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2023 (12) TMI 126 - AT - Service TaxLiability of CHA to pay Service tax on various expenses incurred on behalf of their clients - case of the department is that all these expenses incurred during the course of providing CHA service, therefore the same is includible in the gross value of CHA services provided by the appellant - HELD THAT - As per the provisions of Rule 5 of the Service Tax (Determination of Value) Rules, 2006, the reimbursable expenses also need to be included in the value of taxable services rendered. However, this rule has been held to be ultra-vires to section 67 by Hon ble Supreme 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 . Hence, the demand of Service Tax on this count is clearly not sustainable. In view of the Hon'ble Apex Court judgment in Intercontinental case and the CBIC Circular No. 119/13/2009-ST dated 12.12.2009, the reimbursable expenses incurred by the appellant on behalf of the service recipient is not includible. The demand cannot be sustained. The impugned order is set aside - Appeal allowed.
Issues involved:
The issue involved in the present case is whether the appellant, as a Customs House Agent (CHA), is liable to pay Service tax on various expenses incurred on behalf of their clients. Details of the Judgment: 1. The appellant argued that they are paying service tax correctly on the service charge of their CHA service, while all other charges towards actual expenses are recovered as reimbursement from their clients. 2. The appellant claimed to be acting as a pure agent under the authorization given by the client, and therefore, the actual expenses incurred for and on behalf of their client should not be included in the gross value of CHA service. 3. The appellant relied on Circular No. 119/13/2009-ST dated 12.12.2009, which clarified that charges incurred and recovered as reimbursement from clients other than CHA service charges are not includible in the gross value of CHA service. 4. The appellant also argued that the department invoked Rule 5 for including reimbursable expenses in the value of CHA service charges, but this Rule was held ultra-vires by the Supreme Court in a previous case. Decision of the Tribunal: 1. The Tribunal found that as per Rule 5 of the Service Tax (Determination of Value) Rules, 2006, reimbursable expenses need to be included in the value of taxable services rendered. However, this rule was held to be ultra-vires to section 67 by the Supreme Court in a previous case, making the demand for Service Tax on this count not sustainable. 2. Referring to a Board circular, the Tribunal clarified the conditions under which reimbursable charges should be excluded from the taxable value of CHA services, emphasizing that the appellant's expenses incurred on behalf of the service recipient are not includible. 3. Consequently, the Tribunal held that the demand for payment of service tax cannot be sustained, setting aside the impugned order and allowing the appeal with any consequential relief. Conclusion: The Tribunal ruled in favor of the appellant, stating that the reimbursable expenses incurred by them on behalf of the service recipient are not includible in the gross value of CHA service. The demand for service tax was deemed unsustainable, and the appeal was allowed with any consequential relief.
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