By TIOL News Service

NEW DELHI, AUG 08, 2013: BRIEF facts of the case are that on examination of records of the assessee for the period 2001-02 to 2004-05 it was pointed out that assessee received an amount of Rs.1,46,05,000/- from M/s Hindustan Lever Ltd. (HLL) for carrying out services of cold storage/clearing and forwarding operations of frozen products. According to department, the said service is chargeable to service tax and the demand was confirmed. On appeal, the Commissioner (Appeals) upheld the demand, but reduced penalties. Now, both the assessee and the revenue are in appeal before the CESTAT.

The assessee contended that the charges towards cold storage are in nature of rental for providing cold storage facility and incidental storage should not be confused with independent facility of providing cold storage. It was also contended that storage and warehousing service was brought under service tax net with effect from 16.8.2002 and cold storage service has been excluded from tax net. Therefore tax on the same service cannot be levied under different taxable services.

However, the Tribunal held that as per the agreement, assessee has agreed to provide cold storage for the purpose of storing and forwarding the frozen products belonging to HLL. In Article 2.13 to 2.29 of the Agreement in view of perishable nature of the goods, assessee is required to maintain specific temperature for storage of frozen goods before despatching the same as per direction of HLL. Therefore, the storage of the goods in cold storage is an inseparable part of Clearing & Forwarding activity undertaken by the assessee.

Also, the assessee has entered into one single agreement with HLL in which cold storage charges and C&FA charges have been mentioned separately. Since storage of the goods in cold storage is essential part of assessee's C&F operations, cold storage charges are required to be added in taxable value of C&FA services.

On limitation, the CESTAT held that for the first time the Revenue wrote a letter dated 27.9.2002 asking assessee to pay tax for the period Sept. 2001 to July 2002 and the assessee replied this letter vide their letter dated 3.11.2002 thereafter there was correspondence on 20.11.2002 from the department and replied by assessee on 9.12.2002. The fact that the assessee is not paying duty on cold storage charges was known to department in 2002. Quantum of Cold Storage Charges is already part of agreement and is fixed on monthly basis. Therefore extended period based on suppression of fact cannot be invoked.

Thus, the Tribunal allowed the appeal by assessee and dismissed the appeal by the revenue.

(See 2013-TIOL-1196-CESTAT-DEL)