TaxTMI 
TaxTMI 
2026 (8) TMI 1397
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....Deconsolidation Charges, D.O. Charges, Terminal Handling Charges, Demurrage Charges and similar amounts, but excluded them from the taxable value of CHA services by treating them as reimbursable expenses. The Department alleged that the appellant had not fulfilled the conditions of Rule 5(2) of the Service Tax (Determination of Value) Rules, 2006, and proposed inclusion of the said amounts in the taxable value. The appellant contended that the disputed amounts represented reimbursements towards payments made to Steamer Agents, Port Authorities, CFS Operators and other agencies on behalf of its clients and did not constitute consideration for its CHA services. It also relied upon the applicable departmental circulars and judicial decisions and challenged the adjudication on the ground of the extraordinary delay, the Show Cause Notice having remained in the Call Book for several years. The adjudicating authority rejected these contentions and confirmed the demand, interest and penalty, giving rise to the present appeal. 3.1 The Ld. Advocate Shri Ajay Kumar Gupta, for the appellant, submitted that the impugned Order-in-Original is contrary to Section 67 of the Finance Act, 1994 and....
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.... 16.06.2010, remained in the Call Book for nearly fifteen years, with personal hearing being granted only in February 2025. Such extraordinary delay, it was contended, violated the principles of natural justice and rendered the adjudication unsustainable. Reliance was placed upon Western India Marine Corporation v. Union of India, 2025 (2) TMI 316 (Bom.), Shri Balaji Enterprises v. Additional Director General, 2024 (12) TMI 1208 (Del.), Elite Aromas, Bharat Shetty, Gupta & Co. Pvt. Ltd., 2024 (12) TMI 970 (Bom.), and other decisions cited in the written submissions. 3.5 The Ld. Counsel therefore prayed that the impugned Order-in-Original be set aside in its entirety with consequential relief. 4.1 Per Contra, the Ld. Authorized Representative Shri Anoop Singh for the Revenue, supported the impugned order and submitted that the appellant had collected LCL Charges, Deconsolidation Charges, Delivery Order Charges, Terminal Handling Charges, Demurrage Charges and similar amounts in connection with CHA services but failed to satisfy the conditions of Rule 5(2) of the Service Tax (Determination of Value) Rules, 2006 for their exclusion. The amounts therefore formed part of the taxab....
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....rage Charges and similar amounts in the taxable value on the ground that the appellant had failed to satisfy the conditions for exclusion as a "Pure Agent" under Rule 5(2) of the Service Tax (Determination of Value) Rules, 2006. The adjudicating authority accepted this view and confirmed the demand. The appellant, on the other hand, contends that these amounts were reimbursements of payments made to Port Authorities, Steamer Agents, CFS Operators and other third parties on behalf of its clients and did not constitute consideration for its services. 8. Before examining the rival submissions, it is necessary to notice the statutory framework. During the relevant period, Section 67 of the Finance Act, 1994 provided that where service tax was chargeable on any taxable service with reference to its value, such value shall be the gross amount charged by the service provider for such service. Thus, the taxable value was confined to the consideration charged for the taxable service. Rule 5(1) of the Service Tax (Determination of Value) Rules, 2006 sought to include expenditure or costs incurred by the service provider while providing the taxable service. The controversy, therefore, is w....
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....hat amounts collected towards services rendered by third parties cannot be included in the taxable value of CHA services without establishing that they constitute consideration for the CHA service rendered by the appellant. 12. The appellant relied upon International Shippers & Traders Pvt. Ltd. v. Commissioner of Central Excise, Customs and Service Tax, Visakhapatnam-I, 2016 (45) S.T.R. 460 (Tri.-Bang.) = 2015 (11) TMI 906 (CESTAT Bangalore), wherein the Tribunal, relying upon the applicable CBEC Circular and Intercontinental Consultants & Technocrats Pvt. Ltd., held that freight, loading, unloading and other reimbursable expenses incurred on behalf of clients could not be included in the taxable value of CHA services. The decision supports the appellant's contention that third-party reimbursements cannot be included merely because they are recovered from the client. 13. The appellant also relied upon Broekman Logistics India Pvt. Ltd. v. Commissioner of CGST and Central Excise, Chennai, 2024 (12) TMI 1182 (Mad.), wherein the Hon'ble Madras High Court, following Union of India v. Intercontinental Consultants & Technocrats Pvt. Ltd., 2018 (10) G.S.T.L. 401 (S.C.), hel....
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.... (Del), 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 taxable services, in the value of such taxable services, was stuck down as ultra vires Section 66 and Section 67 of the Act and as travelling beyond the scope of the said sections. The Honourable Supreme Court had also noticed the nature of reimbursable expenses that arose for consideration in the facts of the case as well as that in connected appeals before it, and has gone on to hold as under: "21. Undoubtedly, Rule 5 of the Rules, 2006 brings within its sweep the expenses which are incurred while rendering the service and are reimbursed, that is, for which the service receiver has made the payments to the 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 Secti....
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....n 67 is manifest, as noted above, viz., the service tax is to be paid only on the services actually provided by the service provider. 26. It is trite that rules cannot go beyond the statute. In Babaji Kondaji Garad, this rule was enunciated in the following manner : "Now if there is any conflict between a statute and the subordinate legislation, it does not require elaborate reasoning to firmly state that the statute prevails over subordinate legislation and the byelaw, if not in conformity with the statute in order to give effect to the statutory provision the Rule or bye-law has to be ignored. The statutory provision has precedence and must be complied with." 27. The aforesaid principle is reiterated in Chenniappa Mudaliar holding that a rule which comes in conflict 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 whittl....
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....rospective operation. The idea behind the rule is that a current law should govern current activities. Law passed today cannot apply to the events of the past. If we do something today, we do it keeping in view the law of today and in force and not tomorrow's backward adjustment of it. Our belief in the nature of the law is founded on the bedrock that every human being is entitled to arrange his affairs by relying on the existing law and should not find that his plans have been retrospectively upset. This principle of law is known as lex prospicit non respicit : law looks forward not backward. As was observed in Phillips v. Eyre [(1870) LR 6 QB 1], a retrospective legislation is contrary to the general principle that legislation by which the conduct of mankind is to be regulated when introduced for the first time to deal with future acts ought not to change the character of past transactions carried on upon the faith of the then existing law. 29. The obvious basis of the principle against retrospectivity is the principle of "fairness", which must be the basis of every legal rule as was observed in L'Office Cherifien des Phosphates v. Yamashita-Shinnihon Steamship Co. L....