2007 (12) TMI 156 - AT - Service Tax

Tax Tribunal rules in favor of appellants, excludes reimbursed expenses from taxable service value.

The Tribunal allowed the appeals, ruling in favor of the appellants, holding that expenses reimbursed by the principal should not be added to the value of ... Value of taxable service - consignment sales agent - reimbursement not includible in taxable value - service tax on clearing and forwarding operations - precedential weight of Tribunal and Bench judgments - res-integraValue of taxable service - consignment sales agent - reimbursement not includible in taxable value - service tax on clearing and forwarding operations - Whether amounts reimbursed to the appellants by principals for expenses such as freight, loading and unloading and other similar outlays are includible in the value of taxable service rendered by the appellants as consignment sales agents. - HELD THAT: - The Tribunal examined earlier decisions of this Bench in Nandini Warehousing Corporation v. Commissioner of Central Excise, Belgaum and the Chennai Bench decision in Sangamitra Services Agency v. CCE, Chennai, together with administrative clarifications including the Trade Notice and Board/DGST communications relied upon in those decisions. Applying the ratio adopted in those precedents, the Tribunal concluded that the reimbursed expenses incurred by consignment sales agents for and on behalf of their principals are not to be added to the value of the taxable service. Since the issue was held to be no longer res-integra and the cited authorities dispose of the controversy in favour of the assessee, the impugned orders treating such reimbursements as part of taxable value were found incorrect. [Paras 2, 4]Amounts reimbursed by principals for freight, loading/unloading and similar expenses are not includible in the value of the taxable service of consignment sales agents; the appeals are allowed with consequential relief and the impugned orders set aside.Final Conclusion: The appeals are allowed; the Tribunal follows earlier Bench precedents holding that reimbursements for expenses incurred by consignment sales agents are not to be included in the taxable value of their services, and the impugned orders are set aside with consequential relief. Issues:Appeal arising from Order-in-Appeal No. 80/2006-S.T. and Order-in-Appeal No. 66/2006-ST. Common question of law regarding liability to pay Service tax on services rendered as consignment sales agents.Analysis:The appeals in question arose from a common question of law regarding the liability to pay Service tax on services provided as consignment sales agents to manufacturers of steel products. The appellants were engaged in rendering services and were reimbursed various expenses by the principal, including freight, loading, unloading, and other expenses. Both authorities held that the appellants were liable to pay Service tax for services related to clearing and forwarding operations. The issue was whether these expenses should be added to the value of the taxable service.The appellants' counsel argued that the issue had been settled in their favor based on a previous Tribunal judgment in the case of Nandini Warehousing Corporation. The Tribunal had followed the ratio of a judgment by the Chennai Bench in the case of Sangamitra Services Agency. Reference was made to Trade Notice No. 59/99, DGST clarification from October 2003, and a Board's letter dated August 23, 1999. Relying on these precedents, the counsel contended that the appeals should be allowed.The Department's representative reiterated the Department's view on the matter, opposing the appellants' position. After careful consideration and perusal of the cited Final Order, the Tribunal concluded that the issue had been fully settled in the assessee's favor based on the judgment of the Chennai Bench in the Sangamitra Services Agency case. Since the issue was decisively in favor of the assessee, the impugned order was deemed incorrect. Consequently, the appeals were allowed with consequential relief.In summary, the Tribunal found in favor of the appellants, holding that the expenses reimbursed by the principal should not be added to the value of the taxable service. The decision was based on previous judgments and clarifications, ultimately leading to the allowance of the appeals with consequential relief.