2014 (12) TMI 503 - AT - Service Tax

Waiver of pre-deposit - Rule 5(1) of Service Tax Valuation Rules - Re-imbursement of expenses in the value of taxable services for the purposes of levy of service tax - Whether the appellant is required to discharge Service Tax liability on an amount collected by them from the customers as to they being actual reimbursable expenses - Held that - valuation of the service provided by the appellant needs to be ascertained based upon the provisions of Section 66 & 67 of Finance Act, 1994 and if such taxable amount is not ascertainable, then the recourse has to be taken as per the provisions of Rule 5(1) of Service Tax Valuation Rules. In the case in hand, this is the precise issue. Hon ble High Court of Delhi in the case of M/s Intercontinental Consultants & Technocrafts Pvt.Ltd. 2012 (12) TMI 150 - DELHI HIGH COURT has struck down the said provision of Rule 5(1) of the Service Tax Valuation Rules which would indicate that there is no provision available with the Department as of now to re-work out or re-determine the value of the taxable service. Appellant has made out a prima facie case for waiver of the pre-deposit of the amounts involved. Accordingly, application for waiver of pre-deposit of amounts involved is allowed and recovery thereof stayed till the disposal of appeal. - Stay grantd.

Summary

Issues:
1. Waiver of pre-deposit of Service Tax liability, interest, and penalties.

Analysis:
The judgment revolves around a Stay Petition seeking waiver of pre-deposit of confirmed Service Tax liability, interest, and penalties. The adjudicating authority upheld the demand due to the appellant's failure to discharge the correct value of services, emphasizing the provisions of Rule 5(1) of Service Tax Valuation Rules. The authority concluded that the appellant's deductions were not valid as they did not act as a pure agent, lacking a contract agreement. The appellant argued citing a Delhi High Court ruling that expenses should not be included in the value under Rule 5(1).

The Tribunal considered both sides' arguments and examined the records. It deliberated on whether the appellant should pay Service Tax on collected amounts as reimbursable expenses. Referring to the Delhi High Court's decision, the Tribunal held that the valuation of services should align with Finance Act provisions. As Rule 5(1) was struck down, the Department lacked a basis to reassess the taxable value. The Department contended that previous Tribunal decisions supported including reimbursable expenses, but the Tribunal dismissed this argument due to the Delhi High Court's ruling.

The Tribunal noted subsequent Tribunal decisions citing the larger bench's view but highlighted the absence of mention of the Delhi High Court's judgment. Consequently, the Tribunal found in favor of the appellant, granting a prima facie case for pre-deposit waiver and staying recovery until appeal disposal. The judgment underscores the significance of legal precedent and the impact of higher court decisions on tax liability determinations.

This detailed analysis of the judgment highlights the key legal arguments, the application of relevant provisions, and the Tribunal's decision based on the Delhi High Court's ruling and the absence of contrary legal authority.