2016 (9) TMI 98 - AT - Service Tax

Valuation clearing and forwarding services godown rent loading and unloading charges - is reimbursement expenses added in assessable value of the services? Demand of tax and interest penalty under section 76 and 78 of the Finance Act, 1994 - Held that - the similar issue held in the case of Commissioner of S.T. Chennai Vs. Sangamitra Services Agency 2013 (7) TMI 862 - MADRAS HIGH COURT, where it was held that if the receipt is for reimbursing the expenditure incurred for the purpose of providing clearing and forwarding agent services, the same will not form part of the value of the services. Demand barred by limitation Held that - as appeal allowed on merits, appellant s stand of demand being barred by limitation not relevant appeal allowed decided in favor of appellant.

Summary

Issues involved:
Interpretation of reimbursable expenses in the context of service tax liability for clearing and forwarding agent services.

Analysis:
The case involved a dispute regarding the treatment of reimbursable expenses in the assessable value of services provided by a clearing and forwarding agent. The appellant was providing services as a C&F agent to a principal company and was registered with the Service Tax department. The Revenue contended that expenses like godown rent, loading, unloading, and other factors should be included in the taxable value, leading to a demand for service tax for a specific period. The original adjudicating authority upheld the demand along with penalties, which was affirmed by the Commissioner (A), resulting in the appeal.

The crucial issue to be determined was whether the reimbursable expenses received by the appellant from the principal should be added to the taxable value of the services. The Tribunal examined the contract between the appellant and the principal company, which outlined various charges and reimbursements. The contract specified that all expenses incurred by the C&F agent would be reimbursed by the principal, without any dispute on the factual basis of such reimbursements.

Referring to precedents, the Tribunal cited a decision by a Larger Bench which emphasized that agreed-upon expenses between the service provider and recipient should be considered as reimbursable. Additionally, the Tribunal highlighted judgments by the Madras High Court and Delhi High Court, which supported the exclusion of reimbursable expenses from the value of services. Following these decisions, the Tribunal concluded that the Revenue's stance lacked merit. Therefore, the impugned order confirming the demand was set aside, and the appeal was allowed in favor of the appellant, providing consequential relief.

In light of the favorable decision on the merits of the case, the Tribunal did not delve into the appellant's argument regarding the limitation period for the demand. The judgment was pronounced in open court on 22.08.2016.