2026-VIL-1487-CESTAT-CHE-ST
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SERVICE TAX CESTAT Cases

Service Tax - Customs House Agent Service – Taxability of Reimbursable Expenses - Whether reimbursable expenses recovered by Customs House Agent are includible in taxable value of CHA service under Section 67 of Finance Act 1994 read with Rule 5 of Service Tax Determination of Value Rules 2006 for period prior to 14.05.2015 - HELD - During relevant period Section 67 of Finance Act 1994 provided that where service tax was chargeable on any taxable service with reference to its value, such value shall be gross amount charged by service provider for such service. The controversy is whether Rule 5 could enlarge charging provision contained in Section 67 so as to include reimbursable expenditure - The judgment of Delhi High Court in Intercontinental Consultants and Technocrats case held that Rule 5 insofar as it sought to include expenditure or costs incurred by service provider, travelled beyond Sections 66 and 67 of Finance Act 1994 and delegated legislation cannot enlarge charging provision. This judgment was affirmed by Supreme Court in Union of India v. Intercontinental Consultants and Technocrats Pvt. Ltd. wherein it was held that prior to amendment of Section 67 effective 14.05.2015, expenditure or costs incurred in providing taxable service could not be included in taxable value by virtue of Rule 5 one. The amended provision came into effect only from 14.05.2015 and has no application to period involved in present appeal - For period prior to 14.05.2015, genuine reimbursable expenses incurred on behalf of clients cannot be included in taxable value under Section 67. Mere recovery of such amounts from clients cannot make them taxable consideration - The impugned inclusion of reimbursable expenses in taxable value is unsustainable. Demand of service tax together with interest and penalties is set aside and the appeal is allowed
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