Order date – 14 September 2022

Facts – 

• The Respondent, SEQUEL LOGISTICS PVT. LTD., were denied the benefit of exclusion of amount received after 14.05.2015 towards electricity charges from the assessable value of the service provider.
• It was alleged that in terms of the agreement between the Respondent and Titan Industries Limited (TIL) dated 31.05.2012, the Respondent were engaged in providing certain services to TIL’s Premises.
• In terms of the contract, certain amounts were paid by TIL to the respondent on the basis of actuals subject to certain limits. These amounts included man power cost, additional man power cost, management fee, performance pay, reimbursement and holiday working. Apart from that certain amortization charges were also paid by TIL.
• The Respondent sought to exclude from the assessable value the electricity charges received by them from M/s TIL and claimed the same as reimbursements.
• The Commissioner (Appeals) has allowed the benefit for the period prior to 14.05.2015. Learned Counsel vehemently argued that the electricity charges were paid by the appellant in the capacity as pure agent and therefore, the same are excludable from the value even after 14.05.2015.
• Aggrieved, the appellant filed an appeal.

Issue – 

• Whether the electricity consumed by the appellant for providing the services of managing “IMP watch packing units and warehouse for accessories and sunglasses” can be called as expenses incurred as pure agent?

Order – 

• The Tribunal observed that the electricity is consumed in the said operation as a primary input. The entire warehouse and packing activities are located in the premises located at Hosur. A large number of people work in the said premises and activity of packing, de-packing sorting etc. goes on within the premises.
• Relying the Hon’ble Apex Court in the case of Intercontinental Consultants and Technocrats Private Limited it was clearly held that there was no authority in law to include the reimbursable expenditures in the assessable value.
• The said decision also holds that w.e.f. 14.05.2015 by amendment of Section 67 wherein the definition of the term ‘Consideration’ was amended, reimbursable expenditure or cost would also form part of the value of taxable services. Also it was has held that Rule 5 of Service Tax (Determination of Value) Rules, 2006, went much beyond the mandate of Section 67. 
• In these circumstances, Tribunal set aside the appeal filed by Revenue for inclusion of value of electricity charges for the period prior to 14.05.2015.
• The Tribunal accepted the argument of respondent that they have incurred expenditure of octroi on behalf of TIL and same has been reimbursed by TIL on actual basis whenever Respondent has raised an invoice for the same is itself a proof that Respondent acted as pure agent of TIL in that respect. 
• It has also been argued that Respondent do not hold any title to the goods and therefore, octroi liability cannot arise on Respondent under any circumstances. Therefore, any payment of octroi by SLP has to be treated as payment done by Respondent on behalf of the owner of the goods, namely, TIL. 
• Therefore, the Tribunal did not find any merit in appeal filed by the department, Hence, set aside.