Reimbursable expenses excluded from service tax valuation, but only within the contractual 1% ceiling.

Reimbursable expenses forming part of a clearing and forwarding agent's remuneration were treated as excludible from service tax valuation where the governing arrangement and the applicable Board circular supported exclusion. The authorities could not deny the benefit merely because the expenses were met from the assessee's own resources. However, the exclusion was contractually capped at 1% of net sales, so the relief could operate only within that agreed ceiling. The claim for exclusion was therefore accepted to that extent, with consequential relief limited accordingly.

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Issues: Whether reimbursed expenses forming part of the remuneration of a Clearing and Forwarding Agent were liable to be included in the taxable value for service tax, and whether the assessee's claim for exclusion was confined to the agreed ceiling of 1% of net sales.

Analysis: The reimbursement component was held to be excludible from service tax valuation in terms of the Board's circular and the earlier Tribunal ruling relied upon. The authorities were found unjustified in rejecting the claim merely because the expenses were met from the assessee's own resources. At the same time, the agreement with clients showed that reimbursement was contractually limited to 1% of net sales, and the exclusion could operate only to that extent.

Conclusion: The exclusion of reimbursable expenses was allowed, but only up to the contractual ceiling of 1%; the appeal was therefore accepted to that extent with consequential relief.

Ratio Decidendi: Reimbursable expenses need not form part of the taxable value for service tax where the governing arrangement and applicable circular support exclusion, but the benefit is confined to the contractual limit proved on the record.

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