2015 (6) TMI 508 - AT - Service Tax

Clearing and forwarding agent - Valuation - inclusion of actual expenses received by the appellant as per the contract, chargeable of service tax or otherwise - Held that - As per Rule 6(8) of Service Tax Rules, 1994, the service tax liability which has to be discharged by service provider was the value received for the taxable service in relation to the services rendered by clearing and forwarding agent. From the perusal of the records, we find that there is no dispute as to the service tax discharged by the appellant on an amount received as compensation for the service rendered as clearing and forwarding agent; the additional amount which are received by the appellant are for computer stationery charges, godown rent and establishment charges is not disputed that the said amounts are paid to the appellant as per the agreement in contract which talks about the reimbursement of expenses to the appellant. In the order-in-Review the learned Commissioner has not controverted the said facts by adducing evidences against the same. - Commissioner in the Review Order relies upon the provisions of Rule 5 of Service Tax (Determination of Value) Rules, 2006 which were not in statute during the material period involved in this case. Suffice to say that the provisions which were not in statute cannot be applied for the demand of tax, the impugned order is on this point non-est. - Decided in favour of assessee.

Summary

Issues:
- Interpretation of Service Tax Rules, 1994 regarding the inclusion of actual expenses in service tax liability
- Applicability of Rule 6(8) of Service Tax Rules, 1994
- Comparison with previous tribunal decisions and their impact on the current case
- Reviewing authority's reliance on Rule 5 of Service Tax (Determination of Value) Rules, 2006
- Validity of the reviewing authority's decision and its compliance with legal provisions

Analysis:

The case involves a dispute over the inclusion of actual expenses received by the appellant in their service tax liability. The appellant, a clearing and forwarding agent, was collecting fixed charges for computer stationery, godown rent, and establishment charges, which the department deemed ambiguous. The initial proceedings were dropped by the Asst. Commissioner citing the inapplicability of the Service Tax (Determination of Value) Rules, 2006 for the relevant period. However, the Commissioner as a reviewing authority disagreed and issued a show-cause notice, leading to the current appeal.

The appellant argued that the additional charges were reimbursable expenses agreed upon with the service recipient and cited previous tribunal decisions in their favor. The Tribunal noted that the issue pertained to the period from October 2002 to March 2006, governed by Rule 6(8) of Service Tax Rules, 1994. It emphasized that the service tax liability should be based on the value received for taxable services rendered, separate from reimbursable expenses.

The Tribunal found merit in the appellant's arguments, highlighting that the reviewing authority erred in applying Rule 5 of Service Tax (Determination of Value) Rules, 2006, which was not in force during the relevant period. It emphasized that reimbursable expenses should not be included in the gross value for service tax liability, aligning with previous tribunal decisions upheld by high courts. The Tribunal deemed the reviewing authority's decision unsustainable and set it aside, granting relief to the appellant.

In conclusion, the Tribunal ruled in favor of the appellant, setting aside the impugned order and allowing the appeal with any consequential relief. The judgment emphasized the correct interpretation of Service Tax Rules, 1994, and the exclusion of reimbursable expenses from service tax liability calculations during the relevant period.