2018 (2) TMI 944 - AT - Service Tax

Valuation - includibility - reimbursement of certain expenditure incurred on behalf of the clients - Held that - Regarding exclusion of reimbursement expenses, it is clear that the said exclusion can be allowed on satisfactory proof of documents specifically to the effect that these are on actual basis as per the arrangement between the client and the appellant. This can be easily verified with the supporting documents to be submitted by the appellants - Admittedly, the documents were not fully available at the time of proceedings before the original authority. Now, the appellant assures that all the required documents will be submitted for the scrutiny of the original authority to his satisfaction. The matter is remanded back to the original authority for a fresh consideration - appeal allowed by way of remand.

Summary

Issues:
Tax liability on reimbursement expenses and receipts under Business Auxiliary Services (BAS).

Analysis:
The appeal challenged an order by the Commissioner of Service Tax, Chennai, regarding the tax liability of the appellant, a Custom House Agent and Freight Forwarder. It was noted that for the financial year 2006-07, the appellant collected amounts from clients but did not discharge service tax, claiming these as reimbursement for expenses incurred on behalf of clients. Similar disputes arose regarding expenses/receipts under BAS. The original authority confirmed a tax liability of ?98,08,647/- along with penalties. The appellant argued that certain expenses were reimbursed on an actual basis and should not be included in taxable value. They also cited the invalidity of Rule 5 of Service Tax Valuation Rules, 2006. The appellant requested the opportunity to submit all necessary documents for clarification.

The Revenue contended that exclusion from taxable value should be based on actual reimbursement of client expenses, which the appellant failed to prove satisfactorily. The Tribunal noted that exclusion of reimbursement expenses requires proof through documents showing actual basis as per client-appellant arrangement. The appellant assured submission of all required documents for scrutiny. The receipts under BAS, not related to taxable activities, were also to be verified.

After hearing both parties and reviewing the records, the Tribunal found that the impugned order could not be sustained due to lack of supporting documents during the original proceedings. The matter was remanded to the original authority for fresh consideration, allowing the appellant to present all necessary defenses before a decision is made. The appeal was allowed by way of remand.

This judgment addressed the tax liability issues concerning reimbursement expenses and receipts under BAS, emphasizing the importance of providing supporting documents for exclusion from taxable value and verifying receipts not related to taxable activities. The Tribunal set aside the original order and remanded the matter for reconsideration, highlighting the need for the appellant to submit all required documents for a thorough review by the original authority.