2014 (7) TMI 326 - AT - Service Tax

Valuation of goods - Whether the expenses for arranging transporting from the godown to the premises of the dealers/stockists; the expenses for arranging the loading and unloading of the goods at rake points and at the godown and the godown rent paid by the appellant and which are reimbursed to them by their principals, to be included in the assessable value of the C&F Agents Service or not - Held that - sofar as the godown rent is concerned, in terms of the agreements, it is the principals, who are required to maintain the godown and hence, it is the principals who are liable to pay the godown rent. In this regard, the appellant act only as their agent. Similarly, it is not disputed that the bills of the labour contractors for arranging loading and unloading of the goods at the rake point and at the godown and the bills of transporters are in the name of the principals and not in the name of the appellant and payment against these bills are made by on behalf of the assessee. Thus, the appellant act as pure agent. Therefore, we are of the view that these expenses would not be includible in the assessable value. Moreover, in any case, since the expenses in question, incurred by the appellant in course of providing the taxable service are reimbursed by the service recipients and the department seeks to include these reimbursable expenses in the assessable value of the services by invoking Rule 5 of the Service Tax Valuation Rules and since this rule has been stuck down by Delhi High Court as ultra vires to the provisions of Section 67 of 1994 Rules in its judgement in the case of Inter-Continental Consultants & Technocrats Pvt. Ltd. (2012 (12) TMI 150 - DELHI HIGH COURT), for this reason also, the reimbursement expenses, in question, would not be includible in the assessable value - Decided in favour of assessee.

Summary

Issues:

1. Whether the reimbursed expenses for arranging transportation, supervision of loading and unloading of goods, and payment of godown rent are includible in the assessable value of Clearing and Forwarding Agent services.

Analysis:

The appellant, engaged in providing Clearing and Forwarding Agent services, had expenses reimbursed by their clients for various activities related to the services provided. The jurisdictional Addl. Commissioner held these expenses to be includible in the assessable value, leading to a service tax demand, interest, and penalties. The Commissioner (Appeals) upheld this decision, prompting the appellant to file an appeal challenging the inclusion of these expenses.

The appellant argued that the expenses reimbursed were for activities carried out as pure agents, with bills in the name of the principals, and thus should not be considered as amounts received for services provided. They relied on Rule 5(1) of the Service Tax Valuation Rules but also contended that this rule was ultra vires to the provisions of Section 67 of the Finance Act, 1994, citing a Delhi High Court judgment. The Departmental Representative, however, maintained that these expenses were integral to the services provided and should be included in the assessable value.

The Tribunal considered the submissions and examined the nature of the expenses in question. It found that the appellant acted as pure agents for activities like godown rent, loading and unloading, and transportation, with bills in the name of principals. Therefore, these expenses were not includible in the assessable value. Additionally, the Tribunal noted that the reimbursement expenses were sought to be included using Rule 5, which had been invalidated by the Delhi High Court. Hence, the expenses were not to be included in the assessable value.

Consequently, the Tribunal ruled in favor of the appellant, setting aside the impugned order and allowing the appeal based on the non-inclusion of reimbursed expenses in the assessable value of the Clearing and Forwarding Agent services.