2015 (10) TMI 2358 - AT - Service Tax

Valuation - Reimbursement Expenses - Whether reimbursement of actual expenses undertaken by service provider are required to be includable in assessable value of services so provided by them or not? - Revenue contends that fact of expenses actually incurred requires verification and it includes reimbursement of incentives paid to workers as well which cannot be held as expenses incurred in behalf of service recipient - Held That - Legal position is clear that expenses actually incurred and reimbursed by service recipient are not to form part of assessable value of services - Fact of the matter needs to be seen whether receipts by appellants were on account of reimbursement of actual expenses or not - Matter remanded back.

Summary

Issues:
Whether reimbursement of actual expenses incurred by the service provider should be included in the assessable value of services provided.

Analysis:
The judgment by the Appellate Tribunal CESTAT Bangalore dealt with two appeals arising from the same impugned order, both concerning the inclusion of reimbursement expenses in the assessable value of services provided. The Commissioner had held that all reimbursement expenses should be included in the value of services based on Rule 5(1) of the Service Tax (Determination of Value) Rules of 2006.

The Tribunal noted that Rule 5(1) had been struck down by the Hon'ble Delhi High Court in a previous case, establishing that reimbursable expenses need not be included in the assessable value of services. Citing relevant precedents such as the decision in Link Intime India Pvt. Ltd. vs. CCE and Madhu Enterprises vs. CCE, the Tribunal reaffirmed that such expenses should not be part of the assessable value.

However, the Revenue raised concerns about verifying whether the expenses were actually incurred by the appellant and if the receipts were reimbursement for the same. Additionally, the issue of reimbursement of incentives paid to workers was brought up, emphasizing that these incentives should not be considered expenses incurred on behalf of the service recipient.

The Tribunal observed that the adjudicating authority had not discussed the detailed accounts provided by the appellant. While confirming that reimbursed expenses should not be included in the assessable value, the Tribunal ordered a remand to the original adjudicating authority to verify if the receipts were indeed reimbursement of actual expenses. The appellant was also directed to address the issue of reimbursement of incentives during the remand process. Consequently, both appeals were allowed by way of remand for further examination.