CHA Service - Valuation - Inclusion of Reimbursement charges

PJ/Case Laws/2011-12/1532

Case: M/s INTERNATIONAL CLEARING AND SHIPPING AGENCY PVT LTD Vs COMMISSIONER OF SERVICE TAX, CHENNAI

Citation: 2011-TIOL-1357-CESTAT-MAD

Issue: - Customs House Agent service – whether reimbursement charges are to be excluded from the value of taxable service?

Brief Facts:- Assessee is a CHA. Demand was confirmed against him by including the re-imbursement expenses incurred by him in the taxable value for levy of service tax. Assessee is in appeal before the Tribunal.

Appellant’s Contention:- Appellant-assesses relies on Circular No. 119/13/2009-ST wherein it was stated that reimbursement charges are excluded from the taxable value of CHA services. Reliance also placed on Order-in-Original No. 35 & 36/2010 in the case of Paramount Shipping Services Pvt. Ltd. (CHA) in the light of the circular cited above where certain reimbursement expenses have been excluded whenever the assesses was able to satisfy the conditions.

Reasoning of Judgment:- The Tribunal found certain conditions are required to be satisfied before exclusions can be made to reimbursement expenses from the taxable value of CHA services. The Tribunal considered the request of assessee that if an opportunity is given then they will be in apposition to satisfy the conditions set out namely:

- The activity/service for which a charge is made, should be in addition to provision of CHA service.

- There should be arrangement between the customer and the CHA which authorizes or allows the CHA to (i) arrange for such activities/services for the customer; and (ii) make payment to other service providers on his behalf;

- The CHA does not use the activities/services for his own benefit or for the benefit of his other customers;

- The CHA recovers the reimbursements on actual basis that is without any markup or margin. In case of CHA includes any mark-up or profit margin on any service, then the entire charge for that particular activity/ service shall be included in the taxable value.

- The CHA should provide evidence to prove nexus between the other than CHA services provided and the reimbursable amounts.

- Each charge for separate activities/services is to be covered either by a separate invoice or by a separate entry in a common invoice issued by the CHA to his customer.

- Any other miscellaneous or out of pocket expenses charged by the CHA would be includable in the taxable value for the purposes of charging tax on CHA service.

The Tribunal set aside the impugned order in the light of the calrificatory Circular which is applicable even before amendment and in light of submissions of the appellant. Tribunal remit the case for fresh decision to the jurisdictional commissioner.

Decision:- Appeal allowed by way of remand.

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PJ/Case Laws/2011-12/1532

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