reimbursement on transportation charges

[Sudhir Kumar]

A C&F agent having service tax registration has not paid the service tax on reimbursement charges received from the principal in lieu of providing them transportation facility. The contention of the agent was that the service tax was already paid by the principal however, they have not provided any proof of service tax payment made by the principal. Sir, whether the agent is liable to pay service tax on the value paid by the principal against providing them transportation facility.

[YAGAY and SUN]

Yes, the C&F (Clearing and Forwarding) agent is liable to pay service tax on the reimbursement received for providing transportation facilities unless they can conclusively prove that service tax on the same component has already been paid by the principal.

Let’s break this down a bit:

📌 Legal Position (based on pre-GST era laws – Service Tax regime):

1. C&F Agent’s Scope of Service:
   • C&F agents are taxable under “Business Auxiliary Services” or a specific category depending on the contract.
   • If they arrange or provide transportation as part of their service and get reimbursed, that reimbursement can be considered part of the gross amount charged for services under Section 67 of the Finance Act, 1994.
2. Reimbursement Charges:
   • As per the Supreme Court judgment in Union of India v. Intercontinental Consultants & Technocrats Pvt. Ltd. (2018 (3) TMI 357 - SUPREME COURT), only the consideration for the service rendered should be taxed. But before this judgment, Rule 5 of the Valuation Rules allowed the inclusion of reimbursements.
   • For periods before this judgment, the department usually considered reimbursements taxable.
3. Agent's Contention:
   • If the agent says the principal has paid the service tax, then onus of proof lies on the agent to furnish evidence (like invoice, tax payment challans, etc.).
   • In the absence of such proof, tax authorities can rightly demand tax from the agent on that amount.
4. Double Taxation Concern:
   • If both the agent and principal were made to pay tax on the same component, it would amount to double taxation, which is not permissible.
   • However, in this case, since the agent is receiving the reimbursement and hasn't proved tax payment by the principal, they can be held liable.

✅ Conclusion:

• Yes, the agent is liable to pay service tax on the value received from the principal for transportation, unless they can produce documentary evidence that the principal already paid service tax on that same amount.
• In the absence of such evidence, tax authorities can recover the tax from the agent, possibly with interest and penalty.

[Shilpi Jain]

In case it can be proved that the C&F is acting as a pure agent then there is no liability of ST for the C&F irrespective of the fact whether the principal has actually paid the ST or not.

[KASTURI SETHI]

(1) Valuation (Service Tax) — Reimbursible expenses incurred by Customs House Agent in providing CHA services not includible in assessable value (2) Customs House Agents Service, scope of

The Supreme Court Bench comprising Hon’ble Mr. Justice A.K. Sikri and Hon’ble Mr. Justice Ashok Bhushan on 16-7-2018 dismissed the Civil Appeal No. 8439 of 2016 filed by Commissioner of Central Excise, Customs and Service Tax against the CESTAT Final Order No. 21255/2015, dated 26-5-2015 as reported in (International Shippers & Traders P. Ltd. v. Commissioner - 2015 (11) TMI 906 - CESTAT BANGALORE). While dismissing the appeal, the Supreme Court passed the following order :

“The appeal is dismissed in terms of the judgment dated 7-3-2018 passed in C.A. No. 2013 of 2014 and other connected matters titled as “Union of India & Anr. v. M/s. Intercontinental Consultants & Technocrats Pvt. Ltd. - 2018 (3) TMI 357 - SUPREME COURT”

The Appellate Tribunal in its impugned order had held that in providing Customs House Agents service, reimbursible expenses incurred by CHA for handling, clearing and delivering import cargo at importer’s premises being actual are not includible in gross value of services in terms of settled law on this issue.

It was also held that in terms of Trade Notice No. 39/97, dated 11-6-1997 of Delhi Commissionerate, scope of Customs House Agents service included all activities right from unloading of goods till delivery thereof at importer’s premises by taking reimbursement of actual expenses. Merely by undertaking these activities, CHA does not provide C & F Agent services.

A report relating to the admission of Civil Appeal in question has been related in 2016 (45) S.T.R. J203 (S.C.)

[Commissioner v. International Shippers & Traders P. Ltd. - 2018 (7) TMI 1658 - SC ORDER]

[KASTURI SETHI]

2017 (11) TMI 1799 - CESTAT KOLKATA - COMMISSIONER OF C. EX. & S.T., BOLPUR Versus S.K. CARRYING CORPORATION

 

[KASTURI SETHI]

C & F Agent is the best example of a pure agent. A pure agent always works for and behalf of the principal (owner). Not taxable at the hands of C & F Agent. Also go through the following circular :-

Valuation — Inclusions for Stock Broker service — Expenses includible when service provider liable therefor

Instruction F. No. 187/107/2010-CX. 4, dated 17-9-2010

 

AI Summary

Reimbursement for transportation: taxable unless proven paid by principal or shown to be a pure agent exception.
C&F agents receiving reimbursements for transportation are taxable on those amounts unless they prove the principal already paid tax or that they acted as a pure agent. Documentary proof is required to shift liability; absent such proof, authorities may assess tax, interest and penalties. Established findings indicate actual reimbursible expenses incurred for handling or delivery, when shown to be such, need not be included in the agent's assessable value, but characterization and factual arrangements determine applicability.