2012 (7) TMI 441 - AT - Service Tax

Inclusion of reimbursed amounts in the value of services - advertisements for procurement of materials required for executing the project, clearing & forwarding of such material from the port to the project sites - Held that - The reimbursed expenses in question could not have formed part of the value of the services rendered - the activities for which such charges are levied are not prima-facie covered in the definition of consulting engineering services - no ground to allege suppression on the part of the appellants as the Revenue had issued a show cause notice in 2001 itself, in respect of similar contracts which notices were dropped - in favour of assessee.

Summary

Issues:
1. Whether reimbursed expenses should be included in the value of services for the purpose of paying service tax.
2. Whether the Revenue's demand for service tax on reimbursed amounts not taxed during a specific period is justified.
3. Whether the appellants had a bonafide belief that they need not pay service tax on reimbursed expenses.
4. Whether the expenses incurred by the appellants, such as advertisement charges and clearing & forwarding charges, are covered under consulting engineering services.
5. Whether the Board's clarification on reimbursed expenses applies to the present case.
6. Whether the appellants suppressed relevant information regarding the contracts in question.
7. Whether the appellants are entitled to a waiver of pre-deposit of dues and a stay on recovery during the appeal.

Analysis:
1. The appellants provided consulting engineering services and paid service tax on billed amounts but did not include certain reimbursed expenses in the value of services. The Revenue issued a show cause notice demanding service tax on these reimbursed amounts, alleging they should be part of the service value.

2. The appellants argued that similar cases were dropped by the Commissioner (Appeals) due to time limitations for demanding tax. They contended that the present case should be treated similarly and that there was no suppression of facts.

3. The appellants claimed a bonafide belief based on the initial Board clarification that reimbursed expenses need not be included in the value of service for consulting engineering services.

4. The appellants argued that expenses like advertisement charges for procuring materials and clearing & forwarding charges were not part of consulting engineering services. They contended that such expenses should not be taxed as consideration for providing consulting engineering services.

5. The Revenue contended that the Board's clarification only applied to specific expenses related to engineers' services, not the reimbursed expenses in question. They argued that these expenses were necessary for providing the services and should be taxed.

6. The Tribunal found that the reimbursed expenses were not essential for consulting engineering services based on the activities involved. They also agreed that there was no suppression of facts by the appellants.

7. Considering the arguments, the Tribunal granted a waiver of pre-deposit of dues and stayed the recovery during the appeal, as they found no grounds for alleging suppression and believed the reimbursed expenses did not form part of the service value.

This comprehensive analysis covers the key issues and arguments presented in the judgment by the Appellate Tribunal CESTAT, New Delhi.