Service tax valuation includes reimbursed expenses where the provider is not a pure agent, affecting pre-deposit relief.

For clearing and forwarding agent services, reimbursed expenses incurred in providing the service were treated as prima facie includible in taxable value under the gross amount charged approach, because Rule 5 required inclusion unless the provider acted as a pure agent. For the earlier period, valuation under Section 67 and Rule 6(8) was read consistently, so commission or remuneration did not exclude service-related reimbursed expenses. As the appellant was not shown to be a pure agent, there was no prima facie basis to exclude those expenses from valuation or to seek waiver of pre-deposit.

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Issues: Whether, in the valuation of clearing and forwarding agent services, reimbursed expenses incurred in the course of providing the service are includible in the taxable value and whether the appellant had made out a prima facie case for waiver of pre-deposit.

Analysis: For the period on and after 18-4-2006, the taxable value under Section 67 of the Finance Act, 1994 is the gross amount charged, and Rule 5 of the Service Tax Valuation Rules, 2006 requires expenditure or cost incurred in providing the service to be included unless the service provider acts as a pure agent. In the case of clearing and forwarding agents, Rule 6 of the Service Tax Valuation Rules, 2006 also brings into the value the remuneration or commission paid by the client, and the reimbursed expenses were found to form part of the gross amount paid for the service. For the prior period, Section 67 of the Finance Act, 1994 likewise governed valuation on the gross amount charged, and Rule 6(8) of the Service Tax Rules, 1994 was interpreted consistently with the Act so that the commission or remuneration could not be read to exclude reimbursed service-related expenses. The appellant was not shown to be a pure agent, and the tribunal therefore found no prima facie basis to exclude the reimbursed expenses from valuation.

Conclusion: The reimbursed expenses were prima facie includible in the taxable value, and the appellant was not entitled to waiver of pre-deposit.

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