2007 (8) TMI 90 - AT - Service Tax

Tribunal rules in favor of appellants, exempts service tax on reimbursable expenses

The Tribunal held that the services provided by the appellants were rightly classified as 'C & F Agents' and not 'Del Credere.' It concluded that the ... Classification as C & F agent service - characterisation as del credere agency - deductibility of reimbursable expenses from taxable service value - service tax liability on reimbursable receiptsClassification as C & F agent service - characterisation as del credere agency - Appellants rendered services of a C & F Agent and the element of 'Del Credere' is only one aspect of the service and does not alter its essential character. - HELD THAT: - The Tribunal examined the agreement between the appellants and their principals and accepted that the appointment was as 'C & F Agent'. While the appellants contended that their services were in the nature of 'Del Credere', the Commissioner (Appeals) had found that the essential character of the services was that of a C & F Agent and that 'Del Credere' formed only an aspect of those services. The Tribunal upheld this characterization, treating the services as falling within the 'C & F Agent' category for the purpose of service tax liability. [Paras 2, 4]Services are taxable as C & F Agent services; 'Del Credere' is merely an aspect and does not change the classification.Deductibility of reimbursable expenses from taxable service value - service tax liability on reimbursable receipts - Amounts received as reimbursable expenses under the contract are not liable to service tax and are deductible from the taxable value. - HELD THAT: - The agreement expressly provided for fixed reimbursements (including salaries, godown keeper, office maintenance, computer installation, etc.) distinct from commission for C & F services. The Tribunal held that the entire amount received from the principal could not be subjected to service tax and observed that established decisions support deduction of reimbursable expenses. Noting that the appellants had already paid service tax and interest to certain extent, the Tribunal concluded that no service tax is payable on the reimbursable expenses and allowed deduction accordingly, granting consequential relief. [Paras 4]Reimbursable expenses specified in the contract are deductible and not subject to service tax; appellants entitled to consequential relief.Final Conclusion: Appeal allowed: classification as C & F Agent upheld while recognizing 'Del Credere' as only an aspect; reimbursable expenses under the contract held deductible and not subject to service tax, with consequential relief to the appellants. Issues:1. Classification of services provided by the appellants under the category of C & F Agents for Service Tax.2. Treatment of reimbursable expenses collected from clients in relation to Service Tax liability.Analysis:1. The appeal was filed against the Order-in-Appeal (OIA) passed by the Commissioner of Central Excise (Appeals) alleging non-payment of Service Tax under the category of C & F Agents. The appellants contended that their services should be classified as 'Del Credere' and not as C & F Agents. However, the Commissioner (A) held that the services provided by the appellants were rightly classified as 'C & F Agent' and that 'Del Credere' was just one aspect of the services rendered. The Tribunal examined the agreement between the appellants and their principals, which clearly stated the appointment of the appellants as 'C & F Agents.' The agreement also outlined reimbursable expenses to be paid by the principal, including fixed reimbursements and commissions based on the quantity of cement handled. The Tribunal concluded that the entire amount received by the appellants should not be subjected to Service Tax and held that the appellants were liable for deduction of the reimbursable expenses. The Tribunal allowed the appeal, stating that the appellants were not liable to pay Service Tax on the reimbursable expenses.2. The Tribunal considered the reimbursable expenses collected by the appellants from their clients and the Service Tax already paid by the appellants. The Tribunal noted that the appellants had paid Service Tax and interest but held that they were not liable to pay Service Tax on the reimbursable expenses. The Tribunal allowed the appeal of the appellant with consequential relief, emphasizing that deductions should be given for all reimbursable expenses. The operative portion of the order was pronounced in open court at the conclusion of the hearing.