2018 (3) TMI 505 - AT - Service Tax

C & F Agent service - various considerations received from their clients - liability of service tax - Held that - It is clear that these expenses/charges incurred/paid by the appellants to various third parties are later reimbursed on actual basis by their clients - In the present case, there is no service identified except charges which are reimbursed by the clients. Regarding tax liability of reimbursement expenses, the Tribunal in various cases held that such expenses incurred by the assessee on behalf of the clients, which were later reimbursed on actual basis cannot be includible for discharge of service tax liability. Appeal allowed - decided in favor of appellant.

Summary

Issues: Tax liability of clearing and forwarding agent on various considerations received from clients.

In this case, the appellant, a clearing and forwarding agent, was disputing the tax liability on various considerations received from clients. The charges in question included AAI charges, Octroi charges, Stamp duty charges, Sales tax, Air freight charges, and more. The original authority demanded a service tax of ?3,37,83,247 and imposed penalties under Section 76, 77, and 78 of the Finance Act, 1994. The appellant argued that these charges were reimbursed by clients on an actual basis and were not part of taxable value as they did not provide any Business Support Service (BSS) or C & F agent service for these expenses. The Revenue contended that these activities directly supported the clients' business and should be taxed as BSS.

Upon reviewing the case, the Tribunal found that the expenses incurred by the appellant and later reimbursed by clients on an actual basis were not includible for discharging service tax liability. The Tribunal referred to various decisions, including Pharmalinks Agency (I) Pvt. Ltd. Vs. CCE, Link Intime India Pvt. Ltd. Vs. CCE, and others, where it was established that such reimbursed expenses are not taxable. It was noted that the taxable service was not identified in the present case, and therefore, the impugned order demanding tax on these charges was deemed unsustainable.

Based on the precedents and the lack of identification of taxable service, the Tribunal set aside the impugned order and allowed the appeal of the appellant, ruling that the expenses incurred and reimbursed by clients on an actual basis were not part of the taxable value.