‘Business Auxiliary Service’ and chargeable to Service tax. I have already discussed that the charges at Point- A and Point-B and similar other charges are taxable under the category of ‘Business Auxiliary Service’ for the period upto February-2007.

36.3 I find that there is no dispute with regard to the commission income earned by the said service provider from various airlines as an IATA approved ‘Cargo Agent’. The said income is received by the said service provider towards the service rendered in connection with marketing and selling of the cargo space of an airline. I find that this is nothing but promotion or marketing of services provided by client and falls within the ambit of the taxable category of ‘Business Auxiliary Service’ under Section 65(19)(ii) of Finance Act, 1994. Thus, the differential amount of service tax as per Annexure-A of the show cause notice is recoverable under proviso to Section 73(1) of the Finance Act, 1994 along with interest under Section 75 ibid.

36.4 Now, I come to the issue of transportation of cargo from the customers premises to the desired destinations or vice versa in respect of export and import in relation to which the said service provider has collected charges under various heads viz. Freight Income; Inland Haulage Charges & Ex Work Charges; Insurance; Currency Adjustment Factor; Duty/taxes; Trucking; reimbursements; Others; Others charge collect; Freight Transhipment; Foreign Agents (Actuals); etc. I find that the said service provider’s contention that they were registered under the category of ‘Clearing and Forwarding’ services and filing ST-3 returns is not relevant as the issue here is with regard to taxability of reimbursable charges collected by them. I find that for the period after February- 2007, these are reimbursable charges in relation to the entry or departure of conveyance or the import or export of goods which would be taxable under the category of “Custom House Agent Service”. As discussed above, the said service provider must qualify as a “Pure Agent” in terms of Rule 5(2) of Service Tax (Determination of Value ) Rules, 2006, effective from 19.4.2006 and CBEC Circular No. 119/13/2009-ST dated 21.12.2009 so as to claim exclusion of expenses from the taxable value. The said service provider has failed to give invoice wise details of the amount collected and amount expended. It is apparent that the said service provider has less expended the amount. As per condition d) of CBEC Circular No. 119/13/2009-ST dated 21.12.2009 and Rule 5(2) of the Service Tax (Determination of Value) Rules, 2006, the reimbursements shall be on ‘actual basis’ i.e. without any mark-up or margin and in case CHA includes any mark-up or profit margin on any service, then the entire charge (and not the mark-up alone) for that particular activity/service shall be included in the taxable value. The said service provider has failed to satisfy the said condition, hence I take the entire amount collected from the clients as chargeable to service tax. The said service provider has not submitted any record to enable the verification of fulfillment of other conditions as laid down in Rule 5(2) ibid. Thus during the period of the show cause notice i.e. from February-2007, the said service provider has failed to qualify as a “Pure Agent” in terms of Rule 5(2) of Service Tax (Determination of Value ) Rules, 2006, effective from 19.4.2006 and CBEC Circular No. 119/13/2009-ST dated 21.12.2009 so as to claim exclusion of expenses from the taxable value.

36.4.1 I find that for the period prior to February 2007 when the said service provider was not providing the services of a ‘Custom House Agent’, the transportation of cargo from the customers premises to the desired destinations or vice versa in respect of export and import is a service which is nothing but ‘inputs’ within the meaning of Section 65(19)(iv) of Finance Act, 1994 and categorized under the ‘Business Auxiliary Service’ w.e.f 10.9.2004. Therefore, service tax on charges collected by the said service provider for providing the said service is recoverable under proviso to Section 73(1) of the Finance Act, 1994 along with interest under Section 75 ibid. 43

36.5 I now take up the issue of the ‘services charges’ collected by the said service provider which are proposed to be credited to the account of Central Government under Section 73(A) of the Finance Act, 1994 read with Section 11D of the Central Excise Act,1944. I have seen the Invoice No. 0034003603 dated 2.9.2005 and Invoice No. 0034006242 dated 6.9.2006 referred in the show cause notice. It is an undisputed fact that for the period prior to February 2007 the CHA services were actually being provided by M/s Dawn India as the said service provider did not had a CHA license as required under the regulations made under sub-section (2) of section 146 of the Customs Act, 1962. However, in the above mentioned two invoices amount of Rs. 1800/- and Rs.1500/- respectively is shown as Agency charges and an amount of Rs. 183.60 and Rs. 184/- respectively is shown as ‘service charges’. I find that applying the rate of service tax of 10.2% and 12.24% as it existed at the material time to the amount of Rs.1800/- and Rs.1500/- also gives an amount of Rs. 183.60 and Rs. 184/- respectively. Thus, I have no doubt in my mind that the said amount of Rs. 183.60 and Rs. 184/- collected as ‘service charge’ by the said service provider is nothing but an amount representing service tax collected by the service provider in a disguised manner. I apply the same analogy and extrapolate it to the service charge amount provided by the said service provider vide letter dated 29.5.2009 as the said service provider could not provide the activity wise details of the total amount of Rs. 68,53,84,180/- given in Annexure-A to the show cause notice as specifically asked during the course of Personal Hearing dated 22.2.2011 to provide the same duly certified by their statutory Chartered Accountants. In view of the above discussion, I hold that the said service provider has collected amount of Rs. 47,209/- representing service tax in the guise of ‘service charges’ which is liable to be paid to the credit of the Central Government under Section 73(A) of the Finance Act, 1994 read with Section 11D of the Central Excise Act,1944 along with interest under Section 73(B) of the Finance Act, 1994 read with Section 11DD of the Central Excise Act,1944.

36.6 I finally come to the issue of wrong availment of Cenvat credit of Rs.92,55,810/- for the period from 1.4.2006 to 31.3.2009, by the said service provider. I find that at para 15 of the show cause notice, it is simply alleged that the said service provider has wrongly availed the Cenvat credit on input services as the said service provider did not produce details of cenvat credit availment and therefore demand has been raised in absence of documents. I find that this is a very crude way of demanding, wrongly availed Cenvat credit. The said service provider has contended that they were given only one day time for producing the cenvat documents and before they could submit the details, the show cause notice was issued. However, I find that the said service provider did neither produce any invoice in original nor produce any other record showing the receipt, disposal, consumption and the inventory of input and capital goods even during the adjudication proceedings. They also did not produce any document /record showing the value, amount of service tax and the details of person issuing the cenvatable invoices. This is not only in contravention to Rule 9(5) of Cenvat Credit Rules, 2004 but also leaves the adjudicating authority without any chance to look at the documents to decide on the admissibility. I find that the said service provider has not discharged the burden of proof regarding the admissibility of the Cenvat credit as required under Rule 9(5) of Cenvat Credit Rules, 2004. Therefore, the Cenvat Credit availed by the said service provider is required to be recovered from them under Rule 14 of the Cenvat Credit Rules, 2004. I find that the said service provider has not provided sufficient details of Cenvat credit availed by them along with their ST-3 returns. Therefore, the charge of suppressing the facts with intention to evade payment of service tax sustains. I find that the show cause notice proposes to impose penalty under Rule 15(4) of Cenvat Credit Rules, 2004, when Cenvat credit in respect of input services has been taken or utilized wrongly by reason of fraud, collusion, willful mis-statement, suppression of facts or contravention of any of the provisions of Finance Act or rules made thereunder with intention to evade payment of service tax. I find that since the said service provider has not made sufficient compliance with the law as discussed above, 44 imposition of penalty is justified. I therefore, hold the said service provider liable to penalty under Rule 15(4) of the Cenvat Credit, Rules, 2004. 36.7 I have gone through Affidavit dated 2.2.2011 of Shri Jignesh Brahmbhatt, General Manager in charge for the activities of M/s Agility Logistics Pvt Ltd at Ahmedabad. I find that the affidavit mostly contains reiterations of written submission and contentions made by the assessee in their various defence replies at different points of time beginning from the investigation stage to the end of Personal Hearing. I also observe that the Exhibits annexed with the Affidavit are only photo copies of the documents given on sample basis. I have already discussed the contentions and arguments made by the said assessee in the ‘Discussion & Findings’ above. Therefore, no separate discussion and findings is required on the said Affidavit.

37. As regards the allegation of suppression of facts and invoking the extended period with regard to the short payment of service tax is concerned, the phrase implies that withholding of information is suppression of facts. P. Ramanatha Aiyar’s Concise Law Dictionary [1997 Edition Reprint 2003 – page 822] defines the phrase lucidly and accurately as – Where there is an obligation to speak, a failure to speak will constitute the “suppression of fact” but where there is no obligation to speak, silence cannot be termed “suppression”. It is manifestly clear from this that intention to evade payment of duty is implied in the suppression of facts. Since the said assessee is liable to self assess the liability to pay service tax, they had an obligation to furnish the correct and complete information and the value of services whether taxable or otherwise. With regard to CHA services, I observe that the Board vide letter F.No. B43/1/97-TRU dated 6.6.1997 had amply clarified the issue of taxability on reimbursable expenses incurred by the CHAs on behalf of their clients by use of the word “incurred” which reiterates the Board’s view that expenses made on “actual basis” are only to be excluded from the taxable value. Further, in terms of Rule 5(2) of Service Tax (Determination of Value) Rules, 2006, effective from 19.4.2006 and CBEC Circular No. 119/13/2009- ST dated 21.12.2009 a service provider (CHA in the instant case) must qualify as a “Pure Agent” and satisfy all the conditions laid down therein so as to claim exclusion of expenses from the taxable value. I observe from condition d) of CBEC Circular No. 119/13/2009-ST dated 21.12.2009 and Rule 5(2) of the Service Tax (Determination of Value) Rules, 2006 that the reimbursements shall be on ‘actual basis’ i.e. without any mark-up or margin and in case CHA includes any mark-up or profit margin on any service, then the entire charge (and not the mark-up alone) for that particular activity/service shall be included in the taxable value, reaffirms the Board’s view. I find that despite clarifications by the Board and insertion of Service Tax (Determination of Value) Rules, 2006, w.e.f. 19.4.2006, the said service provider has contravened the provisions of Section 67 of the Finance, Act, 1994 in as much as, they failed to determine the correct value of taxable services provided by them and Section 68 of the Finance Act, 1994 read with Rule 6 of the Service Tax Rules, 1994, in as much as they failed to determine and pay the correct amount of service tax.

37.1 I further observe that in the present system of self-assessment documents like invoices and other transaction details are not supplied to the Department. Moreover, the said service provider did not furnish the required details of receipt of amount of taxable value to the Department, the intention will have to be believed as that of evasion. Once the details are not submitted to the Department, mis-declaration or suppression is rightly invoked. I, therefore, conclude that the element of suppression with intent to evade payment of service tax is conspicuous by the peculiar facts and circumstances of the case as discussed above. In view of the above discussion and findings, the ratio of cases relied upon by the said service provider can not be applied in the case before me.

37.2 I am convinced that had the investigation not been carried out by the service tax authorities, the short payment of service tax would have gone undetected. Therefore, this is a case of improper assessment amounting to 45 deliberate non-declaration and suppression of vital information with a willful intention to evade payment of service tax. Accordingly, the invoking of extended period under proviso to Section 73(1) of the Act in the case before me is fully justified.

38. I now take up the issue of imposition of penalty under section 76, 77 and 78 of the Act.

38.1 As regards the issue of imposition of penalty under Section 76 of the Finance Act, 1994, I observe that penalty under Section 76 and 78 of the Finance Act, 1994 are mutually exclusive w.e.f. 10.05.2008 and once penalty under Section 78 is imposed, no penalty under Section 76 can be imposed in terms of the proviso inserted in Section 78 w.e.f 10.5.2008 in this regard. Therefore, no penalty under Section 76 is imposable for the period from 10.5.2008 onwards. In the case before me, the demand of service tax is for the year from 2004-2005 to 2008-2009, therefore, I hold that penalty under Section 76 of the said Act is not imposable on the said service provider for the period from 10.5.2008 onwards. However, for the period upto 9.5.2008, as the said service provider has not paid service tax within the stipulated time period as prescribed under Section 68 of the Finance Act, 1994 read with Rule 6 of the Service Tax Rules, 1994, I hold them liable to penalty under Section 76 of the Finance Act, 1994.

38.2 As regards imposition of penalty under Section 78, I find that as the said service provider has suppressed the facts with intention to evade payment of service tax, penalty under Section 78 of the Finance Act, 1994 is mandatorily imposable as has been held by the Apex court in the case of Dharmendra Textile Mills Ltd-2008 (231) ELT 3 (SC) and Rajasthan Spinning & Weaving Mills Ltd-2009 (238) ELT 3 (SC). Therefore, I hold that penalty is imposable on the said service provider under Section 78 of the Finance Act, 1994.

38.3 As regards imposition of simultaneous penalty, I place my reliance on the judgment of Hon’ble High Court of Kerala in the case of Assistant Commissioner of Central Excise v. Krishna Poduval as reported at [2006] 3 STT 96 (KER) which is aptly applicable to the present case. I find that the imposition of penalty under sections 76 and 78 of the Act is for non payment of service tax and suppression of value of taxable service respectively which are two distinct and separate offences attracting separate penalties. I find that the said service provider has committed both the offences and therefore penalties under section 76 and 78 of the Finance Act, 1994 are imposable on the said service provider for the period upto 9.5.2008.

38.4 As regards imposition of penalty under section 77 of the Finance Act, 1994, I observe that as discussed above the said service provider was liable to pay service tax during the years from 2004-05 to 2008-09. I find that the said service provider has late obtained the Service Tax registration after a considerable time gap from the day of providing taxable services which is in contravention to Section 69 of the Finance Act, 1994 read with Rule 4 of the Service Tax Rules, 1994. The said contravention has made the said assessee liable to penalty under section 77 of the Finance Act, 1994.

38.5 As regards their contention for invoking Section 80 of the Finance Act, 1994 for waiver of penalty, I find that the said service provider has not produced any reasonable cause for the failure to pay service tax except that it was an issue of interpretation. I have already discussed the issue of taxability of the services in the foregoing paras and arrived at the findings that the said services are taxable. I observe that if the said service provider had any doubt regarding the taxability of the services provided by them, then being a registered service tax assessee they should have approached the service tax authorities for clarification of doubt to ascertain the taxability of the service provided by them. Therefore, I 46 have considered it appropriate to hold the said service provider liable to penalty under Section 76, 77 and 78 of the Finance Act, 1994.

39. In view of the foregoing discussion, I pass the following order:

O R D E R i. I order to consider amount of Rs. 68,53,84,180/- (Rupees Sixty eight crore fifty three lakh eighty four thousand one hundred and eighty only) as detailed in Annexure-A to the show cause notice, received by the said service provider during the years from 2004-05 to 2008-09 as taxable value under the category of “Business Auxiliary Service” and “Custom House Agent Service”; ii. I confirm the demand of service tax of Rs.8,03,63,033/- (Rupees Eight crore three lakh sixty three thousand and thirty three only) as detailed in Annexure-A to the show cause notice, for the years from 2004-05 to 2008-09 and order to recover the same from the said service provider under proviso to Section 73(1) of the Finance Act,1994; iii. I order to recover interest on Rs.8,03,63,033/- (Rupees Eight crore three lakh sixty three thousand and thirty three only) on the above confirmed demand at the prescribed rate from the said service provider under Section 75 of the Finance Act, 1994; iv. I impose penalty of Rs.200/- (Rupees Two hundred only) per day for the period during which failure to pay the tax continued, upon the said assessee under Section 76 of the Finance Act, 1994, for the period upto 17.4.2006; I impose penalty of Rs.200/- (Rupees Two hundred only) per day for the period during which failure to pay the tax continued, or at the rate of 2% of such tax, per month, whichever is higher, starting with the first day after the due date till the date of actual payment of the outstanding amount of service tax upon the said assessee under Section 76 of the Finance Act, 1994, for the period from 18.4.2006 to 9.5.2008; provided further that the amount of penalty payable in terms of this section shall not exceed the service tax payable by the said service provider for the period upto 9.5.2008. v. I impose penalty of Rs.8,03,63,033/- (Rupees Eight crore three lakh sixty three thousand thirty three only) on the said assessee under section 78 of the Finance Act, 1994. In the event of the said assessee opting to pay the amount of service tax along with all other dues as confirmed and ordered to be recovered, within thirty days from the date of communication of this order, the amount of penalty liable to be paid by them under Section 78 of the Finance Act, 1994 shall be 25% of the said amount. However, the benefit of reduced penalty shall be available only if the amount of penalty is also paid within the period of thirty days from the communication of this order, otherwise full penalty shall be paid as imposed in the above order. vi. I confirm the demand of Rs. 47,209/- (Rupees Forty seven thousand two hundred and nine) on ‘service charges’ which is nothing but amount representing service tax for the period prior to February 2007 wrongly collected and retained by the said service provider and order the same to be paid to the credit of the Central Government under Section 73A(3) of the Finance Act, 1994 read with Section 11D of the Central Excise Act,1944; 47 vii. I order to recover interest on the above confirmed demand of Rs. 47,209/- (Rupees Forty seven thousand two hundred and nine) on ‘service charges’ under Section 73A(3) of the Finance Act, 1994 read with Section 11D of the Central Excise Act,1944, at the prescribed rate from the said service provider under Section 73B of the Finance Act, 1994, read with Section 11DD of the Central Excise Act,1944; viii. I impose penalty of Rs. 1000/- (Rupees One thousand only) under Section 77 of the Finance Act, 1994, for failing to obtain service tax registration within the time as required under section 69 of the Finance Act, 1994 read with Rule 4 of the Service Tax Rules, 1994; ix. I confirm the demand of Cenvat credit amounting to Rs.92,55,810/-(Rupees Ninety two Lakh fifty five thousand eight hundred ten only) for the period from 1.4.2006 to 31.3.2009, under Rule 14 of Cenvat Credit Rules, 2004, by invoking the extended period of five years read with proviso to sub-section (1) of Section 73 of the said Act; x. I order to recover interest on the confirmed demand of Cenvat credit amounting to Rs.92,55,810/-(Rupees Ninety two Lakh fifty five thousand eight hundred ten only) at the prescribed rate from the said service provider under Section 75 of the Finance Act, 1994 read with Rule 14 of the Cenvat Credit Rules, 2004; xi. I impose penalty of Rs.92,55,810/-(Rupees Ninety two Lakh fifty five thousand eight hundred ten only) on the said service provider under Rule 15(4) of the Cenvat Credit Rules, 2004 read with Section 78 of the Finance Act, 1944 for contravention of Rule 9(5) of the Cenvat Credit Rules, 2004;

(A. K. Gupta) Commissioner, Service Tax, Ahmedabad.

F.No.STC/4-58/O&A/Prev.-II/2008-09 Date:.20.9.2011 By Regd. Post AD.

To, M/s Agility Logistics (P) Ltd, 3rd Floor, Sun City House, Mithakhali Six Road, Ahmedabad.

Copy to:- 1. The Chief Commissioner, Central Excise & Service Tax, Ahmedabad Zone, Ahmedabad. 2. The Assistant Commissioner, Service Tax, Dn. II, Ahmedabad. 3. The Superintendent, Range-XIII, Division-II, Service Tax, Ahmedabad. 4. The Additional Commissioner (H.Q. Preventive), Service Tax, Ahmedabad. 5. Guard file. 48

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