Service tax on reimbursable export dues excluded where only service charges formed the taxable value.

Service tax was confined to the gross service charges billed for clearing and forwarding work, not to amounts separately recovered as reimbursable expenses paid on the client's behalf. Charges shown in the invoice as export dues, port dues and other statutory or port-related payments were treated as outside the taxable value because they were not part of the contractual service consideration and service tax had already been paid on the handling charges. In turnkey export arrangements, the governing trade notice also indicated that tax was payable only on the service component, including a prescribed portion of any lump sum amount. The reimbursed amounts were therefore excluded from tax, and the demand and penalty were not sustainable.

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Issues: Whether service tax was payable on amounts collected by a clearing and forwarding agent from clients towards export dues and other charges paid to port authorities as reimbursable expenses in a turnkey export arrangement.

Analysis: The invoice showed that the amounts towards export dues and port-related charges were separately indicated and that service tax had already been paid on the handling charges forming the contractual service charges. The Trade Notice clarified that service tax is to be computed only on gross service charges billed by the CHA to the client and that payments made on behalf of the client, including statutory levies, port dues and other reimbursable expenses, are not to be included in the taxable value. It further provided that in turnkey import or export contracts involving a lump sum amount, service tax could be discharged only on 15% of the lump sum amount. The disputed amounts were found to be reimbursable expenses and not part of the taxable service charges.

Conclusion: The demand of service tax on the reimbursed export dues and the penalty could not be sustained. The issue was decided in favour of the assessee.

Final Conclusion: The impugned order was set aside and the appeal succeeded with consequential relief.

Ratio Decidendi: Amounts recovered as reimbursable expenses paid on behalf of the client, including port dues and statutory levies, do not form part of the taxable value of service tax when only the service charges are liable to tax under the governing circular or trade notice.

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