2011 (10) TMI 504 - AT - Service Tax

Service Tax valuation - reimbursement of expenses - pure agent - CHA services - During the course of audit of accounts of the said assessee, it was noticed that, in addition to service charges for the Customs House Agents service, the assessee has collected various charges under different headings and did not include the same for determining the value of CHA services - Learned advocate appearing for the assessee contended that in respect of expenses under certain heads, the Commissioner has failed to consider the factual submissions including sample documents which were submitted from time to time, as required by the department and also the entire documents submitted in CD and disallowed the claim for exclusion - The assessee claims that, on the basis of documents already submitted to the Commissioner, they will be in a position to demonstrate that they are eligible for abatement of these expenses and other expenses referred to in para 8 of the Commissioner s order as towards that of Pure Agent - Held that the documents have been produced by the assessee on different occasions and that there was a change in adjudicating authority and, therefore, possibly there was communication gap in correlating the documents in support of the claim of the assessee - Appeals are allowed by way of remand

Issues:
1. Appeal against Orders-in-Original confirming service tax demands and penalties.
2. Stay applications related to the appeals.
3. Disallowance of certain expenses claimed as reimbursement.
4. Consideration of expenses under different heads by the Commissioner.
5. Department's appeal against the Commissioner's order.
6. Assessee's appeal for reconsideration of expenses as "Pure Agent."
7. Commissioner's decision on expenses under different heads.
8. Commissioner's findings and reasons for allowing or disallowing expenses.
9. Remand of the matter for fresh consideration by the Commissioner.

Analysis:

1. The appeals were filed against Orders-in-Original confirming service tax demands and penalties imposed on the appellants. Stay applications were also submitted in relation to these appeals.

2. The Commissioner disallowed certain expenses claimed as reimbursement by the appellants, leading to a dispute over the treatment of these expenses.

3. During the audit, it was observed that the appellants collected various charges in addition to service charges for Customs House Agents services but did not include them in determining the value of CHA services. Show-cause notices were issued proposing demands of service tax, interest, and penalties.

4. The Commissioner's order favored the appellants in relation to expenses under 15 heads, considering them as expenses incurred by a "Pure Agent." However, for expenses under other heads, the Commissioner disallowed the claim for exclusion due to lack of supporting documents.

5. The department appealed against the Commissioner's order, arguing that each of the 15 activities should have been examined separately to determine inclusion in the taxable service of Customs House Agents.

6. The Commissioner's decision on expenses under different heads was detailed, categorically addressing the conditions stipulated under Rule 5(2) of Valuation Rules, 2006 for expenses to be considered as incurred by a "Pure Agent."

7. The Commissioner allowed expenses under 15 heads as reimbursable, citing specific conditions met by the appellants in recovering these expenses from third parties.

8. The Commissioner's order was set aside for expenses covered in specific paragraphs, directing a fresh consideration by the Commissioner after granting a reasonable opportunity of hearing to the assessees.

9. Ultimately, the appeals by the department were rejected, while the appeals of the assessees were allowed for remand in specific terms, with the stay petitions also being disposed of accordingly.

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