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2019 (3) TMI 1820 - AT - Service TaxDemand of Service Tax - foreign remittances for the period from 18-4-2006 to 31-3-2007 - out of pocket expenses - manpower supply - office maintenance - Penalty - HELD THAT - It is a fact that the appellant has paid the Service Tax after 18-4-2006 with interest and the same has been appropriated by the impugned order. Out of pocket expenses - HELD THAT - As far as the demand of Service Tax which has been confirmed against the appellant undoubtedly pertains to out of pocket expenses which has been reimbursed on behalf of their other firms which has been reimbursed to the appellant. The appellant has rightly contended that these reimbursable expenses is not in the nature of service and, therefore, no Service Tax could have been levied as held in the impugned order. Imposition of penalty on the amount paid by the appellant - Suppression of facts or not - HELD THAT - There is no scope of levy of any penalty under the provisions of Section 78 of the Act - there was no suppression of fact on part of the appellant and the Department was fully aware of the payment which has been made by them along with the interest. Appeal allowed - decided in favor of appellant.
Issues:
1. Confirmation of demand of Service Tax on foreign remittances 2. Imposition of penalties under Sections 77 and 78 of the Finance Act, 1994 3. Legality of the impugned order and delay in passing the order 4. Applicability of Section 73(3) of the Finance Act 5. Taxability of expenses recharged from Indian entities 6. Nature of expenses recovered from member firms 7. Interpretation of Service Tax Law and suppression of facts 8. Reimbursement of out of pocket expenses and applicability of Service Tax 9. Imposition of penalty and eligibility for benefit under Section 80 of the Finance Act Analysis: 1. The appeal was filed against the order confirming the demand of Service Tax on foreign remittances for a specific period along with penalties under Sections 77 and 78 of the Finance Act, 1994. The appellant contended that the order was erroneous due to delay and legal grounds, citing previous judgments in support. The legality of the demand and penalties was challenged based on various legal arguments and interpretations. 2. The appellant argued against the imposition of penalties under Sections 77 and 78 of the Finance Act, claiming compliance with Section 73(3) of the Act. The appellant asserted that no notice should have been issued under Section 73(1) as they had discharged their liability before the issuance of the show cause notice. Legal precedents were cited to support this argument. 3. The appellant disputed the demand of Service Tax on expenses recharged from Indian entities, contending that the expenses were merely cost reimbursements and did not attract Service Tax. The appellant highlighted that the impugned order was contrary to law and failed to consider crucial facts regarding the nature of the expenses and their relation to services rendered. 4. The nature of expenses recovered from member firms was also a point of contention, with the appellant arguing that these expenses were not related to services provided by the appellant. Legal references and circulars were cited to support the argument that such expenses should not be subjected to Service Tax under the prevailing rules. 5. The interpretation of Service Tax Law and the alleged suppression of facts by the appellant were vigorously debated. The appellant emphasized that there was no deliberate suppression and that the matter involved a legal interpretation issue. Legal decisions were cited to support the contention that penalties and tax liabilities were not justified in this scenario. 6. The reimbursement of out of pocket expenses was a crucial aspect of the case, with the appellant asserting that such reimbursements were not subject to Service Tax as per relevant circulars. The applicability of Section 80 of the Finance Act was also raised as a defense against the imposition of penalties, emphasizing the absence of mala fide intentions. 7. After hearing both parties and examining the case record, the Tribunal found in favor of the appellant. The Tribunal held that the demand of Service Tax on reimbursed expenses was not justified, penalties under Section 78 were unwarranted, and there was no suppression of facts by the appellant. The impugned order was set aside, and the appeal was allowed with consequential benefits. This comprehensive analysis covers the various legal issues raised in the judgment, providing a detailed overview of the arguments presented and the Tribunal's decision on each issue.
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