2011 (2) TMI 1138 - AT - Service Tax

Waiver of pre-deposit - contention of the applicant that actuals which were paid and reimbursed by their clients such as out of pocket expenses are not subject to service tax - Held that - As per the provisions of Section 67 of the Finance Act the service tax is on the gross amount received for providing a taxable service. The appellants are not disputing taxability of service provided. As applicants are receiving a gross amount for service rendered. Hence prima facie it is not a case for waiver of pre-deposit of amount of service tax. Applicants are directed to pre-deposit an amount of Rs. 2, 41, 279/- within a period of four weeks and to report compliance.

Summary

Issues:
1. Whether out of pocket expenses reimbursed by clients are subject to service tax.
2. Interpretation of Section 67 of the Finance Act regarding the chargeability of service tax on the gross amount received for providing taxable services.

Analysis:
1. The appellant applied for a waiver of pre-deposit of service tax, interest, and penalties amounting to Rs. 2,41,279, contending that out of pocket expenses reimbursed by clients are not subject to service tax as per the Service Tax (Determination of Valuation) Rules, 2006. The appellant argued that since the demand predates the Rules, the amounts in question are not liable for service tax. However, the Revenue argued that the appellant charges a gross amount from clients for taxable services, making the gross amount chargeable to service tax. The Tribunal noted that the service tax is levied on the gross amount received for providing taxable services as per Section 67 of the Finance Act. Since the appellant did not dispute the taxability of the service provided and received a gross amount for the service rendered, the Tribunal found no grounds for waiving the pre-deposit of the service tax amount.

2. The Tribunal held that the appellant must pre-deposit the amount of Rs. 2,41,279 within four weeks and report compliance before the Assistant Registrar. Upon depositing the specified amount, the condition of pre-deposit of interest and penalties was waived, and the recovery of the same was stayed during the pendency of the appeal. The decision was pronounced and dictated in open court by the Vice-President of the Tribunal, emphasizing the application of Section 67 of the Finance Act in determining the chargeability of service tax on the gross amount received for providing taxable services.