Service tax valuation excludes reimbursable expenses recovered from the principal when they are not part of service consideration.

Reimbursable expenses first borne by a service provider and later recovered from the principal are not includible in the taxable value for service tax under section 67 of the Finance Act, 1994, where they do not form part of the consideration for the taxable service. The Tribunal applied the principle that valuation is confined to the amount charged for the service, and held that a rule cannot expand the statutory measure by adding reimbursed expenses. On that basis, the reimbursed amounts were excluded from assessable value and the Revenue's challenge failed.

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Issues: Whether reimbursable expenses incurred by the service provider and later recovered from the principal are includible in the taxable value for service tax under section 67 of the Finance Act, 1994.

Analysis: The dispute concerned the valuation of service tax where the amounts in question represented expenses first borne by the respondent in the course of rendering clearing and forwarding services and subsequently reimbursed by the principal. The governing principle applied was that only the amount charged for providing the taxable service can form part of the value, and expenses not forming consideration for the service cannot be added. The Tribunal also relied on the settled position that the rule purporting to include reimbursable es in valuation could not override the statute.

Conclusion: The reimbursed expenses were not includible in the assessable value for service tax, and the Revenue's challenge failed.

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