TaxTMI 
TaxTMI 
2026 (3) TMI 1069
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.... of KN Asia Pacific Holding AG Switzerland. The Respondent are registered with the Service Tax department under the centralized registration issued on 17th December, 2008. They are engaged in providing different taxable services viz. storage and warehousing, cargo handing service, business auxiliary service, intellectual property right service other than copyright, transport of goods by road service and customs house agent's service under Section 65 of the Finance Act, 1994. They operate through a network of branches across India, while services rendered outside India are provided by the Respondent's overseas business associates within the KN Group. During the audit conducted by the officers of the Central Excise department, Cochin, it was noticed that the Respondent had wrongly assessed the gross value of services provided by them which resulted in short payment of service tax. The Respondent acting as a Customs House Agent ('CHA') have provided different services to their customers. On these allegations, four SCNs were issued for the periods covering 2004-2009, 2009-2010, 2010-2011 and 01.04.2011 to 31.03.2012. The first three SCNs were adjudicated by a common OIO dated 30.04.201....
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....lated to valuation of CHA service with reference to Section 67 of the Finance Act. 4.4 He also refers to the provisions of Section 65(105) and Section 65(105)(h) of the Finance Act, which define the CHA as well as taxable service provided by the CHA. 4.5 He further submits that method of charging the service tax does not in itself determine whether the service provided is a single service or multiple services, and the classification in such cases is based on essential character by applying the principle of classification enumerated in Section 65A of the Finance Act. 5. On the other hand, the learned Consultant for the Assessee-Respondent justifies the impugned OIOs passed by the learned Commissioner and submits that the entire case of the Revenue is whether the expenditure or cost incurred by the Respondent shall be included in the value for purpose of charging service tax on the CHA service provided by them. 5.1 The learned Consultant further submits that the Revenue in the present case has only relied upon the CBEC Circular No. 43/1/97-TRU dated 06.06.1997 and Rule 5(1) of the Service Tax (Determination of Value) Rules, 2006 which came into effect from 18.04.2006 for ....
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....T & CE, Jaipur - 2023 (73) GSTL 237 (Tri. Del.) * M/s International Shippers & Traders Pvt Ltd vs. CCE & Customs, Visakhapatnam-I - 2015 (11) TMI 906 CESTAT Bangalore * Commr of ST, New Delhi vs. Karam Freight Movers - 2017 (4) GSTL 215 (Tri. Del.) 5.5 The learned Consultant further submits that the Adjudicating Authority has rightly held that the expenses recovered by the Respondent from their clients are not includible in the value charged by them for the provision of services for various reasons as stated in details in the impugned OIOs itself. 5.6 He further submits that in accordance with Section 67 of the Act, only consideration for the specific service is subject to taxation and therefore, any expenses on behalf of the client and recovered on an actual basis cannot be included in the taxable amount. For this, he places reliance on the decision of Bangalore Bench of the Tribunal in the case of Rolex Logistics Pvt Ltd vs. CST, Bangalore - 2009 (13) STR 147 (Tri. Bang.). 5.7 The learned Consultant further submits that the expenses recovered by the Respondent cannot be brought within the ambit of taxable services under the category of CHA services. He ....
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.... reproduced herein below: "9. We find that as per the provisions of Rule 5 of the Service Tax (Determination of Value) Rules, 2006, the reimbursable expenses also need to be included in the value of taxable services rendered. However, this rule has been held to be ultra-vires to section 67 by Hon'ble Supreme Court in the case of Intercontinental Consultants & Technocrats Pvt. Limited as reported in 2018 (10) G.S.T.L. 401 (S.C.). Hence, the demand of Service Tax on this count is clearly not sustainable. On the very issue in hand, the Board in the circular supra has also clarified the matter in favour of the assessee. The relevant para of the circular is reproduced below: 5. It is reported that disputes have arisen on the issue of inclusion of such reimbursable charges, which are currently pending at various stages of dispute settlement mechanism. Certain field formations have also issued communications, directing that charges on certain activities incurred by CHAs are not covered under exclusions available to 'pure agent'. It is also reported that divergent practices as regards the records & documentations, are being followed by the CHAs in relation to the charges ....
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....ut of pocket expenses charged by the CHA would be includable in the taxable value for the purposes of charging tax on CHA services. 7. The conditions mentioned at paragraph (6) would be applicable for services provided with effect from 19th April 2006, i.e. after the introduction of the valuation rules. For the prior period, the taxable value should be determined in accordance with the prevailing instructions issued by Board as referred to foregoing paragraph 3 of this circular. Any communication issued by any of the subordinate offices which are contrary to the conditions referred to in paragraph 6 of this circular, or as the case may be, the prevailing Board's circulars stands super-ceded to the extent of the contradiction. 8. The pending disputes may be settled in terms of this circular. In view of the Hon'ble Apex Court judgment in Intercontinental case supra and the Board circular, the reimbursable expenses incurred by the appellant on behalf of the service recipient is not includible." 8. Further, we find that the ratio of the Hon'ble Supreme Court' judgment in the case of Union of India vs. Intercontinental Consultants & Technocrats Pvt Ltd ....
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....e assessees. As per these Rules, these reimbursable expenses also form part of 'gross amount charged'. Therefore, the core issue is as to whether Section 67 of the Act permits the subordinate legislation to be enacted in the said manner, as done by Rule 5. As noted above, prior to April 19, 2006, i.e., in the absence 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 subclauses 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 c....
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.... with the main enactment has to give way to the provisions of the Act. 28. It is also well established principle that Rules are framed for achieving the purpose behind the provisions of the Act, as held in Taj Mahal Hotel : "the Rules were meant only for the purpose of carrying out the provisions of the Act and they could not take away what was conferred by the Act or 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, ....