2018 (2) TMI 1045 - AT - Service Tax

Clearing and Forwarding Agency Service - Revenue entertained a view that the appellant is also getting other considerations, which assessee claimed as reimbursement, should also form part of taxable value - Held that - It is clear from the scope of the agreement that the appellants were in fact acting as Clearing & Forwarding Agent of the client cement company. They were also undertaking various connected activities, which are essentially loading, transporting the cement. The amount attributable to such activities are shown separately in the agreement as reimbursement. Tribunal in various earlier cases held that when the expenditure incurred by the assessee are in terms of agreement and are actually re-imbursed without any variation, the same shall not form part of the taxable value for C & F agency service. Appeal allowed - decided in favor of appellant.

Summary

Issues: Valuation of services for clearing and forwarding work, inclusion of reimbursement amounts in taxable value

In this case, the appellant was engaged in clearing and forwarding work for a client, which included activities like storage, transport, and dispatch of cement. The dispute revolved around the valuation of these services for the purpose of service tax. The appellant was discharging service tax based on the commission received from clients as per the agreement. However, the Revenue contended that other considerations, claimed as reimbursement by the appellant, should also be included in the taxable value. The Original Authority initially ruled in favor of the appellant, stating that tax was only applicable on the commission received as remuneration for the agency work, not on amounts received as reimbursement for expenses like freight. The Revenue appealed this decision, leading to the Commissioner (Appeals) overturning the ruling and holding the appellants liable to pay service tax on the gross amount charged, including remuneration. This decision prompted the appellant to file the present appeal.

Upon reviewing the agreement and the facts of the case, the Tribunal found that the appellants were indeed acting as Clearing & Forwarding Agents for the client, undertaking activities like loading and transporting cement. The agreement clearly delineated amounts attributable to these activities as reimbursements, which were paid by the client to the appellant on an actual basis. The Tribunal concurred with the Original Authority's view that these reimbursed amounts should not be considered part of the assessable value for the C & F Agency service. Citing previous tribunal decisions, the Tribunal emphasized that when expenses are reimbursed as per the agreement without variation, they should not be included in the taxable value for agency services. Referring to a specific case, the Tribunal highlighted that consistent reimbursement without alteration should not impact the taxable value.

After considering the arguments and examining the agreement, the Tribunal found no merit in the Commissioner (Appeals)'s decision. Consequently, the impugned order was set aside, and the appeal was allowed. The Tribunal's decision clarified that amounts reimbursed for specific activities should not be factored into the taxable value for clearing and forwarding agency services, affirming the Original Authority's interpretation and providing relief to the appellant in this case.