AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2026 (4) TMI 1832
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....a, appellant's balance sheet, P & L account and schedules vide letter dated 10.06.2008, the appellant vide letter dated 01.07.2008 provided the same. The Department was of the view that CBEC circular dated 06.06.1997 communicated vide Chennai Central Excise Commissionerate Trade Notice No.9/97 dated 09.06.97 excludes expenses such as statutory levies and various reimbursable charges, incurred by the CHA on behalf of the client from the taxable value. Therefore, as a corollary, those amounts recovered from the client on account of reimbursable expenses but not actually incurred either fully or partly by the CHA cannot be excluded from the gross amount computed from the taxable value. Further, Department was of the view that consequent to the notification of the Service Tax (Determination of Value) Rules, 2006, in terms of Rule 5(2) expenditure or costs incurred by the service provider as a pure agent of the recipient of the service in conformity with the definition of 'pure agent' contained in the Explanation 1 appended thereto, shall only be excluded subject to satisfaction of the conditions stipulated therein. Conversely, the amount recovered from the recipient of the service and ....
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....alent penalty under Section 78 of the Act. Aggrieved, the appellant preferred an appeal before the Commissioner (Appeals-I). However, the Appellate Authority rejected the appeal and upheld the Order in Original of the Adjudicating Authority. Aggrieved, the Appellant has preferred this Appeal against the impugned order. 3. Ms. Radhika Chandrasekhar, Ld. Advocate appearing for the appellant contended that during the course of rendering CHA service the Appellant incurred certain expenses on behalf of the client such as clearing and forwarding charges, due agent charges, and documentation charges that were reimbursed by the client. The Appellant also purchased cargo slots from various Airlines/Shipping lines and subsequently sold the same to shippers and earned profit. The Airline/shipping lines give commission/incentive to the Appellant to encourage more purchase by the Appellant. Ld. Counsel contends that in the reply of the Appellant it was explained that the Appellant had paid service tax for the CHA services rendered. With respect to the surplus, the Appellant had submitted that there was a markup only on documentation charges and appropriate service tax on the same has been di....
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....od for the same issue, extended period cannot be invoked as the department is already aware of the details. Reliance is placed on the decisions in Nizam Sugar Factory v CCE, (2006) 197 ELT 465 (SC) and ECE Industries Ltd v. CCE, (2004) 164 ELT 236. 7. Ms. G. Krupa, Ld. Authorised Representative, appearing for the respondent submitted that in the instant case various costs incurred by the Appellant cannot be termed as reimbursable expenses as these would be integral to the running of the business of the Appellant. Moreover, the Appellant had not produced any documents or any bills to show that the above charges collected was reimbursed to them by the service receiver. All the costs are obviously charges directly linked to service of the Appellant namely CHA service so the claim of the Appellant to exclude them cannot be acceded to. As regards the issue of booking cargo spaces, Business Auxiliary service includes within its ambit a commission agent acting on behalf of another person. Here the Appellant had acted on behalf of the Airlines to book cargo spaces for various importers/exporters and for such services the airlines had paid them a commission which is consideration for the....
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.... sale of cargo space? Whether the appellant is liable to pay service tax on the reimbursement of expenses while rendering CHA service? 13.1 We find that the Adjudicating Authority has in the impugned Order-in-Original placed reliance on Rule 5(1) and Rule 5(2) of the Service Tax Valuation Rules, 2006 read with Board's Circular dated 21.12.2009 to determine when the reimbursable charges are eligible for exclusion and thereby in confirming the demands in so far as the reimbursable expenses are concerned. We find that the issue of whether service tax is applicable on reimbursement of expenses is no longer res-integra in view of the Supreme Court's ruling in the case of UOI vs. Intercontinental Consultants & Technocrats (P) Ltd. [(2018) 91 67(SC)]. The relevant extract of the ruling is reproduced below: - "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 amount which is calculated not for providing such taxable servic....
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.... 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 Income Tax (Cen....
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....s, legislations which modified accrued rights or which 8 (2015) 1 SCC 1 impose obligations or impose new duties or attach a new disability have to be treated as prospective unless the legislative intent is clearly to give the enactment a retrospective effect; unless the legislation is for purpose of supplying an obvious omission in a former legislation or to explain a former legislation. We need not note the cornucopia of case law available on the subject because aforesaid legal position clearly emerges from the various decisions and this legal position was conceded by the counsel for the parties. In any case, we shall refer to few judgments containing this dicta, a little later." 30) As a result, we do not find any merit in any of those appeals which are accordingly dismissed." 13.2 Thus, following judicial discipline, we order that reimbursement of expenses is not subject to levy of service tax. Whether the Appellant is liable to pay service tax on the incentive/commission received for sale of cargo space? 14.1 The second issue is whether purchase of cargo slots from various Airlines/Shipping-line and subsequent sale of the same to shippers and....
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....d the same is set aside. 4.3. The next issue relates to the income under the head of airline commission and airline incentive sought to be taxed under BAS. It is seen that the said income is generated during the course of booking of bulk cargo by the appellant with the airline. The appellant have received the incentive and commission from the airline. The appellants are engaged in buying and selling of space in the airline and depending on the volume of the space bought by the appellant from the airlines they received the commission/incentive. The appellants are not buying and selling space on the airline on behalf of their client but on their own behalf. To consider the activity of buying and selling the taxable activity under the head of BAS, the same should be done on behalf of the client Thus, if the appellants were selling the space on carrier from the airline directly to the exporters without themselves purchasing the space then it could have been considered as an activity involving promotion of sales. In the instant case the appellant are directly buying themselves and thereafter selling the same to the exporters. In this activity they are receiving incentive and co....
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....T and Central Excise [(2024) 15 Centax 357 (Tri. Mad)]: - "7.4.1 The third issue is the demand raised on freight and brokerage, etc. The Ld. Counsel submitted that the appellant receives a brokerage / rebate from the shipping line on the ocean freight that they have to pay to the shipping lines. It is in the form of the discounts or incentives paid to the CHA and such amount is not a consideration for providing any CHA services. In fact, the appellant does not provide any CHA service to the shipping line. They act as an agent on behalf of the importer / exporter. So the incentive or the discount received by the appellant from the shipping line cannot be treated as a consideration received for CHA services. In the case of Commissioner of Service Tax, New Delhi Vs. Karam Freight Movers [2017 (4) GSTL 215 (Tri. Del.)], the Tribunal observed that the mark-up value collected by the assessee from the exporter is an element of profit in the transaction. The said amount is not a commission earned by the assessee and is not while acting as an agent of the exporter or shipping line and cannot be considered as a consideration. The assessee while acting as an agent on behalf of the sh....
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....ve findings, the impugned Order-in-Appeal No. 13/2015 dated 11.01.2015 passed by Commissioner of Service Tax (Appeals-I), Chennai is set aside. Thus, the appeal is allowed with consequential relief, if any as per law." 11. We have examined the decisions cited by the Ld. A.R. and find that they have been rendered in the facts and circumstances obtaining therein and are distinguishable from the facts of this case. The decision in P.K.Ghosh was rendered before the Apex Court decision in Intercontinental Consultants cited supra and the decision in Hindustan Oil Exploration cases has been rendered without noticing the Apex Court decision in Intercontinental Consultants & Technocrats cited supra. The decision in Modern Business Solutions was in respect of Business Auxiliary services rendered in the context of services provided to ICICI Bank which the appellant was contesting contending that it was manpower supply. The decision in Broekman Logistics was in the context of a specific plea of the consultant therein. In the case of Coromandel Shipping Services, the appellant was also undertaking cargo handling services that was being sought to be classified as port services by the Departme....
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....down by the Apex Court in its decision in Union of India v Intercontinental Consultants and Technocrats Pvt Ltd, 2018 (10) GSTL 401 (SC), puts it beyond the pale of any controversy that Section 67 which deals with valuation of taxable services for charging service tax does not provide for inclusion of the aforesaid expenditure or cost incurred while providing the services as they cannot be treated as element/components of service, till the amendment to Section 67 made effective from May 14, 2015. Concededly, the period involved in the present Appeals are from 01-04-2013 to 31-03-2015, and hence the aforesaid decision would squarely apply, rendering the entire demand confirmed in the impugned order unsustainable and liable to be set aside on this count alone." Admittedly, the period involved in the instant case is prior to May 14, 2015. It is also pertinent that the practice adopted by Custom House Agents and the various reimbursables claimed as not includible were also noticed by the Apex Court in its decision in Intercontinental Consultant case. We are therefore of the considered view that when Rule 5 ibid itself has been held to be ultra-vires Section 67, by the Apex Court in ....
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....14. Furthermore, the Ld. Counsel also contented that extended period is not invokable as none of the ingredients stated in proviso to Section 73 (1) required for invoking the extended period are present. It was also argued further that since the department had issued an earlier SCN, the department could not have invoked the extended period, as the department is aware of the activity of the Appellant. Reliance was placed on the decisions in Nizam Sugar Factory Vs. CCE, 2006 (197) ELT 465 (SC), and ECE Industries Ltd. Vs. CCE, 2004 (164) ELT 236 (SC). We find that the present SCN itself concedes that consequent to an earlier investigation into the receipts and income of the appellant as accounted in their books of accounts, SCN was issued covering the period upto 31.03.2005. Therefore, we find merits in the aforesaid contention of the appellant that invoking the extended period of limitation in the present SCN issued on 3006-2009 was untenable on this count alone. 15. That apart, while extended period has been invoked, there is no evidence let in of any positive act of suppression or willful misstatement with intent to evade payment of service tax by the Appellant so as to satisfy....