2018 (5) TMI 671 - AT - Service Tax

Valuation - inclusion of reimbursement expenses - whether the amounts received as reimbursement by the C & F Agent from the principal is to be included in the taxable value for the purpose of calculation of service tax? - Held that - the issue is already settled in the case of CST vs. M/s. Sangamitra Service Agency 2013 (7) TMI 862 - MADRAS HIGH COURT , where it was held that if a receipt is for reimbursing the expenditure incurred for the purpose, the mere act of reimbursement, per se, would not justify the contention of the Revenue that the same, having the character of the remuneration or commission, deserves to be included in the sum amount of remuneration / Commission - appeal dismissed - decided against Revenue.

Summary

Issues:
Value of taxable services - Inclusion of reimbursable expenses

Analysis:
The appeal before the Appellate Tribunal CESTAT Bangalore involved the issue of whether amounts received as reimbursement by a Clearing and Forwarding (C & F) Agent from the principal should be included in the taxable value for the calculation of service tax. The respondent, a C & F agent, was paying service tax on service charges received at a fixed rate per metric ton, which included service tax as per the agreement with their principal. However, a show-cause notice was issued alleging that reimbursable expenses incurred by the C & F agent and subsequently reimbursed by the principal should be included in the gross taxable value. The matter was adjudicated, and the demand was confirmed, leading to an appeal by the Revenue against the order of the learned Commissioner (A).

The Revenue's case was based on a Tribunal decision upheld by the Madras High Court, while the respondent relied on a Supreme Court judgment in a similar matter. The Tribunal analyzed the issue and referred to the Madras High Court decision, which emphasized that reimbursed expenses should not be automatically included in the remuneration or commission paid to the agent. The Tribunal found that the law was settled on this matter and rejected the Revenue's contention that all incidental charges should be part of the remuneration or commission.

Additionally, the Tribunal cited a Supreme Court judgment that highlighted the importance of Section 67 of the Act in determining the value of taxable services for service tax calculation. The judgment emphasized that reimbursable expenses should be included in the gross amount charged only if they are for providing the taxable service. The Tribunal concluded that the rules cannot go beyond the statute and that the legislative intent must be followed, especially regarding prospective application of amendments.

By following the legal principles established in the cited judgments, the Tribunal found no infirmity in the order of the learned Commissioner (A) and upheld the decision in favor of the respondent. Consequently, the appeal filed by the Revenue was dismissed, and the order was pronounced in open court on a specified date.

This detailed analysis of the legal judgment from the Appellate Tribunal CESTAT Bangalore provides a comprehensive understanding of the issues involved, the arguments presented by both parties, and the Tribunal's decision based on relevant legal principles and precedents.