2011 (3) TMI 600 - AT - Service Tax

waiver of pre-deposit - erection commissioning and installation - reimbursement of expenses - valuation u/s 67 - extended period of limitation - Held that - The appellant has not been able to produce even sample invoice in support of their plea that the consideration for services and the expenses incurred in connection with the providing of the services were separately shown in the relevant invoices and that the consideration for the services alone could be taken as gross taxable value. Prima facie the entire amount collected by the appellant from their customers would constitute gross taxable value for the purpose of payment of service tax. - Pre-deposit of penalty waived subject to deposit of service tax amount.

Summary

Issues:
Waiver of pre-deposit and stay of recovery in respect of service tax and penalty amount.

Analysis:

Issue 1: Demand of Service Tax and Penalty
The demand of service tax and penalty was raised for the period from April 2003 to March 2006 based on a show-cause notice invoking the extended period of limitation due to suppression of facts by the assessee. The original authority confirmed the demand under the proviso to sec. 73(1) of the Finance Act, 1994, imposed interest under sec. 75, and penalty under sec. 78. The Commissioner(Appeals) upheld the order, leading to the present appeal seeking waiver of pre-deposit and stay of recovery.

Issue 2: Applicability of Service Tax on Reimbursable Expenses
The appellant argued that they were not liable to pay service tax on reimbursable expenses incurred in connection with services provided to customers. They contended that the service tax was correctly paid on the consideration received for the services, and the demand of differential tax on reimbursable expenses was not sustainable in law. The appellant also challenged the demand on the grounds of limitation and questioned the retrospective applicability of the Service Tax (Determination of Value) Rules, 2006.

Issue 3: Prima Facie Case and Gross Taxable Value
The SDR argued that service tax was leviable on the gross amount collected by the assessee from customers under sec. 67 of the Finance Act, 1994. Referring to legal precedents, the SDR claimed that the appellant had no prima facie case and should be directed to pre-deposit the service tax and penalty amounts. The Tribunal found that the appellant had not paid service tax on the expenses reimbursed by customers, which should have been part of the gross taxable value.

Issue 4: Suppression of Material Facts
The Tribunal noted that the appellant had suppressed the fact that expenses incurred in connection with services were being recovered from customers, which led to evasion of appropriate tax. This suppression of material facts with intent to evade tax rendered the plea of time-bar not sustainable at this stage.

Conclusion:
The Tribunal directed the appellant to pre-deposit the service tax amount within a specified period, with waiver of pre-deposit and stay of recovery in respect of the penalty amount upon compliance. The judgment highlighted the importance of paying service tax on the entire gross amount collected from customers, including reimbursable expenses, and emphasized the consequences of suppressing material facts in tax matters.