2024 (4) TMI 821 - AT - Service Tax

Demand of differential service tax - Valuation - non-inclusion on reimbursable expenses incurred by the appellant in taxable services - pure agent services - HELD THAT - The appellant is only pure agent and all the expenses for transportation, loading and un-loading etc. paid by the appellant were reimbursed from the Principal on actual basis. In that circumstances, the appellant is not required to include the reimbursable expenses in their taxable services. Moreover, the present issue whether the reimbursable expenses are includable in the taxable value or not, has been examined by this Tribunal in the case of M/s Ganga Carrier Private Limited 2023 (9) TMI 809 - CESTAT KOLKATA , wherein this Tribunal has observed all the 'reimbursement expenses' have been included in the consideration with effect from 14/05/2015. Hence while calculating service tax, the service provider has to include all the expenses whatever he incurred for rendering service, w.e.f.14.04.2015 only and not before that period. The dispute in the present appeal pertains to the period from 2000-01 (October) to 2004-05 (September) and hence, the substitution brought in the definition of 'Consideration' vide Finance Act, 2015 would not be applicable for the period in the present appeal. As this Tribunal has already been held that the reimbursable expenses are not includible in the taxable value of services, therefore, it is held that the reimbursable expenses in this case, are also not includable in the taxable value of service. Therefore, we hold that the appellant has correctly paid the service tax during the impugned period. Thus, no demand of differential service tax is sustainable against the appellant - there are no merit in the impugned order and the same is set aside - appeal allowed.

Summary

Issues:
The judgment involves the issue of demand of service tax based on non-inclusion of reimbursable expenses in taxable services.

Details of the Judgment:

Issue 1: Demand of Service Tax
The appellant appealed against an order raising service tax demand due to non-inclusion of reimbursable expenses in taxable services for the period 2015-16 to 2017-18. The appellant had obtained Service Tax Registration u/s 65(105)(h) of the Act and declared gross amount charged to clients as well as reimbursable expenses. A show-cause notice was issued for demanding differential service tax on the reimbursable expenses claimed by the appellant, which was confirmed in the adjudication. The appellant contended that as a pure agent, the reimbursable expenses should not be included in taxable services, citing precedent cases.

Issue 2: Pure Agency Services
The appellant argued that they were registered as service providers for clearing and forwarding agent services u/s 65(105)(j) read with 65(25) of the Finance Act, 1994. They provided agreements with their Principal to demonstrate acting as a pure agent, offering services like freight charges, loading, and unloading on behalf of the Principal. The Tribunal examined the agreements and concluded that the appellant acted as a pure agent, and the reimbursable expenses should not be included in taxable services, as per relevant rules and precedents.

Conclusion:
The Tribunal found in favor of the appellant, holding that the reimbursable expenses were not includible in the taxable value of services. Therefore, the appellant correctly paid the service tax, and no demand for differential service tax was sustainable. The impugned order was set aside, and the appeal was allowed with consequential relief.