CESTAT Chennai: Reimbursable Transport Charges Not Taxable in C&F Services Before 2015 Amendment

April 1, 2026 : The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Chennai Bench has held that transportation charges incurred by a clearing and forwarding (C&F) agent on behalf of its principal cannot be included in the taxable value of services prior to the 2015 amendment to Section 67 of the Finance Act, 1994. The Tribunal partly allowed the appeal filed by Toll India Logistics Pvt. Ltd., granting substantial relief from a service tax demand exceeding ₹2.06 crore.

The ruling came in an appeal against an Order-in-Original dated 29.05.2015, which had confirmed service tax demand, interest, and penalties under “Clearing and Forwarding Agent Service” for the period 2008–09 to 2011–12.

The Bench comprising M. Ajit Kumar (Technical Member) and Ajayan T.V. (Judicial Member) examined whether transportation charges collected separately by the appellant were liable to be included in the taxable value of C&F services.

The Tribunal noted that Toll India Logistics was engaged as a C&F agent and arranged transportation strictly on behalf of its principals. The agreements on record clearly established that ownership of goods remained with the principals at all times and that transporters were engaged as per their instructions. The transportation expenses were billed separately and reimbursed based on actuals.

On this basis, the Tribunal held that the appellant acted as a “pure agent” within the meaning of Rule 5(2) of the Service Tax (Determination of Value) Rules, 2006. It observed that such reimbursable expenses, incurred on behalf of the client and recovered without any markup, cannot form part of the consideration for taxable services.

Crucially, the Bench relied on the Supreme Court’s ruling in Union of India v. Intercontinental Consultants and Technocrats Pvt. Ltd., which settled that reimbursable expenses are not includible in the value of taxable services prior to the amendment of Section 67 with effect from 14.05.2015. The Tribunal emphasized that service tax is chargeable only on the consideration received “for such service” and not on amounts incurred on behalf of the client.

Applying this principle, it held that inclusion of transportation charges in the taxable value of C&F services for the relevant period was legally unsustainable. Consequently, the entire service tax demand on such charges, along with interest and penalties, was set aside.

On the issue of CENVAT credit, however, the Tribunal upheld the denial of credit on outdoor catering services, citing the specific exclusion introduced in Rule 2(l) of the CENVAT Credit Rules, 2004 with effect from 01.04.2011. At the same time, it restricted the demand to the normal period of limitation, holding that the extended period was not invokable in the absence of suppression or intent to evade tax.

The Tribunal observed that the issue was interpretational and had been subject to prior litigation in the appellant’s own case. Accordingly, penalties were also set aside.

The appeal was thus partly allowed, with the Tribunal setting aside the service tax demand on transportation charges while confirming the denial of CENVAT credit for the normal period.

Case Title: M/s Toll India Logistics Pvt. Ltd. v. Commissioner of GST & Central Excise, Chennai
Case No.: Service Tax Appeal No. 41891 of 2015
Coram: M. Ajit Kumar (Technical Member), Ajayan T.V. (Judicial Member)