2012 (10) TMI 261 - AT - Service Tax

Demand of service tax - Disallowance of CENVAT credit - reimbursed expenses are includible in the taxable value of the services - Invoking the extended period of limitation - Held that - This is a fit case for remand mainly because the crucial aspect of this case pertains to evidence but the evidence adduced by the assessee was not examined. Both the lower authorities, seemingly, required the assessee to prove that the expenses in question were reimbursed on actual basis by their clients but the evidence produced by the assessee were not considered. Needless to say that the plea of limitation raised by the assessee also should be considered - in favour of assessee by way of remand.

Summary

Issues:
1. Confirmation of demand for service tax and education cess.
2. Disallowance of CENVAT credit.
3. Imposition of penalty under Section 78 of the Act.
4. Appeal against the appellate Commissioner's order.
5. Inclusion of certain expenses in the taxable value for service tax payment.
6. Non-consideration of documentary evidence.
7. Reference to Tribunal's Larger Bench decision.
8. Invocation of extended period of limitation.
9. Requirement for remand to examine evidence and consider limitation plea.

The judgment involves the confirmation of a demand for service tax and education cess against the assessee for the period from April 2006 to March 2007, along with the disallowance of CENVAT credit and imposition of a penalty under Section 78 of the Act. The original authority invoked the extended period of limitation under the proviso to Section 73(1) of the Finance Act 1994. The appellate Commissioner upheld the order-in-original with a modification reducing the penalty amount. The assessee's appeal is directed against the appellate Commissioner's order. The Tribunal called for the department's appeal to be disposed of with the assessee's appeal, as the adverse part of the order-in-original was reviewed by the department. The demand in question arose from the inclusion of certain expenses in the taxable value for service tax payment, which the authorities below accepted in principle to be excludable but included due to lack of evidence of reimbursement on an actual basis by the clients. The assessee submitted documentary evidence of reimbursement, which was not considered at the original and appellate levels. The Tribunal found a fit case for remand, emphasizing the need to examine the evidence and consider the plea of limitation properly. The original authority was directed to reconsider the evidence, the substantive issue, and the plea of limitation, providing a reasonable opportunity for the party to be heard.

In the analysis, it was noted that both the lower authorities required the assessee to prove the reimbursement of expenses on an actual basis by their clients, but the evidence provided was not examined. The Tribunal highlighted the importance of considering the evidence and the plea of limitation, setting aside the orders of both authorities and allowing the appeals by way of remand. The original authority was instructed to carefully assess the evidence, the substantive issue regarding the inclusion of reimbursed expenses in the taxable value of services, and the plea of limitation. Additionally, a reasonable opportunity for the party to be heard was mandated. The judgment also disposed of the stay application.