2007 (12) TMI 156 - AT - Service Tax

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

AL-BAITH STEEL (P) LTD. Versus COMMISSIONER OF C. EX., CALICUT

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 ... Services as consignment sales agents – Besides the commission for the services rendered to the principals, the principal has also reimbursed various expenses such as freight, loading and unloading and other expenses incurred by the appellants for an on behalf of the principal – in view of tribunal’s decisions, Trade Notice No. 59/99, DGST clarification issued in October 2003, judgment of the Chennai Bench in Sangamitra Services Agency case tax liability doesn’t arise 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.