By Puloma Dalal, Jayesh Gogri, Mandar Telang Chartered Accountants
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Whether, reimbursement of expenses paid by Principal to C&F Agent on actual basis are includible in the value of clearing and forwarding service? Held, no.
Facts:
The issue before the High Court was, whether various charges towards freight, labour, electricity, telephone etc, which were reimbursed by the principal to the C & F Agent on the basis of actuals, were required to be added to the value of the taxable service in relation to the clearing and forwarding services provided by a C&F agent of the Principal.
On behalf of the respondent, nobody represented the matter. The Revenue contended that, in terms of the provisions of Rule 6(8) of the Service Tax Rules, 1994, the value of taxable service in relation to the services provided by the Clearing and Forwarding Agent to the client for rendering services of the Clearing and Forwarding operations, in any manner, shall be deemed to be the gross amount of remuneration or commission (by whatever name called) paid to such agent by the client, engaging such agent and considering this, the charges collected towards freight, labour, electricity, telephone etc., in connection with the Clearing and Forwarding Services, would form part of the remuneration/commission.
Held
Rejecting the revenue’s contention, the Hon’ble High Court held that the gross amount referred to in Rule 6(8) of the Service Tax Rules, 1994 would apply to receipts of such sum, which would bear the character of remuneration or commission in that. In the absence of any material to show the understanding between the Principal and the Client that the commission payable by the principal was all inclusive, it is difficult to hold that the gross amount of remuneration/commission would nevertheless include expenditure incurred by the assessee providing the services; that all incidental charges for running of the business would also form part of the remuneration or commission (by whatever name called). The phrase “by whatever name called” must necessarily have some link or reference with the nature of the receipt of remuneration or commission. Thus, if a receipt is for reimbursing the expenditure incurred for the purpose per se, would not justify that the same had the character of the remuneration or commission.
