Reimbursable Expense not Subject to Levy of Service Tax: CESTAT [Read Order]

The Chennai Bench of the Customs Excise and Service Tax Appellate Tribunal (CESTAT), held that the reimbursable expenses are not subject to the levy of service tax.

The appellant, M/s. United India Shipping Services, is engaged in providing services in the nature of Custom House Agent Services. They are also registered with the Department. During the course of audit conducted by the internal audit party, it was noticed that the appellant apart from collecting charges for providing CHA services also collects LCL charges, and other charges from their clients.

The appellant had excluded these charges while computing the total taxable value and had not discharged service tax on such charges on the claim that these are only reimbursable expenditure.

The department was of the view that the appellant ought to have included these expenses in the taxable value to discharge service tax liability. Show cause notice was issued proposing to demand service tax on such expenses incurred by the appellant for providing CHA services. After due process of law, the original authority confirmed the demand along with interest and imposed equal penalty under section 78 of the Finance Act 1994.

T.R. Ramesh appeared and argued for the appellant. The Counsel adverted to the show cause notice and submitted that from the show cause notice it is seen that the demand is raised on reimbursable expenses. The value mentioned in profit and loss account consists of total amount received from their clients and includes the charges in the nature of reimbursable expenses. The appellant is not liable to pay service tax on the reimbursable expenses and therefore such an amount has not been included in the taxable value while filing the ST-3 returns.

A Two-Member Bench of the Tribunal comprising CS Sulekha Beevi, Judicial Member and M Ajit Kumar, Technical Member observed that “It is settled position that the reimbursable expense is not subject to levy of service tax as per the decision of the Apex Court in the case of Union of India vs Intercontinental Consultants and Technocrats Ltd.”

To Read the full text of the Order CLICK HERE

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