TaxTMI 
TaxTMI 
2026 (4) TMI 306
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....ia, provided that in case the appellant uses his own transport for transport and delivery of goods to third parties, such transportation shall be at the company's cost and C&FA should submit such transportation bill to the company. 3. The view of the department was that the appellants were required to perform certain functions including maintenance of godown and all necessary corresponding facilities like electricity, water, godown, cleaning, telephone and transportation of vehicles, etc., and also employee suitable staff. It was the view of the department that essentially expenses incurred for providing C&F Agent services were not in the nature of reimbursable expenses and they were required to be included in the gross value for discharging service tax liability. 4. Learned Advocate for the appellant has mainly submitted that they were incurring various expenses including freight. His main submission is that they were getting certain amount reimbursed by their principal and therefore, the issue to be decided is whether such reimbursable expenditure paid to the appellant by the principal is liable to service tax for provision of C&F Agent services or otherwise. He has relied ....
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....ven if it is reimbursed separately by the client. 6.1 Having analyzed the various decisions cited on behalf of the assessee and on behalf of the department, it would be appropriate to consider the scope of the term "reimbursements" in the context of money realized by a service provider. A person selling the goods to another cannot treat cost of raw materials or the cost of labour or other cost components for inputs services, which went into the manufacture of the said goods as reimbursements. If the buyer enters into a contract for supply of raw materials after negotiating prices from the supplier for the raw materials and the raw materials are received by the manufacturer and the manufacturer pays the amounts to the supplier of raw materials and recovers the same from the buyer, it can certainly be considered as reimbursements. It is to be noted that in such a case, the manufacturer has no role about choosing the source of the materials procured or the price at which the materials procured and the manufacturer is not under any legal or contractual obligation to pay the amount to the supplier. However, if the manufacturer procures raw materials from a source of his choice ....
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....m by the service provider that they can render such services in vacuum. What are costs for inputs services and inputs used in rendering services cannot be treated as reimbursable costs. There is no justification or legal authority to artificially split the cost towards providing services partly as cost of services and the rest as reimbursable expenses." 6. Similar view has also been taken by the Coordinate Bench at Ahmedabad in the case of Modern Business Solutions Vs CST, Ahmedabad [2018 (11) TMI 27 - CESTAT Ahmedabad], wherein, inter alia, it was observed that all expenses incurred by a service provider cannot be called reimbursable expenses and only the expenses that qualify the test laid down in the decision of Sri Bhagvathy Traders (supra), can be called as reimbursable expenses. Further, in the case of Adarsh Agency Vs CCE & C, Nagpur [2017 (8) TMI 1232 - CESTAT Mumbai], the Coordinate Bench at Mumbai dealing with identical case of C&F Agency claiming certain expenses as reimbursable expenses, inter alia, held that service tax is chargeable on such reimbursement. The relevant para is cited below for ease of reference. "5. We find that appellant is providing servic....
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....provider on behalf of the service recipient, the question of reimbursement of expenses incurred on behalf of the recipient shall arise. It was also, inter alia, observed that claim for reimbursement towards rent of premises, telephone charges, stationery charges, etc., amounts to a claim by the service provider that they can render such services in vacuum. Therefore, what are costs for input services and inputs used in rendering services cannot be treated as reimbursable costs. 10. Therefore, we find that in this case, admittedly, though they are getting certain amount paid back by the principal, however, the said amount in totality cannot be considered as reimbursable expenses keeping in view the judgment of the Larger Bench in the case of Sri Bhagvathy Traders (supra). However, we find that there is a provision in the agreement that in case the C&F agency uses his own transport for transport and delivery of goods to third parties, such transportation shall be at the company's cost and C&F agent has to submit such transportation bill to the company. In other words, this is one of the expenses, which was clearly meant for reimbursement on actual basis and it was reimbursed by th....