2008 (1) TMI 71 - AT - Service Tax

Clearing and Forwarding Agent - received reimbursement of various expenses such as rent, loading and unloading, postage and telegraph, printing and stationary, telephone charges, sundry expenses etc. incurred by them for and on behalf of their principals - actual service charges received by the appellant is also mentioned in the contract - no justification for levying service tax on reimbursements of actual expenses

Summary

Issues:
1. Taxability of reimbursements received by Clearing and Forwarding Agents for expenses incurred on behalf of principals.
2. Application of Rule 6 of Service Tax Rules.
3. Bar of limitation under Section 73 of the Finance Act.

Analysis:
1. Taxability of Reimbursements:
The appeal challenged the demand for service tax on reimbursements received by Clearing and Forwarding Agents for expenses incurred on behalf of principals. The appellants argued that reimbursements should not be included in taxable value, citing various case laws. The Tribunal noted that reimbursements for actual expenses like rent, loading/unloading, etc., are not part of the charges for services rendered. The contract specified the service charges separately from reimbursements. The Tribunal agreed with the appellants that service tax should only apply to charges for services, not reimbursements. Citing previous case laws, the Tribunal ruled in favor of the appellants, allowing the appeal.

2. Application of Rule 6 of Service Tax Rules:
The appellants contended that including reimbursements in taxable value goes against Rule 6 of Service Tax Rules. The Tribunal observed that the case laws referred to by the appellants supported the exclusion of reimbursements from taxable value, aligning with Rule 6. By analyzing the nature of the reimbursements and the service charges specified in the contract, the Tribunal found no justification for levying service tax on reimbursements. Consequently, the Tribunal upheld the appellants' argument based on Rule 6 and relevant case laws.

3. Bar of Limitation under Section 73 of the Finance Act:
The appellants also raised the issue of the limitation period under Section 73 of the Finance Act, arguing that the show cause notice was issued beyond the prescribed date. The Tribunal examined the dates provided in the case and noted that the notice was indeed issued after the latest permissible date. Furthermore, since no findings indicated fraud or willful misstatement, the extended period for issuing the notice was deemed unjustified. Consequently, the Tribunal concluded that the show cause notice was time-barred under Section 73. This aspect further supported the appellants' case and contributed to the Tribunal's decision in their favor.

In conclusion, the Tribunal, after considering the arguments presented, the relevant legal provisions, and precedents, ruled in favor of the appellants on the issues of taxability of reimbursements and the limitation period. The judgment highlighted the importance of distinguishing between service charges and reimbursements, as well as adhering to the statutory limitations for issuing show cause notices.