Leviability of service tax on demurrage charges on storage of export cargo – Commissioner (Appeal) can exercise power of adjudicating authority in the absence of power of remand.

PJ/Case Laws/2010-11/1092

Case:Cochin International Airport Ltd v/s Commr of C. Ex., Cochin

Citation:2011 (21) STR 169 (Tri-Bang)

Issue: - Leviability of service tax on demurrage charges on storage of export cargo – Commissioner (Appeal) can exercise power of adjudicating authority in the absence of power of remand.

Brief Facts: - Appellant had allowed many exporters to store their export cargo in their premises during the material time. Appellant collected demurrage charges for the same. Demand of service tax was raised on the demurrage charges. The Adjudicating Authority confirmed the demand which was raised under the head of ‘Storage and Warehousing’ services. Interest was also demanded and penalty was also imposed.

In appeal, the Commissioner (Appeal) held that service tax was not leviable on any demurrage collected on agricultural produce and accordingly, case was remanded for re-quantifying the service tax on demurrage charges collected in respect of goods other than agricultural produce. Interest liability was upheld but penalty was set aside by granting benefit of Section 80 to the appellant.

Against this decision, appeal has been filed before the Tribunal.

On remand, the Adjudicating Authority passed fresh order re-confirming the demand of service tax on Demurrage with interest. In appeal, the Commissioner (Appeal) noted that no evidence was produced by the appellant before him as well as before the lower authority. Relying upon judgment in Karnataka State Beverages Corporation v/s Commissioner of Service Tax, Bangalore [2006 (4) STR 469 (Tri-Bangalore)] the matter was once again remanded to the original authority. The said decision is also challenged before the Tribunal.

Reasoning of Judgment: - The Tribunal held that in so far as storage of agricultural produce is concerned, Service tax I not leviable on any demurrage charges collected by the warehousing company inasmuch as the definition of “storage and warehousing”. Reliance was also made on Board Circular No. B11/1/2002-ST dated 01.08.2002.

The Tribunal further held that the Commissioner (Appeal) had rightly held in the first round of litigation that demurrage collected on agricultural produce was not chargeable to service tax. Therefore, pursuant to the remand order, it was not open to the Original Adjudicating Authority to demand service tax from the appellant in respect of such demurrage charges.

The remand order has been challenged on the ground that the Commissioner (Appeals) has no power to remand as held by the Apex Court in the case of MIL India Ltd v/s Commissioner [2007 (210) ELT 188 (SC)].

The Tribunal held that the orders of the Lower Authority are liable to be set aside on this sole ground. The Tribunal noted that the contention of the appellant that no service tax was payable on the demurrage collected on any stored goods and they had relied on the judgment given in Karnataka State Beverages Corporation v/s Commissioner of Service Tax, Bangalore. But this contention was not considered by the lower appellate authority.

The question that whether demurrage charges were to be included in the taxable value of storage and warehousing services was a fundamental question which went to the root of the dispute between the assessee and the Department and the Commissioner (Appeal) ought to have addressed the issue. On the basis of judgment given in MIL India Ltd it was held that the Commissioner (Appeal) can exercise the power of adjudicating authority also when the Commissioner (Appeal) has no power of remand.

Accordingly, matter remanded to Commissioner (Appeal). It was also noted that the question that whether demurrage charges were to be included in the taxable value of storage and warehousing services is no longer res integra and is settled in favour of the assessee.

Decision: -Appeals disposed off.

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PJ/Case Laws/2010-11/1092

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