In two appeals from Jaipur, CESTAT New Delhi set aside service tax demands on freight reimbursed to a C&F agent and on pre-2015 reimbursable expenses of a consulting engineer.

The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), New Delhi, has held in two appeals decided the same day that expenses a service provider incurs for its client and recovers as reimbursement cannot be taxed as part of the value of its service [Madhu Agencies v. Commissioner of CGST-Jaipur I, 2026-juristway.com-3321-CESTAT(New Delhi)-ST; Consulting Engineers Group Ltd. v. Commissioner (Appeals), Central Excise & CGST Commissionerate, Jaipur, 2026-juristway.com-3323-CESTAT(New Delhi)-ST].

Madhu Agencies. The Bench of Ajay Sharma, Member (Judicial), and P.V. Subba Rao, Member (Technical), with the order written by Mr. Subba Rao, heard a clearing and forwarding (C&F) agent of Birla Tyres Ltd. Its contract required it to receive, warehouse, store and dispatch tyres. It paid freight on stock transfers and was reimbursed under separate bills; the consignment notes named Birla Tyres as consignor and consignee, and Birla Tyres paid tax on the goods transport service under reverse charge.

An earlier demand for October 2011 to November 2014 had been dropped on the footing that the agent acted as a pure agent. A fresh show cause notice (SCN) dated 5 Oct 2018 for December 2014 to June 2017 treated transport as part of the C&F service and led to a demand of ₹30,01,257 with an equal penalty under Section 78 of the Finance Act, 1994. The appellant relied on Astha Solutions v. Principal Commissioner of CGST and Central Excise, Jaipur (Final Order No. 50336/2026).

The Tribunal held that transportation was outside the contract and the dispute over it lay between Birla Tyres and the transporter. Paying the transporter and being reimbursed was “more or less like lending money to Birla Tyres and Birla Tyres reimbursing the amounts so paid is like repaying the amounts”, and was not part of the C&F service.

Consulting Engineers Group. Before Ashok Jindal, Member (Judicial), and P.V. Subba Rao, Member (Technical), the appellant had provided consulting engineer services to the National Highways Authority of India from July 2003 to September 2005. It paid tax on staff remuneration but not on transportation, travel, office rent, supplies, utilities, printing and contingencies. In remand proceedings the Commissioner (Appeals) confirmed ₹63,07,016.

The Tribunal rejected the plea that bodies corporate were outside the definition of consulting engineer, following Commissioner of Central Excise, Raipur v. SEPCO Electric Power Construction Corporation (2022). It accepted the reimbursement plea: Rule 5 of the valuation rules had been held ultra vires Section 67 in Intercontinental Consultants and Technocrats Pvt. Ltd v. UOI (2013), upheld by the Supreme Court, and Section 67 was amended only in 2015 to include reimbursable expenses. The demand covered only such expenses for the earlier period.

Both appeals were allowed and the demands set aside.

2026-juristway.com-3321-CESTAT(New Delhi)-ST | 2026-juristway.com-3323-CESTAT(New Delhi)-ST