TaxTMI 
TaxTMI 
TaxTMI 
2025 (6) TMI 7
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....e of audit it was noticed by the Department that the Appellant apart from collecting charges for providing CHA service also collected various charges such as IAAI Charges, Delivery Order charges/Air Freight Charges, Booking Charges, Survey Charges, Warehousing Charges, Steamer Agent Charges, Container Freight Station Charges, Repacking Charges, Insurance Charges, Godown rent etc., from their clients. However, the appellant has not included the aforementioned charges collected in the gross taxable value for the purpose of payment of service tax and did not pay service tax on the said charges. 3. A show cause notice No.435/2009 dated 12-10-2009 covering the period from 19.04.2006 to 31.10.2008, was issued alleging that the above charges collected from the clients are to be treated as expenditure or costs incurred by the appellant in the course of providing taxable service and all such expenditure or cost form part of the taxable service provided and are liable to be included in the gross value for the purpose of charging service tax on the Custom House Agent Service, as per provisions of Section 67 of the Finance Act 1994 read with Rule 5(1) of the Service Tax Valuation Rules. The s....
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....by their clients. The appellate authority has upheld the demand on these charges invoking Rule 5(1) of the Valuation Rules 2006 which has since been struck down by the Honourable Delhi High Court in the Intercontinental Technocrats case and further affirmed by the Honourable Supreme Court. These expenses are reimbursed by the client on actuals. The appellant did not discharge service tax on the reimbursable expenses as it is not a consideration for any services rendered. The learned counsel submits that only the service charges received as consideration for the services provided or to be provided would form part of the taxable value for the purposes of service tax and it is a settled position in law that reimbursements are not liable to tax for the relevant period. 6. The learned counsel submits that the Honourable Supreme Court has in the case of UOI v Intercontinental Consultants and Technocrats Pvt Ltd, reported in (2018) TIOL 76-SC-ST : 2018 (10) GSTL 401 (SC), affirmed the decision of the Delhi High Court wherein Rule 5(1) of the Service Tax Valuation Rules, 2006 which provided for inclusion of expenditures or costs incurred by the service provider in the course of providing ....
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.... of any such Rule, the valuation was to be done as per the provisions of Section 67 of the Act. 22. Section 66 of the Act is the charging Section which reads as under: "there shall be levy of tax (hereinafter referred to as the service tax) @ 12% of the value of taxable services referred to in sub-clauses of Section 65 and collected in such manner as may be prescribed." 23. Obviously, this Section refers to service tax, i.e., in respect of those services which are taxable and specifically referred to in various sub- clauses of Section 65. Further, it also specifically mentions that the service tax will be @ 12% of the 'value of taxable services'. Thus, service tax is reference to the value of service. As a necessary corollary, it is the value of the services which are actually rendered, the value whereof is to be ascertained for the purpose of calculating the service tax payable thereupon. 24. In this hue, the expression 'such' occurring in Section 67 of the Act assumes importance. In other words, valuation of taxable services for charging service tax, the authorities are to find what is the gross amount charged for providing 'such' taxable services. As a fortiori, any other ....
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....r whittle down its effect." 29. In the present case, the aforesaid view gets strengthened from the manner in which the Legislature itself acted. Realising that Section 67, dealing with valuation of taxable services, does not include reimbursable expenses for providing such service, the Legislature amended by Finance Act, 2015 with effect from May 14, 2015, whereby Clause (a) which deals with 'consideration' is suitably amended to include reimbursable expenditure or cost incurred by the service provider and charged, in the course of providing or agreeing to provide a taxable service. Thus, only with effect from May 14, 2015, by virtue of provisions of Section 67 itself, such reimbursable expenditure or cost would also form part of valuation of taxable services for charging service tax. Though, it was not argued by the Learned Counsel for the Department that Section 67 is a declaratory provision, nor could it be argued so, as we find that this is a substantive change brought about with the amendment to Section 67 and, therefore, has to be prospective in nature. On this aspect of the matter, we may usefully refer to the Constitution Bench judgment in the case of Commissioner of Inco....