Pure agent reimbursements in clearing and forwarding services are excluded from assessable value; valuation rules cannot widen the charge.

Reimbursed godown rent, loading and unloading charges, and transportation expenses incurred in clearing and forwarding agency work were treated as pure-agent payments because the principals bore the underlying obligation and the bills stood in their names. On that basis, the reimbursements were not part of the consideration for the service and were not includible in the assessable value. Rule 5 of the Service Tax Valuation Rules could not be used to add such reimbursable s to taxable value where the rule would extend beyond Section 67 of the Finance Act, 1994. The demand based on those inclusions was unsustainable.

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Issues: (i) Whether reimbursed expenditure towards godown rent, loading and unloading charges, and transportation charges incurred in the course of clearing and forwarding agency services was includible in the assessable value. (ii) Whether Rule 5 of the Service Tax Valuation Rules could be invoked to include such reimbursable expenses in the taxable value.

Issue (i): Whether reimbursed expenditure towards godown rent, loading and unloading charges, and transportation charges incurred in the course of clearing and forwarding agency services was includible in the assessable value.

Analysis: The agreements placed the obligation to maintain the godown on the principals, and the appellant acted only as their agent in that respect. The bills for labour, transport and related activities stood in the name of the principals, and the payments were made on their behalf. On these facts, the appellant functioned as a pure agent for the relevant expenses and the reimbursements did not represent consideration for the service itself.

Conclusion: The reimbursed expenses were not includible in the assessable value.

Issue (ii): Whether Rule 5 of the Service Tax Valuation Rules could be invoked to include such reimbursable expenses in the taxable value.

Analysis: The department sought to rely on Rule 5 to add reimbursable costs to the value of services. However, the rule had already been held to travel beyond Section 67 of the Finance Act, 1994. Once the reimbursement was not part of the consideration and the service provider acted as a pure agent, the rule could not sustain inclusion of those amounts in valuation.

Conclusion: Rule 5 could not be invoked to include the reimbursed expenses in the taxable value.

Final Conclusion: The demand based on inclusion of the reimbursed expenses could not be sustained, and the assessee succeeded in the appeal.

Ratio Decidendi: Reimbursed amounts incurred by a service provider as a pure agent, and not forming part of consideration for the service, are not includible in the assessable value, and a valuation rule cannot expand the charging provision beyond Section 67 of the Finance Act, 1994.

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