Whether mere facilitating payment of octroi by filling up forms and presenting to octroi officer for clearance on behalf of client is taxable under BAS?

PJ/CASE LAW/2015-16/2903

Case:- TRIMURTI OCTROI COMPANY VERSUS COMMISSIONER OF C. EX., MUMBAI

Citation:- 2015 (40) S.T.R. 152 (Tri. - Mumbai)

Brief facts:- The appellant is an Octroi clearing agent having a licence issued by the Bombay Municipal Corporation. The appellant is in appeal against Order-in-Appeal No. PKS/03/BEL/2010, dated 23-4-2010 passed by Commissioner of Central Excise & Customs (Appeals), Mumbai, whereby it was held that for the clearing services of Octroi provided to their clients, they are liable to pay service tax under classification of “Business Auxiliary Service” under Section 65(19) of the Finance Act, 1994.

The brief facts of the case are that a show cause notice dated 30-1-2008 was issued to the appellant for the period from October, 2004 to March, 2007 stating therein that they have received an amount of Rs. 9,63,576/- for the services provided to M/s. Lubrizol India Ltd., being the amount paid by Lubrizol India Ltd., @ 2.5% by way of service charges of the Octroi amount. The nature of business as explained by the learned Counsel for the appellant is that when the goods are arrived at the check post or Octroi post they facilitate in payment of Octroi by filling up various forms and presenting the same before the Octroi authorities for the correct determination of the amount of Octroi. Thereafter they deposited the amount of Octroi on behalf of the client and obtained clearance under the Octroi Act, which facilitated the goods of the clients to cross over into the city of Mumbai. He further explained that the Octroi is chargeable even in case of stock transfer of goods. The appellant raise invoices on their clients, which is normally 2.5% of the amount of octroi assessed. A service charge also charged @ Rs. 50/- per vehicle. It appears to the Revenue that the said services provided by the appellant is classifiable under head “Business Auxiliary Service” under Heading 65(19) of the Finance Act, wherein clause (vi) provides Business Auxiliary Service means any service in relation to provision of service on behalf of the clients and further clause (vii) provides as incidental or auxiliary to any activity specified in sub-clauses (i) to (vi), such as billing, issue or collection or recovery of cheques, payments, maintenance of accounts and remittance, etc., and includes services as commission agent, but does not include any information technology service and any activity that amounts to “manufacture” within the provisions of Central Excise Act.

Show cause notice dated 30-1-2008 was issued to the appellant asking them why the service tax amounting to Rs. 1,09,715/- should not be demanded on the ground that amount is received by the appellant as octroi clearing charges along with interest. Further penalty was proposed under Sections 76, 77 & 78 of the Act.

Appellant’s contention:-The appellant contested the show cause notice on the ground that they do not provide any of the services as mentioned in clauses (i) to (vi) of Section 65(19) of the Act, nor they provide any incidental or auxiliary services to any of the activity specified in sub-clauses (i) to (vi) of Section 65(19) of the Finance Act. It is also contended that they do not act as commission agent and the nature of services provided by them is only in the form of assisting their clients in payment of octroi and complying with the provisions of BMC Act. Further, they contended that the services provided by them is similar to the services provided by the Customs House Agent. Payment of service tax on CHA service is an independent category of service and no such specific category is applicable to Octroi clearing agent. They relied upon the decision of the Commissioner (Appeals) in the case of Express Octroi Clearing Agency - reported in 2007 (8)S.T.R.78, wherein it was held that activities of Octroi Clearing Agents are neither liable under the category of “Clearing and Forwarding Agents Service” not under the category of “Business Auxiliary Service” for payment of service tax.

The show cause notice was adjudicated and the demands were confirmed, holding that the activities of the appellant involve handling of documents of title of goods for obtaining octroi clearance. Accordingly, in view of the explanation to Section 65(19) which provides that “Commission Agent” includes any person, who deals with the goods or services or documents of title to such goods or services. Further penalty was also levied for an amount of Rs. 90,000/- under Section 78. Further, penalty was dropped under Sections 76 & 77. It is also seen that lower amount of Rs. 87,393/- was confirmed, in view of levy of “Business Auxiliary Service” with effect from 16-6-2005 as Commission Agent was included as taxable category from that date. Aggrieved with the above order, the appellant preferred an appeal before the Commissioner (Appeals), who have rejected the appeal upholding the findings of the lower authorities.

It was further observed that the definition in sub-clause (b), “deals with”, indicate that to take measures concerning with anything would come within the definition. Further, having commercial trading need not mean only sale or purchase. The fact that the appellant have used various documents accompanying goods for completing services at Octroi check post, would undoubtedly come within the meaning of dealing with the documents. According to the contention of the appellant relating to “deal” indicates narrow and construed view. Aggrieved by the order, the appellant is before this Tribunal.

The learned Counsel for the appellant repeated the grounds as relied upon before the adjudicating authority and the first appellate authority. Further contended that they are not providing any service in the nature of “Business Auxiliary Service” under Section 65(19) of the Finance Act. It is further contended that for the purpose of obtaining clearance under octroi provisions, they are simply required to read the documents of title, being the invoices or challans, have to fill up the forms, for the purpose of assessment of the octroi amount, which does not amount to handling of documents. They have no authority from their principal to handle the documents of title, as they cannot make any endorsement on the documents. Accordingly, it is contended that the learned Commissioner have erred in holding by mere reading of the title document for the purpose of getting octroi assessment and clearance does not amount to handling of the documents of title.
The learned Counsel also relied upon the decision of this Tribunal in the case of United Telecoms Ltd. v. CST, Hyderabad - 2011-TIOL-56-CESTAT-BANG = 2011 (22)S.T.R.571 (Tri.-Bang.), wherein under the fact that show cause notice did not specify the sub-clause of Section 65(19) of the Finance Act, under which the assessee was required to pay tax. It was held by this Tribunal that no demand can be confirmed against any person towards service tax liability unless the sub-clause is specified. As assessee should know vide the notice as to exact liability under the statute and it was held for such of vagueness, where scant nature of proposed demand is not provided under which an assessee is taxable, and the gross amount on which taxes demanded from an addressee, for such vagueness in case, it was held that demand is not sustainable. The appellants takes them to show cause notice and pointed out that no sub-clause to Section 65(19) having been mentioned under which the tax is proposed/charged and as such the demand is fit to be set aside on this ground also.

Respondent’s contention:- The learned AR relies on the impugned order. He further states that the appellant is providing services as octroi agent and tax is being paid by the appellant on behalf of the client, which is subsequently reimbursed to them along with service charges. Further, the learned AR relies on the findings of the Commissioner (Appeals) with regards to the term “deal with” and prays that the appeal is to be rejected.
The learned AR also relies on the decision of this Tribunal in the case of MSC Agency (India) Pvt. Ltd. v. CCE, Thane-II reported in 2014-TIOL-1043-CESTAT-MUM wherein this Tribunal held that merely because the particular sub-clause of Section 65(19) has not been specifically mentioned in the show cause notice, it does not vitiate the show cause notice or the proceedings initiated thereunder.

Reasoning of judgment:- Having considered the rival submission, they hold that mere reading of the invoices and the challans by the appellant, (the octroi agent) for the purpose of filling up the form and obtaining clearance at the check post, does not amount to dealing with or handling the documents of title. One can in the normal commercial term “dealing with the title” is possible when a person having authority to transfer the title of such documents. Wherein in the present case it is an admitted fact that the appellant does not have any authority to transfer the title and as such, the mere reading of the documents for the purpose of clearance of octroi does not amount to dealing with or the handling of documents of title of the goods. Thus, they hold that the learned Commissioner has erred in holding that the appellants have handled or are handling the documents of title. Thus, the appeal is allowed with consequential benefits, if any. The impugned order is set aside.

Decision:- Appeal allowed.

Comment:- The analogy of the case is that facilitating payment of octroi by filling up forms and presenting to octroi officer for clearance on behalf of client cannot be considered as ‘dealing with goods on behalf of client’ and so cannot be leviable to service tax under Business Auxiliary Service. Mere reading of invoices and challans for filling up does not amounts to dealing with or handling documents of title because appellant having no authority to transfer such title. Accordingly, it cannot be treated as dealing of goods on behalf of client so as to levy service tax under BAS.

Prepared by:- Monika Tak

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PJ/CASE LAW/2015-16/2903

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