2024 (4) TMI 821

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.... period, they have declared the gross amount charged to their clients an amount of Rs.21,74,65,342/- and an amount of Rs.20,71,78,011/- as reimbursable expenses. However, the appellant has declared taxable value as Rs.3,13,96,519/-. 2.1 The case of the Revenue is that the appellant has incurred expenses showing reimbursable expenses but the tax was paid on some charges taking into consideration the same as taxable value for CHA services. 2.2 On the said basis, a show-cause notice was issued to the appellant to demand differential service tax for payment of service tax on reimbursable expenses claimed by the appellant. 2.3 The matter was adjudicated. The demand of service tax was confirmed. 2.4 Against the said order, the appellant is before us. 3. The ld.Counsel for the appellant submits that the appellant was registered as service provider for clearing and forwarding agent services under Section 65 (105)(j) read with Section 65 (25) of the Finance Act, 1994. It is his submission that the appellant is providing the pure agency services and to that effect, the appellant provided various agreements with their Principal showing that the appellant is only a pure agent. I....

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....s salaries of client's staff, other expenses like rent, telephone expenses, printing, postage, etc. They were under the bona-fide belief that reimbursement of expenses was never under the scope of levy of service tax. They cited Board Circular F. No. B.43/7/97-TRU dated 11th July, 1997 and contended that the reimbursement of expenses in case of clearing and forwarding agents are not forming part of gross value as per this Circular and hence not includable in the assessable value for the purpose of computation of service tax. 15. We observe that Service tax (Determination of Value) Rules, 2006, has brought in the concept of 'Pure Agent' to address the taxability issues of reimbursements. As per the said Rules, expenditure incurred as a 'Pure Agent' were excluded from the assessable value. In the present matter under dispute, a perusal of the agreements entered with the different principals clearly revels that there were specific amounts for remuneration to be charged as a C&F Agent. We also observe that the Respondent has recovered precisely the same amount from the recipient that has been paid on their behalf by producing the documentary evidence in regard to such expendit....

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....he sense that only the service actually provided by the service provider can be valued and assessed to service tax. We are, therefore, undoubtedly of the opinion that Rule 5(1) of the Rules runs counter and is repugnant to Sections 66 and 67 of the Act and to that extent it is ultra vires. It purports to tax not what is due from the service provider under the charging Section, but it seeks to extract something more from him by including in the valuation of the taxable service the other expenditure and costs which are incurred by the service provider "in the course of providing taxable service". What is brought to charge under the relevant Sections is only the consideration for the taxable service. By including the expenditure and costs, Rule 5(1) goes far beyond the charging provisions and cannot be upheld. It is no answer to say that under sub-section (4) of Section 94 of the Act, every rule framed by the Central Government shall be laid before each House of Parliament and that the House has the power to modify the rule. As pointed out by the Supreme Court in Hukam Chand v. Union of India, AIR 1972 SC 2427 :- "The fact that the rules framed under the Act have to be laid b....

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....alf of the principal. The pure agent shall keep a record of all imports & exports and s regularly receive from the principal. All sums reimbursed by the principed in respect of such all the transactions of Exports and imports less agency commission had been received from the principal during different period of time. All the transactions related to Imports and exports of the principal shall be made to the pure agent for cash/cheque against services/delivery of goods. 3. That the pure agent shall, at the expense of the principal, take or deliver the goods,make the payment to transporters & Freight Forwarders on services and made service for the purpose of the agency. All the goods entrusted to his services by the principal under this agreement and on request, shall produce to the principal, receipts, for the transactions of the said reimbursement. That the principal shall reimburse all the transactions relating to or incidental to the said pure agent. 4. That the pure agent shall, in all his commercial dealings and on documents and produce on behalf of the principal. 5. That the agent shall not sell the goods of the principal to any pu....