2008 (8) TMI 104 - AT - Service Tax

Issue relates to grant of abatement of reimbursed expenses from the gross value of remuneration received against the services of C/F Agent appellant s submission that reimbursement expenses beyond maximum ceiling of 1% of the net sales are borne by them, is correct hence their claim is restricted to maximum ceiling of 1% only and that cannot be denied - Since the appellant s agreement itself shows reimbursement to a maximum limit of 1%, therefore, it has to be restricted to that extent only

Summary

Issues:
Grant of abatement of reimbursed expenses from the gross value of remuneration received against the services of Clearing & Forwarding Agent.

Analysis:
The appeal in this case arose from Order-in-Appeal No. 164/2007-CE dated 26.3.2007, concerning the grant of abatement of reimbursed expenses from the gross value of remuneration received by a Clearing & Forwarding Agent. The appellant's claim for reimbursement of expenses beyond the maximum ceiling of 1% of the net sales was contested by both authorities. However, it was acknowledged that the expenses incurred by the assessee were eligible for reimbursement as per the CBEC Circular F.No. B.43/1/97 TRU dated 6.6.1997. The dispute centered on whether the expenses made out of the appellant's own resources should be granted reimbursement. The learned Counsel argued that their claim was restricted to the maximum ceiling of 1% as per the agreement with their clients. The Tribunal had previously ruled on a similar issue in the case of Sri Sastha Agencies Pvt. Ltd. Vs. Asst. Commissioner of Central Excise & Customs, Palakkad, which the Counsel relied upon.

The Tribunal carefully considered the submissions and found that both authorities were unjustified in rejecting the reimbursable expenses up to the maximum limit of 1% as per the Board's Circular. It was clarified that the excess amount received beyond the 1% limit was not being claimed as deductions. The Tribunal held that the authorities' findings were not legal and proper, and the appellant's claim was allowed to the extent of the maximum ceiling specified in the agreement with their clients. The appeal was allowed in favor of the appellant with consequential relief, if any. The judgment highlighted the importance of adhering to the terms of agreements with clients when determining the extent of reimbursable expenses in such cases.

This judgment serves as a precedent for cases involving the grant of abatement of reimbursed expenses for service providers, emphasizing the significance of contractual agreements in determining the permissible limits of reimbursement. It underscores the need for authorities to adhere to relevant circulars and legal principles when assessing such claims, ensuring a fair and consistent application of tax laws in similar situations.