Pure agent reimbursements and actual expenses were excluded from Service Tax valuation for share transfer services.

Reimbursement of actual postage and other out-of-pocket expenses incurred by a share transfer agent and registrar on behalf of client companies was not includible in the taxable value for Service Tax. The amounts were recovered on actuals for postage, printing, mailing, telephone, envelopes and xerox, and therefore constituted reimbursement rather than consideration for the service. Amounts collected while acting as a pure agent were excluded from valuation, and the valuation rule used to tax such reimbursements had been struck down. The service tax demand on these reimbursements was therefore unsustainable.

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Issues: Whether reimbursement of postage and other actual expenses incurred by a Share Transfer Agent and Registrar to an Issue was includible in the taxable value for Service Tax.

Analysis: The disputed amounts were actual reimbursements towards postage, printing, mailing, telephone, envelopes, xerox and similar expenses incurred on behalf of client companies. Such reimbursements were not consideration for the service itself. Postage, being in the nature of a duty or tax, could not be treated as service consideration, and amounts recovered on actuals while acting as a pure agent were not includible in the value of taxable service. The valuation rule relied upon for including reimbursed expenses had also been struck down, leaving no authority to levy Service Tax on such reimbursements.

Conclusion: The reimbursement amounts were not includible in the taxable value, and the demand of Service Tax was unsustainable. The assessee succeeded and the Revenue challenge failed.

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