TMI Blog2012 (7) TMI 564X X X X Extracts X X X X X X X X Extracts X X X X ..... unt like wages of the personnel employed by the service provider, the telephone expenses incurred by the service provider, office rent of the service provider etc. will not form part of the value if billed as reimbursable expenses. This matter has been examined by a Larger Bench of the Tribunal in the case of Sri Bhagavathy Traders v. CCE [2011 (8) TMI 430 - CESTAT, BANGALORE] the ratio laid down in that decision would apply and service tax has to be paid on value inclusive of such amounts even if billed as reimbursements. In the matter of Misc. expenses like Registration fees for label or brand, the expenses is not for providing the service being provided by the respondents. So if there is any proof of such expenses incurred by the respondent and reimbursed by SBL, such reimbursed amount will not form part of gross value of services. Similar is the case of transportation expenses paid by respondents on behalf of the SBL. The respondents are not in the business of organising or doing transportation. Transportation is not part of business promotion activity. So actual transportation cost reimbursed will not form part of value of service rendered by the respondents. Invoking ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the concerned products. (xiv) To liaison with Government agencies regulating the liquor trade, Bars, Club, etc. 3. M/s Raj Wines, Raipur was providing these services to M/s SBL "since July, 2003. 4. The details of amounts received as service charges under various heads received from the aforesaid principal during the period 1.7.03 to 31.8.06 are as under: Sl.No . Particulars of charges Amount received Rs. 1. Primary claim/Retailer Scheme 1,45,86,101 2. Commission Claim 1,22,25,348 3. Merchandiser Expenses 3,45,163 4. Fixed Office Expenses 11,28,000 5. Other expenses (label Reg. Brand Reg., Courier, NOC Excise on breakages) 1,50,341 Total 2,84,34,953 5. The Respondents explained the activities associated with the terms "Primary Claim/Retailer Scheme", "Commission Claim", "Merchandiser Expenses", "Fixed office Expenses and Other Expenses (Label Registration Brand Registration, Courier, NOC excise on breakages)" as follows: 5.1 Primary Claim/Retailer Scheme - Primary claim/Retailer scheme is discount ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t sometimes, liquor is required to be transported from CSBC, Bilaspur and they on behalf of the company arrange the transportation, pay to the transporter and then later on claim the said amount from the company. 6. Raj Wines was not registered with Service Tax authorities and they were not paying any service tax. However they paid tax on commission income received for the period 09-07-2004 to 31-08-2006 as calculated by them amounting to Rs. 5,46,945/- on 26-10-2006. 7. Based on investigations conducted, a Show Cause Notice was issued to the Respondents on 21-11-2006 demanding service tax to the tune of Rs. 25,57,063/- from the Respondents for the period 01-07-2003 to 31-08-2006, The Show Cause Notice was adjudicated by the Additional Commissioner confirming the demand along with appropriate interest. Further penalties under sections 76 and 78 were also imposed. Aggrieved by the order, the Respondents filed an appeal with Commissioner (Appeal). 8. The Commissioner (Appeals) observed that the demand should have been confirmed only for the commission amount received and not for the reimbursable expenses received. Further he observed that it is not clear whether the demand conf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... example, the remuneration payable on the basis of letter dated 6.9.03, was as under:- "Subject: Letter of intent for sales promoter - Chattisgarh 2003-04 Further to your meetings with T.J. Venkateshwaran subsequently with me during my visit to Raipur on 21st August 2003, we are pleased to inform that you are continuing as our Sales Promoter agent for the state of Chattisgarh during the financial year 2003-04. We are detailing below the major terms and conditions under this renewed agreement, which has been agreed in principle with you. (1) Brands: Castle Lager, Royal Challenge, Hawards Lager, Haywards 5000, Knowout. Haywards 2000, Lal Toofan. (2) Volume target: In view of the fact that the minimum guarantee has been fixed at 40% as against 50% last year, the volume target has been retained at last year's achievement level of 2,40,000 cases of erstwhile Shah Wallace brands and minimum 10,000 cases of SAB Miller brands. (3) Remuneration: Based on the return on investment (ROI) model, the commission amount was fixed at Rs. 8.10 per case w.e.f. 1 Aug 03 at an average investment level to Rs. 50 lacs throughout the year. We would be furnishing Rs. 6 lacs ban guarantee to CSBC ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r that the amount payable is towards discounts given to the customer, as a part of the business model. This money cannot form part of the gross value of services rendered. However, expenses reimbursed as per arrangements stated in para 5.3 and para 5.4 are of a type which forms integral part of the value of service rendered. Without employing manpower the respondents could not have provided the service in question. The case laws on "reimbursable expenses" developed around expenses incurred by Clearing and Forwarding agents for godown rented out for keeping the goods of the principal and freight paid for forwarding the goods. These essentially do not form part of the value of the services of C F agents. Now such decisions are being further interpreted to argue that any amount like wages of the personnel employed by the service provider, the telephone expenses incurred by the service provider, office rent of the service provider etc. will not form part of the value if billed as reimbursable expenses. This matter has been examined by a Larger Bench of the Tribunal in the case of Sri Bhagavathy Traders v. CCE [2011] 33 STT 1/13 taxmann.com 83 (Bang. - CESTAT) the ratio laid down in tha ..... X X X X Extracts X X X X X X X X Extracts X X X X
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