2016 (4) TMI 982 - AT - Service Tax

Includability - Whether reimbursable expenses to be included in the gross value - Handling operations of regional mother warehouse - Held that - the issue is no more res-integra. By referring to the ratio laid down by the Hon ble High Court of Delhi in the case of Intercontinental Consultants & Technocrats Pvt. Ltd. vs. Union of India 2012 (12) TMI 150 - DELHI HIGH COURT , reimbursable expenses cannot be added to the value for discharge of services tax. - Decided in favour of assessee

Summary

Issues:
1. Revenue's appeal against setting aside of penalties by the first appellate authority.
2. Assessee's appeal against the first appellate authority's failure to exclude reimbursable expenses from the gross value for service tax discharge.

Analysis:
1. The revenue appealed against the first appellate authority's decision to set aside penalties. The appellant assessee, a clearing and forwarding agent, received various amounts as part of their contract with a company, including fixed monthly remuneration, variable charges, and other expenses. While the appellant had discharged the service tax liability on the services rendered, the issue arose regarding the reimbursement of expenses such as rent, local charges, and handling expenses. The lower authorities found that these reimbursable expenses were incurred for providing the clearing and forwarding services, thus attracting service tax liability.

2. The Tribunal referred to a case where it was held that only the remuneration or commission received by a clearing and forwarding agent should be included in the taxable value of the service. The revenue contended that charges collected for various expenses should be part of the remuneration/commission. However, the Tribunal disagreed, stating that unless there was evidence to show that the commission payable was all-inclusive, reimbursed expenses should not be considered part of the remuneration or commission. The Tribunal also cited a High Court case where it was held that reimbursable expenses cannot be added to the value for service tax discharge.

3. Considering the judicial pronouncements and the facts of the case, the Tribunal held in favor of the appellant assessee. The impugned order was set aside to exclude reimbursable expenses from the taxable value for service tax discharge. Consequently, the revenue's appeal was deemed inconsequential and rejected.