Reimbursable expenditure excluded from service tax value where actual recovery was separately evidenced from service charges.

Reimbursable expenditure recovered on an actual basis under a client arrangement was treated as outside the taxable value of advertising service because it was separately supported by purchase bills, invoices and contractual records, and was distinct from service charges. Section 67 of the Finance Act, 1994 continued to govern valuation by reference to the service rendered, and the Service Tax Valuation Rules did not create a fresh liability for amounts not forming part of the consideration. The exclusion was also stated to be covered by Notification No. 12/2003-ST dated 20.06.2003, with only the service charges forming the taxable value.

---

---

Issues: Whether reimbursable expenditure incurred on actual basis under the client arrangement could be excluded from the taxable value of advertising service, and whether the introduction of the Service Tax Valuation Rules affected the position under Section 67 of the Finance Act, 1994.

Analysis: The appeal concerned valuation of taxable service. The reimbursed amounts were supported by purchase bills, invoices and contractual arrangements showing that the expenses were recovered on actual basis and were separately identifiable from service charges. The valuation provision under Section 67 continued to govern taxable value by reference to the service rendered, and the later Valuation Rules did not create a new liability for amounts that were not part of the service consideration. The exclusion was also found to be covered by Notification No. 12/2003-ST dated 20.06.2003. The finding of the original authority that only the service charges formed part of the taxable value was upheld.

Conclusion: The reimbursable expenditure was not includible in the taxable value, and the assessee succeeded.

Ratio Decidendi: Amounts recovered purely as reimbursable expenditure on actual basis, and separately evidenced from the service consideration, do not form part of the taxable value under Section 67 of the Finance Act, 1994.

---