Service tax base excludes ocean freight mark-up, pure-agent reimbursements, and foreign exchange gains for the disputed period.

Service tax was treated as inapplicable to the differential between ocean freight paid and freight recovered from customers, and to any mark-up on ocean freight. Reimbursements for boat hire, launch hire, barge expenses and watchman charges, where incurred as a pure agent, were held outside the taxable value for the disputed period. Gains arising from foreign exchange fluctuation were also treated as non-taxable service consideration. The overall effect was that these items were not includible in the service tax base for the period before the relevant statutory change or recognised taxability, and the demand was set aside.

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Issues: (i) whether service tax was payable on excess ocean freight or the mark-up on ocean freight; (ii) whether amounts collected towards boat hire, launch hire, barge expenses and watchman charges, claimed as pure-agent reimbursements, were includible in the taxable value; and (iii) whether gains arising from foreign exchange fluctuation were liable to service tax.

Issue (i): Whether service tax was payable on excess ocean freight or the mark-up on ocean freight.

Analysis: The dispute on ocean freight was treated as covered by the cited decisions holding that the differential between freight actually paid and freight recovered from customers does not constitute taxable consideration, and that ocean freight or the mark-up thereon is not liable to service tax.

Conclusion: Service tax was not payable on excess ocean freight or the mark-up on ocean freight.

Issue (ii): Whether amounts collected towards boat hire, launch hire, barge expenses and watchman charges, claimed as pure-agent reimbursements, were includible in the taxable value.

Analysis: The amounts were treated as actual reimbursable expenses incurred by the appellant in the capacity of an agent. The decision relied on the principle that reimbursements satisfying the pure-agent condition are not includible in the value for service tax, and that such reimbursable expenses became taxable only from the date recognised in the cited precedent.

Conclusion: These reimbursable amounts were not liable to service tax for the period in dispute.

Issue (iii): Whether gains arising from foreign exchange fluctuation were liable to service tax.

Analysis: The exchange fluctuation income was held to be covered by the earlier final order in the appellant's own case and by the cited reasoning that such extra amount earned due to currency fluctuation is not taxable as service consideration.

Conclusion: Foreign exchange fluctuation gains were not liable to service tax.

Final Conclusion: The impugned orders could not be sustained on any of the three issues, and the demand was set aside with consequential relief in accordance with law.

Ratio Decidendi: Ocean freight mark-up, pure-agent reimbursements of actual expenses, and exchange fluctuation gains are not includible in the taxable value for service tax for the period prior to the relevant statutory change or binding recognition of taxability.

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