2019 (2) TMI 439 - AT - Service Tax

Valuation - inclusion of reimbursable expenses received from the principals in the assessable value - Clearing and Forwarding Agent service Held that - Hon ble Supreme Court in their recent decision in the case of Intercontinental Consultants and Technocrats Pvt. Ltd. Vs. Union of India 2018 (3) TMI 357 - SUPREME COURT OF INDIA has upheld the decision of the Hon ble Delhi High Court which struck down as ultra vires Rule 5 (1) of the Service Tax (Determination of Value) Rules, 2006. This rule provides for treating any expenditure/costs incurred by service provider in the course of providing the taxable service, to be treated as consideration. The levy of Service Tax on expenses cannot be sustained - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Service Tax on reimbursement expenses received by the appellant.
2. Validity of remand by Commissioner (Appeal).
3. Applicability of Rule 5 (1) of the Service Tax (Determination of Value) Rules, 2006.

Analysis:

1. The appellant, appointed as a 'Clearing and Forwarding Agent,' received reimbursement expenses from the principal, in addition to the Agency Commission. The Department demanded Service Tax on these reimbursable expenses, claiming them as part of the commission received. The Adjudicating Authority confirmed the demand, but the Commissioner (Appeal) remanded the matter for re-calculating the duty liability.

2. The appellant challenged the remand by the Commissioner (Appeal), arguing that it lacked direction and legal basis. During the appeal hearing, the appellant did not appear but requested disposal based on written submissions and grounds. The Tribunal noted the dispute centered on the reimbursement amounts from the principal, M/s. Camlin Ltd. The Tribunal referenced a recent Supreme Court decision, upholding the decision of the Delhi High Court that struck down Rule 5 (1) of the Service Tax (Determination of Value) Rules, 2006. This rule treated any costs incurred by the service provider in providing the taxable service as consideration.

3. Considering the legal precedent, the Tribunal concluded that the levy of Service Tax on expenses could not be sustained. Consequently, the Central Excise Duty demand was set aside, and the appeal was allowed. The judgment highlighted the invalidity of taxing reimbursement expenses and the impact of the Supreme Court ruling on the case. The decision provided clarity on the interpretation of rules governing the taxation of service-related expenses, ultimately benefiting the appellant by overturning the duty demand.