No Service Tax on Reimbursed Expenses Incurred by Multi-Modal Transport Operators: Delhi HC upholds CESTAT Ruling [Read Order]

In a recent ruling, the Delhi High Court dismissed the appeal filed by Principal Commissioner CGST Delhi South and upheld the order passed by the Customs Excise and Service Tax Appellate Tribunal (CESTAT). 

In this case, the appeal has been filed by the principal commissioner of CGST seeking to impugn the order of CESTAT  dated 10-09-2023, which has been ruled in favor of the respondent, M/S Haiko Logistics Pvt India.

The main issue raised in this case is whether the respondent, being a multi-modal transport operator, is liable to pay service tax on what it has claimed as reimbursement received from its clients, and these include customs duty, air freight, and ocean freight. 

During the course of enquiry that was conducted, it was found by the adjudicating authority that the payments made by the respondent were being reimbursed by the individual clients, and the issue was confined to that of reimbursement of expenses incurred for and on their behalf.

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CESTAT held that the demand for Service Tax was unjustified because the Show Cause Notice was based on provisions that had ceased to exist.

CESTAT noted that it had been said that this demand had also been made under the Business Support Service (BSS) category which was not available for the period in dispute (April, 2014 to March, 2015). CESTAT bench further observed that the demand for service tax will not be sustained as it was based on obsolete provisions.

The CESTAT bench held that “The non-taxable amount includes amounts like customs duty, BAF & CAF charges, ocean freight and air freight. All these amounts are paid by the appellant on behalf of the client and later on are reimbursed. Thus, same cannot be taxed as they are in nature of reimbursements.”

The Delhi High Court bench consisting of Justice Yashwant Varma dismissed the appeal and upheld the ruling of CESTAT.

To Read the full text of the Order CLICK HERE

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