2016 (1) TMI 300 - AT - Service Tax

Valuation - Steamer agent services - reimbursement of expenses - inclusion of additional expenditure towards arranging drinking water, garbage clearance - expenses incurred by them for supply of mobile phones, and airtime charges, crew medical etc. - Held that - the type of expenses involved in the present dispute will not definitely fall within the ambit of the taxable service vis- -vis a steamer agency. They are only courtesy services or assistance rendered by the appellants to shipping lines, beyond the scope of their contractual obligations. Obviously, the Appellant is the ship s conduit in the port of call for contracted steamer agency service. There would sometimes also arise requests for assistance for the ship or her officers, on issues not related to ship s husbandry or booking etc. of cargo of the genre billed in this case. The Steamer Agent, by virtue of their ongoing relationship with the shipping line, inevitably extends any such assistance requested for. Items that may be required for the ship or her officers for personal use are thus very often procured from the market and supplied by steamer agent. In my view, the billings made by the Appellant for expenses incurred by them for supply of mobile phones, and airtime charges, crew medical etc. would fall in this category of other/ additional assistance rendered and the value thereof is not required to be added to value of taxable services and hence no tax liability will arise on such value. In the case of Sangamitra Services Agency 2013 (7) TMI 862 - MADRAS HIGH COURT , Hon ble High Cout has held that if a receipt is for reimbursing the expenditure incurred for the purpose, the mere act of reimbursement, per se, would not justify the contention of Revenue that the same, having the character of the remuneration or commission deserves to be included in the sum amount of remuneration/commission. Appeal filed by the Revenue gets rejected - Decided in favor of assessee.

Summary

Issues Involved:
1. Inclusion of reimbursable expenses in the taxable value for service tax purposes.
2. Interpretation of the term "service charges" for steamer agents.
3. Applicability of the High Court judgment in Sangamitra Services Agency.

Issue-wise Detailed Analysis:

1. Inclusion of reimbursable expenses in the taxable value for service tax purposes:
The core issue was whether reimbursable expenses received by the steamer agent for services such as drinking water, garbage clearance, and crew transport should be included in the taxable value of services rendered. The Department issued a Show Cause Notice alleging that the reimbursable expenses amounting to Rs. 21,89,729/- should form part of the value of services and demanded service tax on the surplus income generated. The Assistant Commissioner confirmed this demand, but the Commissioner (Appeals) set aside the order, leading to the Revenue's appeal before the Tribunal.

2. Interpretation of the term "service charges" for steamer agents:
The Tribunal examined Trade Notice No. 39-CE (Service Tax 39) 97 dated 11.06.1997, which clarified that service charges for steamer agents include husbandry fees and agency commissions but exclude other expenses incurred on behalf of the shipping line. The Tribunal noted that the expenses billed by the respondent, such as marine charges, garbage removal, and supply of fresh water, do not fall under the statutory definition of "service charges" related to a ship's husbandry or dispatch. These were considered courtesy services or additional assistance beyond the scope of contractual obligations.

3. Applicability of the High Court judgment in Sangamitra Services Agency:
The Tribunal relied on the judgment of the Hon'ble High Court of Madras in the case of CST, Chennai Vs. Sangamitra Services Agency, which held that reimbursable expenses do not form part of the taxable value if they are merely reimbursements and not remuneration or commission. The High Court emphasized that the phrase "by whatever name called" must have a link to remuneration or commission. The Tribunal found that the nature of expenses in the present case did not fit within the taxable service ambit and upheld the Commissioner (Appeals)'s order, rejecting the Revenue's appeal.

Conclusion:
The Tribunal concluded that reimbursable expenses incurred by the steamer agent for various services provided to the shipping line should not be included in the taxable value for service tax purposes. The Tribunal upheld the Commissioner (Appeals)'s order, finding no infirmity in it and rejected the appeal filed by the Revenue. The judgment emphasized the distinction between service charges and reimbursable expenses, aligning with the High Court's interpretation in Sangamitra Services Agency.