Other illustrations of ‘pure agent’:
Illustration 1 (Given in service tax law).—X contracts with Y, a real estate agent to sell his house and thereupon Y gives an advertisement in television. Y billed X including charges for television advertisement and paid service tax on the total consideration billed. In such a case, consideration for the service provided is what X pays to Y. Y does not act as an agent on behalf of X when obtaining the television advertisement even if the cost of television advertisement is mentioned separately in the invoice issued by X. Advertising service is an input service for the estate agent in order to enable or facilitate him to perform his services as an estate agent.
This illustration clearly shows distinction between payments made as ‘pure agent’ and payment made as ‘Principal’.
Expenses incurred by Customs Broker – In Bax Global India v. CST (2008) 13 STT 263 (CESTAT), it was held that activity of CHA relates to entry or departure of conveyances or import or export of goods any customs station. It cannot extend beyond it. Charges collected for freight, cartage, MSIL/JWG charges, examination charges, DO fees, Bill of Lading fee, CFS charges, storage and handling etc. do not pertain to CHA service. In case of charges collected by CHA for activities not related to CHA, he is not liable to pay service tax. Even if he earns profit on these activities, it is not includible in value of CHA services.
No service tax on registration fee and stamp duty of immovable property – Service tax is not payable on reimbursable expenses like registration charges and stamp duty, recovered by builder from the customer – LCS City Makers P Ltd. v. CST (2012) 36 STT 228 = 23 169 (CESTAT).
No service tax on passenger service fee and airport tax collected by airlines – In Lufthansa German Airlines v. CST (2016) 56 GST 58 = 70 60 (CESTAT), it has been held that passenger service fee and airport tax which is collected from passengers and paid over to airport/Government authorities is not includible in value of service as it is collected as pure agent – same view in Lufthansa German Airlines v. CST (2016) 56 GST 196 = 70 169 (CESTAT),
No service tax on stamp duty and Security Transaction Tax (STT) – Stamp duty and Security Transaction Tax (STT) is liability of buyer and stock broker pays it acting as pure agent of the customer. These are not includible in taxable amount for service tax – CBE&C letter No. 187/107/2010-CX.4 dated
Reimbursement of expenses which is liability of service receiver as per agreement is not includible – In Scott Wilson Kirkpatrick India P Ltd. v. CCE (2007) 8 STT 58 (CESTAT), the customer (NHAI – National Highways Authority of India) was to provide some basic facilities as per agreement. NHAI agreed that service provider (assessee in this case) can procure the facilities and claim reimbursement from NHAI. It was held that such tax is not payable on reimbursement of such expenses.
Valuation of services of C&F Agent – The C&F Agent gets his commission or remuneration for the services provided to Principal. In addition, he claims reimbursement of expenses incurred by him for providing the service e.g. transport, godown charges, office expenses etc. Issue is whether service tax is payable on these expenses also.
In Sangamitra Services Agency v. CCE (2006) 5 STT 85 (CESTAT), prima facie view was held that in case of services of clearing and forwarding agent, service tax is only on commission or remuneration and not on incidental expenses like loading expenses, godown charges, freight, electricity, telephone, labour etc. – confirmed in Sangamitra Services Agency v. CCE (2007) 12 STT 103 (CESTAT) – followed in Nandini Warehousing Corporation v. CCE (2007) 11 STT 352 and 12 STT 120 (CESTAT) * Marakadham Agencies v. CCE (2007) 11 STT 133 (CESTAT) * Veerappan Traders v. CCE (2008) 12 STT 87 (CESTAT) * Tulsiram Hanumanbags Gilada v. CCE (2008) 16 STT 33 (CESTAT) * CST v. Sangamitra Service Agency (2010) 24 STT 106 (CESTAT).
This view has been confirmed in CST v. Sangamitra Services Agency (2014) 44 GST 644 = 43 363 = 66 VST 451 (Mad HC DB). It was observed, the commission or remuneration of clearing and forwarding agent, by whatever name called, must necessarily have some link with or reference or nature to the receipt of remuneration or commission. Mere act of reimbursement, per se, would not justify its addition to value of remuneration or commission.
The view was also confirmed in Venkatesh Merchantiles v. CST (2014) 46 GST 591 = 47 129 (CESTAT) on basis of decision of Delhi High Court.
In Dimensions Logistics Services v. CST (2014) 48 GST 50 = 49 413 (Bom HC DB), a strong prima facie view was held that freight and destination charges (sum received from foreign service provider) is not includible in value for purpose of service tax.
In K D Associates v. CCE (2008) 17 STT 188 (CESTAT), it was held that service tax is only on amount received for rendering C&F services and not on godown rent and salary reimbursed by Principal – same viewin K D Sales Corporation v. CCE (2007) 10 STT 284 (CESTAT).
Service tax is not payable on loading and unloading charges – U M Thariath v. CCE (2008) 12 STT 378 (CESTAT) * Keralam Enterprises v. CCE (2008) 15 STT 280 (CESTAT) * Sri Sastha Agencies v. ACCE (2009) 18 STT 31 (CESTAT).
Service tax is payable on commission as C&F Agent and not on reimbursement of expenses – CCE v. Pratik Agencies (2008) 17 STT 12 (CESTAT SMB) * Nazeer & Co. v. CCE (2009) 20 STT 425 (CESTAT).
In DHL Lemuir Logistics v. CST (2009) 22 STT 398 (CESTAT), it was held that rental income, distribution charges, warehousing and transportation charges recovered under separate contracts is not taxable under Clearing & Forwarding Agent’s service.
Service tax is payable on commission of C&F Agent and not on rental, telephone, handling, electricity, salary of employees etc. reimbursed by Principal – Popular Cement v. CCE (2007) 8 STT 120 (CESTAT) * S&K Enterprises v. CCE (2008) 15 STT 36 (CESTAT SMB) * Apco Agencies v. CCE (2008) 14 STT 305 = 33 VST 191 (CESTAT) * Keralam Enterprises v. CCE (2009) 19 STT 155 (CESTAT).
In U M Thariath v. CCE (2008) 12 STT 378 (CESTAT), it was held that service tax is not payable on commission collected on behalf of Principal.
There are many contrary views also. However, since GST is on ‘supply of service’, aforesaid judgments are likely to held valid in GST also.