2012 (6) TMI 119 - AT - Service Tax

Service tax demand on the entire bill value amount without allowing a deduction for the reimbursement expenses - Ld. Commissioner disallowed the claim as the appellants have not produced the supporting documents evidencing the claim whereas the contention of assessee is that now they are in a position to produce the requisite documents - Held that - In light of the judgment of the case of Sri Bhagavathy Traders Vs. Commissioner of Central Excise, Cochin 2011 (8) TMI 430 (Tri) wherein guidelines have been laid down how to compute the expenses defines that only when the service recipient has an obligation legal or contractual to pay certain amount to any third party and the said amount is paid by the service provider on behalf of the service recipient, the question of reimbursing the expenses incurred on behalf of the recipient shall arise - the claim for reimbursement towards rent for premises, telephone charges, stationery charges, etc. amounts to a claim by the service provider that they can render such services in vacuum - what are costs for inputs services and inputs used in rendering services cannot be treated as reimbursable costs as there is no justification or legal authority to artificially split the cost towards providing services partly as cost of services and the rest as reimbursable expenses - the aforesaid decision was not before the ld. Commissioner while passing the Order, the case is remanded to the Ld. Commissioner to decide afresh.

Summary

Issues:
- Waiver of predeposit of service tax and penalty under Section 78 of the Finance Act, 1994.
- Disallowance of reimbursement expenses in service tax calculation.
- Requirement of producing supporting documents for reimbursement claims.
- Application of guidelines from previous Tribunal decisions in determining reimbursable expenses.
- Remand of the case to the Commissioner for fresh consideration.

Analysis:
The applicant sought waiver of predeposit of service tax and penalty amounting to Rs.1,45,55,074/- under Section 78 of the Finance Act, 1994, contending that the service tax demand was based on the entire service value without allowing deduction for reimbursement expenses. The applicant claimed that after deducting the reimbursable expenses, the actual service tax liability was around Rs.20.00 lakhs, of which Rs.9.95 lakhs had already been deposited. The Tribunal found that the appeal could be disposed of without predeposit and penalty, proceeding to consider the appeal itself.

The case involved the disallowance of reimbursement expenses in the service tax calculation by the Commissioner. The appellants, engaged in providing CHA Services, were alleged to have suppressed agency commission and not acted as pure agents. The appellants contended that the reimbursable amount was not deducted in arriving at the service value, and the Commissioner did not consider their claim due to lack of supporting documents. The appellants asserted their ability to now produce the necessary documents to support their claim.

The Department argued that while the appellants claimed deductibility of reimbursable expenses, they failed to provide the required supporting documents to the Commissioner. Reference was made to a previous Tribunal decision outlining guidelines for computing expenses, which were also reflected in the Valuation Rules of Service Tax. The Department emphasized the importance of considering these guidelines in determining expenses related to reimbursement.

After careful consideration, the Tribunal noted that the appellant had not produced evidence to support their claim for deduction of reimbursable expenses before the Commissioner. The case was remanded to the Commissioner for a fresh decision, considering the guidelines from the previous Tribunal decision. Both parties were granted the opportunity to submit the necessary documents, and a reasonable hearing was to be provided. The appeal was disposed of by way of remand, with all issues kept open for further consideration.