TaxTMI 
TaxTMI 
2026 (4) TMI 1230
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....II), Chennai. The dispute pertains to the period January 2009 to November 2009 involving service tax demand of Rs. 43,550/- under the category of Clearing and Forwarding Agency service. 1.2 The facts briefly stated are that the appellant is engaged as a Clearing and Forwarding agent for M/s. Himalaya Drug Company and is registered with the Service Tax department. During audit of Accounts, it was noticed that apart from commission received, the appellant had also received reimbursements towards various expenses such as freight, telephone, packing, electricity, stationery and labour charges. The Department formed a view that such reimbursed expenses are includible in the taxable value in terms of Rule 5 of the Service Tax (Determination of....
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....8 (10) GSTL 401 (SC), wherein it was held that reimbursable expenses cannot be included in the taxable value. 4.3 The appellant also relied on the judgment of the Hon'ble Madras High Court in Commissioner of Service Tax vs. Sangamitra Services Agency 2014 (33) STR 137 (Mad.), wherein it was held that reimbursement of expenses cannot automatically form part of taxable value in the absence of evidence that such expenses are part of remuneration. 4.4 Further reliance was placed on the decision of the Tribunal in United India Shipping Services vs Commissioner of Service Tax Final Order No. 40417/2023, wherein it has been held that reimbursable expenses are not subject to service tax following the Supreme Court decision. 4.5 Finally, th....
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....ceived by the appellant are liable to be included in the assessable value for levy of service tax. 9.2 We observe that Section 67 of the Finance Act, 1994 provides that the value of taxable service shall be the gross amount charged for such service. The expression "for such service" restricts the valuation only to the consideration attributable to the service rendered. It is a settled principle that the charging provision must be strictly construed and no tax can be levied on amounts which do not fall within the scope of the charging section. It is settled law that valuation provisions cannot be expanded by delegated legislation beyond the scope of the charging section. 9.3 We find that the learned counsel for the appellant has relied....
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....Following the same, we hold that the demand cannot sustain." 9.6 In the present case, we find that the expenses sought to be included consist of freight, telephone charges, electricity, packing, stationery and labour charges which were incurred in the course of providing service and reimbursed by the principal. 9.7 We find that each of the expense heads sought to be included in the taxable value is specifically governed by the terms of the agreement. Freight, insurance and documentation expenses are expressly borne by the principal, while other expenses such as electricity, labour and telephone charges are in the nature of operational costs incurred by the appellant without any element of profit or remuneration. The agreement clearly ....
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....o make them taxable unless it is shown that such amounts are in the nature of consideration. 9.10 Applying the ratio of the decisions relied upon by the appellant, particularly the judgment of the Hon'ble Supreme Court in Union of India v. Intercontinental Consultants and Technocrats Pvt. Ltd., 2018 (10) GSTL 401 (S.C.), and taking note of Rule 6(1)(viii) of the Service Tax (Determination of Value) Rules, 2006, it is held that such reimbursed expenses cannot be included in the taxable value and consequently the demand raised on such inclusion is liable to be set aside, which we accordingly do so. Issue (ii): Sustainability of demand, interest and penalties 10.1 We find that the entire demand in the present case is based on inclusio....