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2019 (8) TMI 212

..... THAT:- From the sample agreement shown by the Ld. Counsel between the appellant and the service recipient it is observed that there is a separate amount of only service charges for CFA service and some actual amount payable by the service recipient to the appellant on account of various expenses. There is a fixed amount on the quantum of sale towards remuneration for ‘CFA’ service. From the agreement it is seen that there is a separate charges for the service of ‘CFA’ and there are additional charges towards the various expenses which appellant has to undertake on behalf of their client, therefore, the remuneration for the ‘CFA’ service is clearly identified all other charges are paid as reimbursable charges by the service recipient. Since, the other expenses are incurred as per the instruction of the service recipient the same is reimbursed on actual basis by the service recipient to the appellant - Therefore, these charges are over and above the remuneration in respect of ‘CFA’ service and it is not towards the service of ‘CFA’ as a reimbursement of expenses. Therefore, it cannot be said that the reimbursable expenses is .....

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..... t Charges, Manpower Expenses, Packing Manpower Expenses, Packing Manpower Expenses, Packing Material Charges, Postage & Courier Charges, Printing Stationery Charges, Repair & Maintenance, Telephone Charges. However, on these charges the appellant did not discharge the service tax. The case of the department is that the above services are required for performing the service of Clearing and Forwarding Agent Service , therefore, charges received as reimbursement on the above expenses shall from part of gross value of CFA services and is liable for service tax. There is also demand on franchisee service under Section 65 (105) (zze) Finance Act, 1994. 2. Sh. Bishan R. Shah, Ld. CA appearing on behalf of the appellant submits that all the expenses are on actual basis. These are expenses incurred on behalf of the principal client and the same is reimbursed, therefore, and these charges are not part of their activity as Clearing and forwarding agent service. The remuneration towards the CFA service is clearly indicated in each contract with the service recipient, only such remuneration which is representing the service charges towards CFA service is liable to the tax under heard of .....

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..... sed the actual expenditure incurred by CFA as per Annexure-A 5. From the above agreement it is seen that there is a separate charges for the service of CFA and there are additional charges towards the various expenses which appellant has to undertake on behalf of their client, therefore, the remuneration for the CFA service is clearly identified all other charges are paid as reimbursable charges by the service recipient. Since, the other expenses are incurred as per the instruction of the service recipient the same is reimbursed on actual basis by the service recipient to the appellant. Therefore, in our view, these charges are over and above the remuneration in respect of CFA service and it is not towards the service of CFA as a reimbursement of expenses. Therefore, it cannot be said that the reimbursable expenses is part of the service charge of CFA . This issue has been considered by the Hon ble Supreme Court in the judgment cited by the appellant: In the case of Malabar Management Service Pvt. Ltd (Supra), it was held that reimbursement of salary and infrastructure expenses not be termed as amount charged towards the service provided by the service provider. In the case Bhayana .....

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..... as the service tax) @ 12% of the value of taxable services referred to in sub-clauses of Section 65 and collected in such manner as may be prescribed. 23.Obviously, this Section refers to service tax, i.e., in respect of those services which are taxable and specifically referred to in various subclauses of Section 65. Further, it also specifically mentions that the service tax will be @ 12% of the value of taxable services . Thus, service tax is reference to the value of service. As a necessary corollary, it is the value of the services which are actually rendered, the value whereof is to be ascertained for the purpose of calculating the service tax payable thereupon. 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 service cannot a part of that valuation as that amount is not calculated for providing such taxable service . That according to us is the plain meaning which is to be attached to .....

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..... roviding 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 (Central)-I, New Delhi v. Vatika Township Private Limited [(2015) 1 SCC 1] wherein it was observed as under : A legislation, be it a statutory Act or a statutory rule or a statutory notification, may physically consists of words printed on papers. However, .....

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..... 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. Civil Appeal No. 6865 of 2014, Civil Appeal No. 6864 of 2014, Civil Appeal No. 4975 of 2016, Civil Appeal No. 5130 of 2016 and Civil Appeal Nos. 4536-4537 of 2016 31.In the aforesaid appeals, the issue is as to whether the value of free supplies of diesel and explosives in respect of the service of Site Formation and Clearance Service can be included for the purpose of assessment to service tax under Section 67 of the Act. These assessees had not availed the benefit of aforesaid Notifications Nos. 15/2004 and 4/2005. Therefore, the issue has to be adjudged simply by referring to Section 67 of the Act. We have already held above that the value of such material which is supplied free by the service recipien .....

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