2015 (10) TMI 2407 - AT - Service Tax

Valuation Demand of service tax on reimbursable/out of pocket expenses incurred by appellant while rendering services to various service radicands Held That - Issue is no more res integra as demand on reimbursable services cannot now survive in light of case of Enter Continental Consultants and Technocrats pr. Ltd. vs. Union of Indian 2012 (12) TMI 150 - DELHI HIGH COURT which struck down the provisions of roll find (1) of service tax valuation rolls Impugned order set aside Decided in favour of assessee.

Summary

Issues Involved:
Interpretation of service tax liability on reimbursable expenses incurred by the appellant while providing consulting engineer services.

Detailed Analysis:

Issue 1: Service Tax Liability on Reimbursable Expenses
The appellant provided consulting engineer services to clients and recovered actual expenses like traveling, accommodation, and office rent from the service recipients. The revenue claimed that service tax liability should be discharged on these reimbursable expenses. Both the adjudicating authority and the first appellate authority ruled against the appellant, imposing service tax liability, interest, and penalty. The appellant argued that the demand on reimbursable expenses should not be subject to service tax based on the judgment of the Hon'ble High Court of Delhi in a specific case. The learned chartered accountant contended that the demand for service tax liability was only on reimbursable expenses incurred by the appellant, which should not be taxed. The departmental representative supported the findings of the lower authorities.

Issue 2: Judicial Precedent and Legal Interpretation
After considering the submissions and case records, the appellate tribunal found that the service tax demand was indeed related to reimbursable expenses incurred by the appellant for deputing professionals, supporting staff, transportation charges, office rent, and accommodation expenses. The tribunal noted that the issue was squarely covered by the judgment of the Hon'ble High Court of Delhi in a specific case. The tribunal reproduced relevant paragraphs from the judgment, emphasizing that the rule requiring inclusion of all expenditure or costs incurred by the service provider for charging service tax went beyond the mandate of the relevant sections. The tribunal concluded that the impugned orders were unsustainable based on the authoritative judicial pronouncement and set them aside, allowing the appeals with consequential relief.

In summary, the appellate tribunal ruled in favor of the appellant, holding that the demand for service tax on reimbursable expenses incurred while providing consulting engineer services was unsustainable based on the interpretation of relevant legal provisions and the precedent set by the Hon'ble High Court of Delhi. The tribunal set aside the impugned orders and allowed the appeals with consequential relief.