2013 (10) TMI 1011 - AT - Service Tax

Valuation - inclusion of value of reimbursement of expenses - Rule 5(1) - Waiver of pre deposit - Business Auxiliary Services - Held that - Prima face, we find that the said provision has been struck down by the Hon ble Delhi High Court in Inter-continental s case (2012 (12) TMI 150 - DELHI HIGH COURT) as ultra vires to Section 66 and 67 of the Finance Act, 1994. Thus, the applicant could able to make out a prima facie case for total waiver of dues adjudged. Accordingly, all dues adjudged is waived and its recovery stayed during the pendency of the appeal - Decided in favour of assessee.

Summary

Issues: Application for waiver of pre-deposit of Service Tax, penalty under Section 78, and penalties under other provisions of Finance Act, 1994.

Analysis:
The application before the Appellate Tribunal sought the waiver of pre-deposit of Service Tax amounting to Rs.73.04 Lakhs and an equal amount of penalty imposed under Section 78, along with penalties under other provisions of the Finance Act, 1994. The applicant, represented by a Chartered Accountant, argued that they had been engaged by their principal for activities falling under Business Auxiliary Services and had incurred reimbursable expenditures reimbursed by the principal. The Department sought to include these reimbursable expenditures in the taxable value of services received by the applicant under Rule 5(1) of the Service Tax (Determination of Value) Rules, 2006. The Chartered Accountant contended that Rule 5(1) had been declared ultra vires to Section 66 and 67 of the Finance Act, 1994, by the Hon'ble Delhi High Court in a previous judgment.

The Revenue's representative informed the Tribunal that the Department had filed a Special Leave Petition (SLP) against the Delhi High Court's judgment, but there was no information regarding any stay granted by the Supreme Court. After hearing both sides and examining the records, the Tribunal noted that the main issue in the case was the inclusion of reimbursable expenses under Rule 5(1) of the Service Tax (Determination of Value) Rules, 2006. The Tribunal observed that the said provision had indeed been struck down by the Delhi High Court as ultra vires to the relevant sections of the Finance Act, 1994. Consequently, the Tribunal found that the applicant had established a prima facie case for the total waiver of the dues adjudged. Therefore, all dues were waived, and the recovery was stayed during the pendency of the appeal. The Tribunal allowed the application for waiver as prayed for by the applicant.