2013 (10) TMI 586 - AT - Service Tax

Non-inclusion of Reimbursable Charges - Discharge of Service Tax liability and part of the amount is for non-discharge of Service Tax liability under renting of immovable property by the appellant Held that - The appellant had entered into memorandum of understanding with various persons and were recovering the actual expenses incurred by them in respect of their members - To that extent, no Service Tax liability may arise on the appellant as Hon ble High Court of Delhi in the case of Intercontinental Consultants & Technocrats Pvt. Ltd. 2012 (12) TMI 150 - DELHI HIGH COURT - had struck down the provisions of Rule 5(1) of Service Tax Valuation Rules as ultra vires - Since a specific rule had been struck down, any demand arising on such reimbursable expenses cannot be sustained - part of the property was given on rent by the appellant to various persons and collecting the rent - such an activity would fall under the category of renting of immovable property services - Partial Stay Granted.

Summary

Issues: Stay petition for waiver of pre-deposit of Service Tax, including interest and penalty, based on non-inclusion of reimbursable charges and non-discharge of Service Tax liability under renting of immovable property.

Analysis:
The appellant filed a Stay Petition seeking waiver of pre-deposit of Service Tax amounting to Rs.48,78,955/-, along with interest and penalty. The lower authorities confirmed the dues, attributing part of the Service Tax liability to non-inclusion of reimbursable charges and part to non-discharge of Service Tax liability related to renting of immovable property by the appellant. The Tribunal examined the case, noting that the appellant had entered into agreements with individuals to recover actual expenses incurred by them, which could exempt the appellant from Service Tax liability as per a ruling by the Hon'ble High Court of Delhi. The Tribunal recognized that the provisions of Rule 5(1) of Service Tax Valuation Rules had been declared ultra vires, rendering demands on such reimbursable expenses unsustainable. However, the Tribunal acknowledged that the renting of immovable property by the appellant constituted a taxable service. The Tribunal emphasized that the defenses raised by the appellant against the imposition of Service Tax liability required detailed consideration at the final disposal of the appeal.

The Tribunal issued a directive for the appellant to deposit Rs.3 lakhs within eight weeks and report compliance by a specified date. Upon verification of compliance, the application for waiver of pre-deposit of the remaining amounts was allowed, and recovery was stayed pending the appeal's final disposal. The Tribunal's decision balanced the appellant's obligation to make a partial deposit with the recognition of legal complexities surrounding the Service Tax liability on reimbursable charges and renting of immovable property services. The order provided a structured approach to addressing the financial obligations while ensuring due process in the appeal proceedings.