2019 (6) TMI 1496 - AT - Service Tax

Clearing and Forwarding Agents services - non-inclusion of certain expenses in the total taxable value while discharging service tax liability - period 2005-06 to 2009-10, and April 2010 to March 2011 - HELD THAT - The demand is raised on the expenses which are reimbursed by the principal to the appellant herein. It is undisputed that the appellants have discharged service tax on the entire commission received by them. Apart from such commission, they are also receiving amounts in the nature of reimbursement of expenses. Such amount is not in the nature of consideration for any services provided by the appellant. These are the expenses incurred by the appellant and have been reimbursed by the principal pursuant to the agreement. Such reimbursable expenses cannot form part of the assessable value during the relevant period because service tax can only be levied on the gross amount charged for rendering services as has been held by the Hon ble Apex Court in the case of UNION OF INDIA AND ANR. VERSUS M/S. INTERCONTINENTAL CONSULTANTS AND TECHNOCRATS PVT. LTD. 2018 (3) TMI 357 - SUPREME COURT . In the present case, the show-cause notice clearly indicates that the disputed amounts are reimbursable expenses, therefore no service tax can be levied on such reimbursable expenses. In view of the above, the impugned orders are not sustainable and need to be set aside - Appeal allowed - decided in favor of appellant.

Summary

Issues: Service tax liability on expenses reimbursed by principal in Clearing and Forwarding Agents services.

Analysis:
1. Issue of Tax Liability: The appellants, engaged in Clearing and Forwarding Agents services, were found to have not included certain expenses reimbursed by the principal in the total taxable value while discharging service tax liability for the period 2005-06 to 2010-11. The show-cause notice proposed to demand service tax, interest, and penalties for this omission.

2. Legal Submissions: The appellant argued that they had discharged service tax on the commission received but not on the reimbursed expenses like electricity, loading/unloading charges, etc. They contended that such reimbursed expenses are not subject to service tax as per the decision of the Apex Court in a relevant case.

3. Department's Position: The department argued that the expenses reimbursed were in the nature of charges for services provided and should have been included in the service tax calculation. They relied on decisions in other cases to support their stance.

4. Tribunal's Decision: After hearing both sides and examining the records, the Tribunal found that the demand was raised on expenses reimbursed by the principal to the appellant. It was noted that the appellants had already paid service tax on the commission received. The Tribunal held that the reimbursed expenses were not part of the assessable value for service tax calculation. The Tribunal distinguished the present case from others cited by the department, where deductions for expenses were disallowed. In this case, the reimbursable expenses were not subject to service tax.

5. Conclusion: The Tribunal allowed the appeals, setting aside the impugned orders and providing consequential relief, if any. The decision was based on the principle that service tax can only be levied on the gross amount charged for services, excluding reimbursable expenses. The judgment clarified the distinction between commission and reimbursed expenses in the context of service tax liability for Clearing and Forwarding Agents services.