2015 (11) TMI 1104 - AT - Service Tax

Valuation of service - Includibility of warehousing and other reimbursables in the value of C&F agent service - Held that - Madras High Court in the case of CCE, Chennai Vs. Sangamitra Services Agency 2013 (7) TMI 862 - MADRAS HIGH COURT held that reimbursable expenses received by the assessee need not be added to the taxable value relating to clearing and forwarding agents service and that the receipt is for reimbursing expenditure incurred for the purpose and the mere act of reimbursement per se would not justify the contention of Revenue that the same was having the character of the remuneration or commission for the purpose of Rule 6(8) of Service Tax Rules, 1994. It is also seen that the Supreme Court has dismissed the Civil Appeal No. 171/2009 filed by C.C.E. against CESTAT Final Order 2008 (6) TMI 78 - CESTAT AHMEDABAD in the case of Reliance Industries Ltd. Vs. CCE which allowed assessee s appeal and held that expenses incurred on account of reimbursable expenses shall not be includible in the taxable value (Service Tax Review 15 Sept. 2011 page 70). The reimbursable expenses in this case related to travelling expenses of a consulting engineer. In the wake of these judicial pronouncements, the CESTAT Larger Bench judgement in case of Shri Bhagavathy Traders (2011 (8) TMI 430 - CESTAT, BANGALORE) which had distinguished CESTAT judgement in case of Sangamitra Services Agency (2007 (7) TMI 33 - CESTAT, CHENNAI) has since been overtaken by Madras High Court judgement in the case of Sangamitra Service Agency (supra) and the judgement in case of Reliance Industries Ltd. (supra). - Decided in favour of assessee.

Summary

Issues:
Inclusion of warehousing and other reimbursables in the assessable value of C&F agent service.

Analysis:
The appeal was filed against the Order-in-Appeal upholding the Order-in-Original confirming service demand and penalty for not including amounts received for godown rent, staff salary, sample handling, and freight charges in the assessable value. The appellant argued that the rent for warehousing was reimbursed by the service recipient, staff salary was claimed on an actual basis, and freight charges were not part of the assessable value for clearing and forwarding service.

The Departmental Representative contended that warehousing and other reimbursables were related to providing C&F agent service and should be included in the assessable value as per Section 67 of the Finance Act, 1994. Reference was made to a CESTAT judgment emphasizing that reimbursement arises when the service recipient has a legal obligation to pay a third party, which was paid by the service provider. The respondent cited various judgments to support their argument that such charges should not be included in the assessable value.

The Tribunal considered previous judicial pronouncements on the issue. It was noted that expenses like godown rent, clerk salary, establishment expenses, incentives, and various other charges were held to be excludable from the assessable value of C&F agent service in different cases. The Tribunal referred to a Madras High Court judgment and a Supreme Court dismissal supporting the position that reimbursable expenses need not be added to the taxable value of the service. In light of these precedents, the Tribunal found no merit in the Revenue's contentions and allowed the appeal filed by the appellant.