Reimbursable expenses excluded from service tax before 2015, commission from shipping space sales not taxable service

CESTAT Kolkata set aside service tax demands totaling Rs.1,96,84,415 against the appellant for 2006-07 to 2009-10. The tribunal held that reimbursable expenses received from clients were not includable in taxable value prior to 14.05.2015, following SC precedent in Intercontinental Consultants case. Commission amounts earned from selling shipping space purchased from shipping lines at higher rates to clients constituted business profits from principal-to-principal transactions, not taxable services under business auxiliary service category. Penalties were also set aside as demands were quashed. Appeal allowed.

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Issues:
- Non-payment of Service Tax on reimbursable expenses
- Non-payment of Service Tax on commission received from clients
- Non-payment of Service Tax on commission earned on sea freight charges

Analysis:
The appellant appealed against an order demanding Service Tax of Rs.1,75,03,370/- along with interest and penalty under the Finance Act, 1994. The appellant, registered under various service categories, was accused of not paying Service Tax on the full amount of services provided. The charges included non-payment of Service Tax on reimbursable expenses, commission received from clients, and commission earned on sea freight charges. The Show Cause Notice was upheld by the adjudicating authority, leading to the appeal.

Regarding the issue of non-payment of Service Tax on reimbursable expenses, the appellant argued that expenses reimbursed by clients should not be taxable, citing a Supreme Court decision. The Tribunal found in favor of the appellant, stating that reimbursable expenses are not taxable pre-2015, thus setting aside the demand.

On the issues of non-payment of Service Tax on commission received from clients and commission earned on sea freight charges, the appellant contended that the amounts were profits from selling space purchased from shipping lines, not commissions. Citing precedent, the Tribunal agreed with the appellant, ruling that the profits earned did not fall under the category of business auxiliary service and were not subject to Service Tax. The Tribunal set aside the demands on these grounds.

As the entire demand was set aside, no penalty was imposed on the appellant. Consequently, the impugned order was set aside, and the appeal was allowed with any consequential relief. The Tribunal's decision was pronounced in open court, providing relief to the appellant against the Service Tax demands.

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