2013 (9) TMI 838 - AT - Service Tax

Demand - C&F service - Commissioner upheld demand - 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 - Following decision of BENCHMARK CONSULTANTS VERSUS COMMISSIONER OF CUSTOMS, CENTRAL EXCISE AND ST, COIMBATORE 2013 (9) TMI 69 - CESTAT CHENNAI - stay granted.

Summary

Issues:
1. Whether the reimbursable expenses should be included in the taxable value of services rendered.
2. Validity of Rule 5 of the Service Tax (Determination of Value) Rules, 2006.
3. Application for waiver of predeposit of dues for admission of the appeal.

Analysis:

Issue 1:
The case involved a provider of C&F services who received fixed monthly remuneration, handling charges, and other payments from a client. The Revenue contended that additional expenses reimbursed by the client, such as freight charges, electricity charges, and miscellaneous charges, should be part of the taxable value of the services provided. A demand was raised, which was confirmed along with interest and penalties. The appellant argued that these expenses were reimbursable and not consideration for the services rendered. The Tribunal considered the arguments and granted waiver of predeposit of dues for admission of the appeal, staying the collection during the appeal process.

Issue 2:
The appellant relied on the decision of the Hon'ble Delhi High Court in the case of Intercontinental Consultants and Technocrats Pvt. Ltd. Vs. Union of India, where Rule 5 of the Service Tax (Determination of Value) Rules, 2006, was struck down as ultra vires section 67 of the Finance Act, 1994. The appellant contended that since Rule 5 was invalidated, the demand based on it was not sustainable. The Tribunal acknowledged the appellant's reliance on the Delhi High Court decision and the waiver granted in a similar case, M/s. Benchmark Consultants Vs. CCE, Coimbatore, and decided to grant waiver of predeposit of dues for the current appeal.

Issue 3:
The Revenue argued that the expenses reimbursed were necessary for the provision of services and should be included in the value of the services rendered. The Revenue highlighted a previous decision of the Tribunal in the case of Supreme Agencies Vs. CCE, Mangalore, to support their position. However, the Tribunal noted that the decision in Supreme Agencies was made before the Delhi High Court's ruling on Rule 5. Considering the subsequent waiver granted in a similar case, the Tribunal granted the waiver of predeposit of dues for the appellant's appeal and stayed the collection during the appeal process.

This detailed analysis of the judgment provides a comprehensive overview of the issues involved and the Tribunal's decision on each issue, ensuring a thorough understanding of the legal implications and arguments presented in the case.