2023 (6) TMI 500 - AT - Service Tax

Valuation - Custom House Agent Services - inclusion of reimbursable expenses in assessable value or not - LCL charges - deconsolidation charges - transportation charges - DO charges - terminal handling charges - demurrage charges - documentation charges - other charges from their clients - Department was of the view that the appellant ought to have included these expenses in the taxable value to discharge service tax liability - Time Limitation. HELD THAT - From the SCN itself it is seen that the demand has been made on the reimbursable expenses incurred by the appellant. Further, the allegation as per para 3.2 of the SCN that appellant has not included the charges in the nature of deconsolidation charges, transportation charges, DO charges etc. incurred by them for providing CHA services. It is understandable that such charges are collected by the appellant from their clients and paid to the concerned service provider. It is settled position that the reimbursable expense is not subject to levy of service tax as per the decision of the Hon ble Apex Court in the case of UNION OF INDIA AND ANR. VERSUS M/S. INTERCONTINENTAL CONSULTANTS AND TECHNOCRATS PVT. LTD. 2018 (3) TMI 357 - SUPREME COURT . After analysing the facts and going through the evidence, we are of the considered view that the decision of Hon ble Apex Court in Intercontinental Consultants and Technocrats Ltd. will be squarely applicable to the facts of the case. The demand cannot sustain. The impugned order is set aside. Appeal is allowed.

Summary

Issues:
The issues involved in this case are whether the appellant is liable to pay service tax on various charges collected for providing Custom House Agent (CHA) services and whether the penalty imposed under section 78 of the Finance Act 1994 is justified.

Issue 1: Liability to pay service tax on reimbursable expenses

The appellant, engaged in providing CHA services, was found to have excluded charges like LCL charges, deconsolidation charges, transportation charges, DO charges, terminal handling charges, demurrage charges, and documentation charges while computing taxable value. The department contended that these charges should have been included in the taxable value to discharge service tax liability. The original authority and the Commissioner (Appeals) upheld the demand. However, the appellant argued that these charges were reimbursable expenses and not subject to service tax. The Tribunal, after considering the arguments and the decision of the Hon'ble Apex Court in Union of India Vs Intercontinental Consultants and Technocrats Ltd., held that reimbursable expenses are not subject to service tax. Therefore, the demand was set aside, and the appeal was allowed.

Issue 2: Penalty under section 78 of the Finance Act 1994

The appellant also challenged the penalty imposed under section 78 of the Finance Act 1994. The appellant contended that they had discharged service tax on the consideration received and the demand was raised only on reimbursable expenses. They argued that the extended period for invoking penalty cannot be applied as the issue was interpretational and under litigation. The Tribunal, after considering the arguments, held that the penalty imposed under section 78 should be waived as the appellant had put forward a reasonable cause for non-payment of the differential amount of service tax.

In conclusion, the Tribunal ruled in favor of the appellant, stating that reimbursable expenses are not subject to service tax as per legal precedent. The demand for service tax on such expenses was set aside, and the penalty imposed under section 78 of the Finance Act 1994 was waived due to a reasonable cause presented by the appellant.