2026-VIL-599-CESTAT-HYD-ST
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SERVICE TAX CESTAT Cases

Service Tax - Reimbursable expenses or not - Appellant was a Clearing and Forwarding (C&F) Agent who incurred various expenses in performing their functions but claimed to have been reimbursed by their principal - Whether such reimbursable expenditure paid to the appellant by the principal is liable to service tax – HELD - There is an agreement between the principal and the appellant to act as a C&F Agency for the principal, which obligated the appellant to perform certain functions. While performing said functions, they were incurring various expenses and according to the appellant they were getting those expenses reimbursed from the principal. The issue as to whether any amount, which is being incurred by a C&F agency and later on certain amount is getting reimbursed or repaid by the principal has been subject matter of various orders passed by the Coordinate Benches - Only when the service recipient has a legal or contractual obligation to pay certain amount to a third party and the service provider pays that amount on behalf of the recipient, the question of reimbursement arises. The claim for reimbursement towards rent, telephone charges, stationery, etc. amounts to a claim by the service provider that they can render services in a vacuum, and such costs for input services and inputs used in rendering services cannot be treated as reimbursable costs - However, the agreement provided that in case the C&F agent uses their own transport for delivery of goods, such transportation charges shall be reimbursed by the principal. This element was a reimbursement and should not be included in the gross value for charging service tax. For the rest of the expenses, they were incurred in relation to performing the C&F agent's obligations and functions, and hence should be part of the gross value - The matter was remanded back to the Original Adjudicating Authority to re-compute the demand after allowing the exclusion of reimbursable expenses for transportation charges, if found to be on actual cost basis. If it is on notional basis, then the said amount cannot be considered as reimbursable expenses and hence includible – The impugned order is set aside and the appeal is allowed by way of remand
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