The Kolkata bench of the Customs Excise and Service Tax Appellate Tribunal (CESTAT) ruled that the reimbursement of expenses, while includible in the assessable value, does not constitute the taxable value of the service.
The issue to be decided was whether the reimbursement of expenses received by the Respondent are includable in the assessable value for the purpose of payment of service tax
The Service Tax Audit was initiated for the period 2015-16 to 2017-18 (upto June 2017) by the Department against the appellant. A letter was issued for submissions of the documents. The appellant supplied the documents and it was observed that the appellant has obtained the Service Tax Registration under Section 65 (105)(h) of the Act. In the balance sheet and trading/profit and loss account for the relevant period, they have declared the gross amount charged to their clients an amount of Rs.21,74,65,342/- and an amount of Rs.20,71,78,011/- as reimbursable expenses. However, the appellant has declared taxable value as Rs.3, 13, 96,519/-.
Mr. Avra Mazumder representing the appellant submits that the appellant was registered as a service provider for clearing and forwarding agent services under Section 65 (105)(j) read with Section 65 (25) of the Finance Act, 1994. It is his submission that the appellant is providing the pure agency services and to that effect, the appellant provided various agreements with their Principal showing that the appellant was only a pure agent
Mr. S.Mukhopadhyay representing the respondent stated that they have paid Service tax on the amount of remuneration/ commission received, which include handling charges, transportation charges, salvaging charges, documentation charges, etc. They did not pay service tax on the amount of reimbursement of expenses such as salaries of client’s staff, other expenses like rent, telephone expenses, printing, postage, etc. They were under the bona-fide belief that reimbursement of expenses was never under the scope of levy of service tax
The bench observed that 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.
Further observed that the adjudicating Authority has dropped the demand made in the Notice on the ground that the remuneration for C&F work and reimbursement for miscellaneous activities have been separately mentioned against specific items and they got reimbursement on actual basis.
The two member bench of the tribunal comprising Ashok Jindal ( Judicial member) and K.Anpazhakan( Technical member) held that the reimbursable expenses were not includible in the taxable value of services, therefore, the tribunal hold that the reimbursable expenses in this case, are also not includable in the taxable value of service. Therefore, further hold that the appellant has correctly paid the service tax during the impugned period. Consequently, no demand of differential service tax is sustainable against the appellant
CESTAT does not found any merit in the impugned order and the same was set aside, In the result, the appeal was allowed
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