2008 (1) TMI 72 - AT - Service Tax

Reimbursement of expenses valuation - Revenue contended that they had not paid the service tax on the gross receipts & they have suppressed the value of the reimbursement Held that expenses like loading, unloading charges & freight are not to be added to the value of service - appellants were under the bona fide belief that cost/expenses incurred by them are not includible in the consideration of the value of service rendered by them so penalty not imposable u/s 76 & 78

Summary

Issues:
Appeal against Orders-in-Appeal regarding service tax on gross receipts and penalties imposed for suppression of reimbursement value.

Analysis:
The appeals were filed against Orders-in-Appeal passed by the Commissioner of Customs & Central Excise. The issue revolved around the non-payment of service tax on gross receipts and the alleged suppression of reimbursement value by Clearing and Forwarding Agencies, leading to penalties being imposed. The appellants argued that only remuneration related to services should be taxed, citing a Board circular and various judgments supporting this view. They also highlighted the Service Tax (Determination of Value) Rules, 2006, which specified the inclusion of all expenses incurred by the service provider in the taxable service consideration. The appellants contended that penalties imposed were arbitrary and illegal, as they believed expenses were not part of the taxable service value, supported by case laws. The Departmental Representative insisted on taxing the gross amount received.

Upon careful consideration, the Tribunal found that only the commission related to the Clearing and Forwarding activity should be subject to service tax, excluding other reimbursements like loading/unloading charges and freight. The decision aligned with previous Tribunal rulings in similar cases. The Tribunal emphasized that penalties were unwarranted as the appellants genuinely believed reimbursements should not factor into the taxable service value. Consequently, the appeals were allowed, providing consequential relief to the appellants. The judgment was pronounced on January 17, 2008.