2015 (6) TMI 958 - AT - Service Tax

Banking and financial services - valuation - inclusion of reimbursement of expenses - appellant contends that postage and telegraph and courier services are engaged by them for correspondence and they only claim the actual amount which has been paid by them to this service provider and also pay service tax to the service provider - Held that - Impugned order as well as the Adjudicating Authority s order seeks to rely upon Rule 5(i) of the Service Tax (Determination of Value) Rules, 2006 to include this amount as a taxable amount as a consideration for the services under the provisions of Section 67 of the Finance Act, 1994. This very identical issue of discharge of service tax liability of the reimbursement of the actual expenses was considered by the Hon ble High Court of Delhi in Intercontinental Consultants & Technocrats P. Ltd. 2012 (12) TMI 150 - DELHI HIGH COURT wherein the Lordship had struck down Rule 5(i) of Service Tax (Determination of Value) Rules, 2006 holding that these provisions are ultra vires of Section 67 of the Finance Act, 1994. - Since the provisions on which reliance was placed to confirm the service tax liability have been struck down, we do not find any merits in the arguments put forth by the ld. Departmental Representative. The impugned order is unsustainable and is liable to be set aside - Decided in favour of assessee.

Summary

Issues Involved:
Discharge of service tax liability on amount collected for postage and courier charges under banking and financial services.

Analysis:
The appeal was filed against Order-in-Appeal No. IPL/202 NSK/2008 dated 15.10.2008. The core issue revolved around the service tax liability concerning the amount collected by the appellant from customers for postage and courier charges related to their banking and financial services. The revenue contended that these charges were collected during the provision of their services and should be taxable. However, the appellant argued that they only claimed the actual amount paid to the service providers for postage, telegraph, and courier services, on which they also paid service tax. The Tribunal noted that the issue was no longer res integra as the impugned order and the Adjudicating Authority relied on Rule 5(i) of the Service Tax (Determination of Value) Rules, 2006.

The Tribunal referred to a judgment by the Hon'ble High Court of Delhi in Intercontinental Consultants & Technocrats P. Ltd. 2013 (29) STR 9 (Del) where Rule 5(i) was deemed ultra vires of Section 67 of the Finance Act, 1994. Since the provisions used to confirm the service tax liability had been struck down, the Tribunal found no merit in the arguments presented by the Departmental Representative. Consequently, the impugned order was deemed unsustainable and set aside, allowing the appeal with any consequential relief.

In conclusion, the Tribunal ruled in favor of the appellant, setting aside the impugned order and allowing the appeal with any consequential relief. The judgment highlighted the inapplicability of Rule 5(i) of the Service Tax (Determination of Value) Rules, 2006, following the precedent set by the Hon'ble High Court of Delhi, which rendered the provisions ultra vires of the Finance Act, 1994.