No Service Tax on Reimbursable Expenses or Crane and Forklift Hire Prior to 16.05.2008: CESTAT Allows Appeal under Finance Act [Read Order]
Supply of Cranes, Forklifts used to Shift Big Machineries/Materials from one place to another within the same Premises, Not classifiable under the Category of "Business Support Services"
Service Tax
Service Tax
The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Chennai, has ruled in favour of appellant holding that reimbursable expenses and charges for crane/forklift hire cannot be included in the service tax valuation for the period 2006–2009. The Tribunal also set aside all penalties imposed under Sections 76, 77, and 78 of the Finance Act, 1994.
The appellant, Sri Rama Vilas Services Ltd., engaged in Customs House Agent (CHA) services, warehousing, transport of goods by road, and renting of immovable property, had contested the inclusion of certain costs in taxable value. The Department had sought service tax on reimbursable charges like Forms & Stamps, Xerox, customs examination fees, and local conveyance, as well as charges collected for crane and forklift hire, treating the latter under Business Support Services.
The appellant argued that reimbursable expenses were incurred as a “pure agent”, and therefore, cannot form part of the taxable value under the Service Tax Rules. It was further contended that the charges for crane and forklift services did not fall under Business Support Services for the relevant period and as a result, imposition of penalties under Sections 76, 77, and 78 of the Finance Act, 1994, was unwarranted and unsustainable as the appellant had acted in good faith.
Understanding Common Mode of Tax Evasion with Practical Scenarios, Click Here
The Tribunal bench comprising Member (Judicial) A. Ramachandran and Member (Technical) K. V. Balamurugan observed that Rule 5(1) of the Service Tax (Determination of Value) Rules, 2006, which allowed inclusion of such costs, was struck down by the Delhi High Court and later upheld by the Supreme Court. Therefore, the Department’s demand for service tax on these expenses was unsustainable.
Regarding crane and forklift charges, the Tribunal noted that these services did not constitute Business Support Services prior to 16.05.2008, citing earlier CESTAT and High Court rulings. Consequently, the Tribunal allowed the appeals and quashed all associated penalties, emphasizing that the Department cannot levy tax or penalties based on incorrect service classification.
Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates
