Service tax demand on customs house agent's reimbursed charges set aside under pure agent principle

CESTAT Ahmedabad held that service tax demand on reimbursed charges collected by customs house agent from clients was unsustainable. The appellant recovered payments made to service providers on behalf of importer/exporter clients with minimal commission addition. The tribunal found appellant acted as pure agent, not service provider, since actual services were rendered by third parties who issued invoices and charged service tax. Small commission variation did not change the nature of underlying services. Following Tiger Logistics precedent, the demand under Business Auxiliary Service was set aside as legally unsustainable.

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Issues:
1. Whether service tax liability on reimbursed charges collected by the appellant from their clients is valid.
2. Whether the appellant is liable to pay service tax on the mark-up amount for services provided to clients.
3. Whether the appellant's transactions of buying and selling space on ships are liable for service tax.

Analysis:
1. The appellant, engaged in Business Auxiliary Service, was found to have raised two sets of invoices - one for agency charges and the other for reimbursement of expenses. The department demanded service tax on the reimbursed charges. The Tribunal found that the appellant was not the service provider for these reimbursed charges, as the service providers had already paid service tax on the services provided. The small commission added by the appellant did not change the nature of the service, and the appellant acted as a pure agent. The Tribunal relied on previous decisions and set aside the demand for service tax on the reimbursed charges.

2. The Tribunal considered the mark-up amount charged by the appellant for services provided to clients. It was argued that this mark-up did not pertain to taxable value, and various judgments were cited in support. The Tribunal found that the appellant was not providing a service but acting as a trader dealing on a principal-to-principal basis. The Tribunal referred to Circulars and past decisions, concluding that the mark-up amount was not liable for service tax. The demand for service tax, interest, and penalties was set aside.

3. The Tribunal examined the appellant's transactions of buying and selling space on ships. It was contended that the mark-up amount was for services provided by the appellant and was liable for service tax. However, the Tribunal held that the appellant was only trading in space and not providing a service. Citing past decisions and Circulars, the Tribunal concluded that the mark-up amount was not taxable. The impugned order-in-appeal was deemed legally unsustainable, and the appeals were allowed.

In conclusion, the Tribunal ruled in favor of the appellant on all issues, setting aside the demand for service tax on reimbursed charges and mark-up amounts. The Tribunal emphasized that the appellant acted as a pure agent and was not providing taxable services in these transactions.

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