Export-linked commission and reimbursable expenses cannot be taxed beyond actual service value; demands beyond the notice fail.

Service tax on export-linked air freight commission was found unsustainable because the commission arose from booking cargo space for export goods and was covered by earlier tribunal rulings. Reimbursable expenses, documentation charges, handling charges and delivery-order recoveries could not be added to taxable value, as Section 67 taxes only the value of the service actually rendered and Rule 5(1) cannot enlarge that base. Demands on pickup charges and receipts from GE Industrial Ltd. were also rejected because they went beyond the scope of the show cause notice. The extended limitation period was not invocable absent suppression with intent to evade tax.

---

---

Issues: (i) whether service tax was leviable on air freight commission received in connection with export-related services; (ii) whether reimbursable expenses, documentation charges, handling charges and delivery order related recoveries could be included in the taxable value; (iii) whether the demands on pickup charges and income from GE Industrial Ltd. were sustainable; and (iv) whether the extended period of limitation was invocable.

Issue (i): whether service tax was leviable on air freight commission received in connection with export-related services.

Analysis: The service was rendered for booking cargo space for export of goods and the commission arose from an activity connected with export. The demand was also found to be covered by earlier tribunal decisions holding that such export-linked commission was not liable to service tax.

Conclusion: The demand on air freight commission was not sustainable and was set aside in favour of the assessee.

Issue (ii): whether reimbursable expenses, documentation charges, handling charges and delivery order related recoveries could be included in the taxable value.

Analysis: The materials showed that the amounts represented reimbursements and actual expenses incurred on behalf of clients. The valuation principle under Section 67 of the Finance Act, 1994 permits tax only on the value of the service actually rendered, and Rule 5(1) of the Service Tax (Determination of Value) Rules, 2006 could not enlarge that charging base. The demand was also not justified merely because the entire bulk record was not produced when sample invoices and supporting records had been verified. The issue of includibility of reimbursable expenses stood settled against inclusion.

Conclusion: The demand on reimbursable expenses and allied charges was not sustainable and was set aside in favour of the assessee.

Issue (iii): whether the demands on pickup charges and income from GE Industrial Ltd. were sustainable.

Analysis: The pickup charges were treated in the notice as CHA-related levies even though the earlier adjudication had dealt with transportation-related elements separately, and the present confirmation went beyond the scope of the notice. The demand on receipts from GE Industrial Ltd. was also confirmed under a category different from that proposed in the notice, amounting to travel beyond the show cause notice.

Conclusion: The demands on pickup charges and income from GE Industrial Ltd. were not sustainable and were set aside in favour of the assessee.

Issue (iv): whether the extended period of limitation was invocable.

Analysis: The dispute concerned valuation of taxable services and inclusion of reimbursable expenses, an issue on which there had been genuine confusion. The assessee had been discharging tax on service charges, and the record did not establish suppression with intent to evade tax.

Conclusion: The extended period was not invocable and the demands confirmed on that basis were unsustainable.

Final Conclusion: The impugned order was sustained only to the limited extent of the service charges already accepted by the assessee, while the remaining confirmed demands were set aside and the departmental appeal was rejected.

Ratio Decidendi: Service tax is chargeable only on the value of the service actually rendered, reimbursable expenses cannot be added to that value, and a demand cannot be sustained when it travels beyond the scope of the show cause notice.

---