2015 (7) TMI 591 - AT - Service Tax

Valuation - Inclusion of reimbursable expenses - Inclusion of postage and other stationary expenditure - Held that - appellant herein is rendering services of a Share Transfer Agent and Registrar to an Issue under the Securities and Exchange Board of India (Registrar to an Issue and Share Transfer Agents) Rules, 1993 and the connected regulations. The said service came under the tax net for the first time on 01/05/2006. Therefore, the question of demanding any service tax on reimbursement of expenditure would not arise at all prior to 01.05.2006, even though the appellant might have paid service tax wrongly under the category of Business Auxiliary Service . Postage and other stationary expenditure, have been reimbursed on actual basis - service tax cannot be levied on an amount charged as tax since the same is not a consideration for rendering any service. Postage is an amount received by the postal department for transmission by post and cannot be considered as a consideration received by the person who is the sender of the postal article. Further, when the postage is recovered from the service receiver on actual basis by a service provider, he acts as a pure-agent and, therefore, the reimbursements made to a pure-agent is not includible in the value of taxable service rendered, as what is provided under Section 67 of the Finance Act, 1994 is only the consideration received for the value of services rendered. Same is the position with respect to the cost incurred towards stationary articles used for sending various items by post. Therefore, these reimbursements on actual basis cannot form the value of taxable service at all. Therefore, the service tax demand by including cost of such expenditure in the value of taxable service is clearly unsustainable in law. - impugned order is clearly unsustainable in law. Accordingly, we set aside the same - Decided in favour of assessee.

Summary

Issues Involved:
Service tax demand on reimbursement of expenses incurred by the appellant in the value of taxable services rendered; Penalties imposed under Sections 76 and 78 of the Finance Act, 1994.

Analysis:

1. Service Tax Demand on Reimbursement of Expenses:
- The appeal challenged an order confirming a service tax demand against the appellant for including the value of reimbursable expenses in taxable services rendered.
- The appellant, a Share Transfer Agent (STA) and Registrar to an Issue (RTI), contended that service tax was wrongly paid under 'Business Auxiliary Service' before being correctly paid under RTI/STA services.
- The appellant argued that expenses like postage and other additional expenses reimbursed by the company were not taxable, citing relevant case laws.
- The appellant relied on decisions stating that certain expenses incurred for rendering services should not be included in the taxable value of services.
- The appellant highlighted that the impugned demands should be set aside based on these arguments.

2. Legal Analysis of the Demand Periods:
- For the period before 01/05/2006, the appellant's services were not liable to service tax, thus questioning the demand for service tax on reimbursement of expenses before this date.
- Regarding the demand for the period after 01/05/2006, the Tribunal analyzed the nature of expenses like postage and stationary, concluding that they were in the nature of a duty/tax and not a consideration for services rendered.
- The Tribunal emphasized that reimbursements made to a pure-agent were not includible in the value of taxable service rendered, as per Section 67 of the Finance Act, 1994.
- The Tribunal also noted that Rule 5(1) of the Service Tax (Determination of Value) Rules, 2006 had been declared ultra vires by the Delhi High Court, setting aside any authority for subjecting reimbursement of expenses to service tax.

3. Decision and Conclusion:
- The Tribunal found the impugned order unsustainable in law and set it aside, allowing the appeal with consequential relief, if any, in accordance with the law.
- The judgment highlighted the legal principles regarding the inclusion of reimbursable expenses in the taxable value of services and the impact of relevant case laws and rules on the service tax demand.
- The Tribunal's decision was based on a detailed analysis of the legal provisions, case laws, and the nature of expenses involved, ensuring a fair and comprehensive resolution of the appeal.