Awasthi Brothers Vs Principal Commissioner, Customs, Central Excise & Service Tax (CESTAT Delhi)
The issue under consideration is whether expenses received as reimbursement of expenses made on behalf of service recipients can form part of the assessable value and service tax will be applicable on it?
In the present case, the internal audit link of the Department conducted an audit of statutory records of the appellant and formed a view that appellant adopted a novel modus operandi by which it bifurcated the amount received by it from various service recipients under two different category of services i.e. “Clearing and Forwarding services‟ and “Goods and Transport Agency service‟. The Department after detailed scrutiny of the financial ledgers and profit and loss account of the appellant reached a conclusion that the appellant had not declared the taxable value correctly as gross receipts as per section 67 of the Finance Act, 1994 for the purpose of payment of Service Tax.
CESTAT states that expenses which have been reimbursed by the principals to the appellant working as a pure agent, cannot be included in the assessable value for charging the service tax. An amount was received by the appellant as reimbursement of expenses made on behalf of service recipient on account of depot expenses, weighing machine expenses, empty cartons charges, diesel expenses, house keeping expenses etc. CESTAT are of the opinion that expenses which have been received as reimbursement of expenses made on behalf of service recipient by the appellant cannot form part of the assessable value as held by the Supreme Court in Union of India vs. M/s. Intercontinental Consultants and Technocrats Pvt. Ltd.
Accordingly, the appeal is allowed.
FULL TEXT OF THE CESTAT JUDGEMENT
The brief facts are that the appellant is a partnership firm registered with the Service Tax department for the taxable service under the category of „Clearing and Forwarding services‟.
The appellant as Clearing and Forwarding agent has been undertaking the work of Clearing and Forwarding for various companies such as M/s. Hindustan Unilever Limited, M/s. Berger Paints India Ltd., M/s. L G Electronics India Pvt Ltd. And M/s. Moser Baer India Ltd. etc. The appellant has been discharging service tax liability on the commission / remuneration received by it towards „Clearing and Forwarding service‟ received by it from the above mentioned companies.
2. The internal audit link of the Department conducted audit of statutory records of the appellant and formed a view that taxable value has not been declared truthfully by the appellant. The Department was of the view that appellant adopted a novel modus operandi by which it bifurcated the amount received by it from various service recipients under two different category of services i.e. „Clearing and Forwarding services‟ and „Goods and Transport Agency service‟. The Department after detailed scrutiny of the financial ledgers and profit and loss account of the appellant for the period 2007-2008 to 2011-2012 reached a conclusion that the appellant had not declared the taxable value correctly as gross receipts as per section 67 of the Finance Act, 1994 for the purpose of payment of Service Tax. The Table below makes the entire allegations apparent by a simple glance at the same.
