2013 (9) TMI 69 - AT - Service Tax

Valuation of taxable services - inclusion of reimbursement of expenses in the gross value - Reimbursements whether taxable or not Held that - In INTERCONTINENTAL CONSULTANTS AND TECHNORATS PVT. LTD. V/s U. O. I. & ANR. (2012 (12) TMI 150 - DELHI HIGH COURT), it was held that Rule 5 (1) which provides for inclusion of the expenditure or costs incurred by the service provider in the course of providing the taxable service in the value for the purpose of charging service tax is ultra vires Section 66 and 67 and travels much beyond the scope of those sections. - prima facie case is in favor of assessee - stay granted.

Summary

Issues:
- Application for waiver of predeposit of tax, penalty, and interest
- Interpretation of Rule 5(1) of the Service Tax (Determination of Value) Rules, 2006
- Applicability of Section 67 in the case
- Comparison with judicial precedents
- Decision on waiver of predeposit and stay of recovery

Analysis:
The judgment dealt with an application seeking waiver of predeposit of tax, penalty, and interest amounting to Rs.9,64,172/- related to the period from 2005-06 to 2009-10. The applicant argued that the demand was based on reimbursements received from a bank for various expenses like courier charges, telephone charges, and travelling expenses. The applicant contended that the adjudicating authority wrongly applied Rule 5(1) of the Service Tax (Determination of Value) Rules, 2006, which had been invalidated by the Delhi High Court in a previous case. Additionally, the applicant claimed that the demand was time-barred.

The respondent, on the other hand, relied on a Tribunal decision in a different case to support the inclusion of such expenses in the taxable value under Section 67. The adjudicating authority justified the inclusion of reimbursements in the taxable value based on the statutory provisions of Rule 5(1) and relevant explanations and illustrations, disregarding the separate listing of expenses in the invoice.

The judgment referenced the Delhi High Court's ruling in a similar case, declaring Rule 5(1) as ultra vires Section 66 and 67, thus rendering it invalid. Consequently, the Tribunal found merit in the applicant's argument and granted a waiver of predeposit, staying the recovery of the entire tax amount, penalty, and interest until the appeal's final disposal. The decision was based on the applicant establishing a prima facie case for the waiver, aligning with the legal precedent set by the Delhi High Court.

In conclusion, the Tribunal's decision was in favor of the applicant, recognizing the invalidity of Rule 5(1) and granting the requested waiver of predeposit and stay of recovery pending the appeal's outcome, in line with established legal principles and precedents.