2015 (12) TMI 160 - AT - Service Tax

Demand of differential tax - Security deposit - inclusion of reimbursable expenses - Held that - Decision in the case of Security Agencies Association (2013 (2) TMI 356 - KERALA HIGH COURT) as relied upon by the learned Authorised Representative for the Revenue is in the context of challenging the vires of Service tax under the category of Security service. There is some force in the submission of the Appellant that the Hon ble Delhi High Court in the case of Intercontinental (2012 (12) TMI 150 - DELHI HIGH COURT) held that the reimbursable expenses would not be included in the taxable value as per the Valuation Rules. In our considered view, the Adjudicating authority should examine the demand of balance amount of tax alongwith interest and penalty in the light of the decisions placed by the Appellant and the learned Authorised Representative on behalf of the Revenue, in the interest of justice. - Appeal disposed of.

Summary

Issues:
1. Dispute over the demand of tax for security services.
2. Applicability of deductions for reimbursable expenses, salary, P.F., E.S.I.
3. Interpretation of relevant case laws by the Adjudicating authority.
4. Examination of tax demand in light of conflicting decisions.
5. Directions for re-examination of the tax demand by the Adjudicating authority.

Analysis:
The judgment by the Appellate Tribunal CESTAT Ahmedabad pertains to a case where the Appellants contested a tax demand for security services. The Appellants had paid a significant amount of tax, but a dispute arose regarding the balance amount of tax, interest, and penalties. The Appellants argued that certain deductions, including reimbursable expenses, salary, P.F., and E.S.I., should have been allowed by the Adjudicating authority. They cited a decision by the Hon'ble Delhi High Court to support their claim that reimbursable expenses should not be included in the taxable value as per Valuation Rules.

On the other hand, the learned Authorised Representative for the Revenue relied on a decision by the Hon'ble Kerala High Court in a similar case, where deductions were disallowed. The Adjudicating authority had provided detailed findings for disallowing the deductions, leading to a conflicting interpretation of case laws. The Tribunal acknowledged the differing perspectives presented by both parties and emphasized the need for a thorough examination of the tax demand in light of the decisions cited.

The Tribunal found merit in the Appellant's argument and directed the Adjudicating authority to re-examine the demand for the balance amount of tax, interest, and penalties. The Appellants were instructed to cooperate with the Adjudicating authority during this process. It was emphasized that the Adjudicating authority must provide a proper opportunity for a hearing before making a decision. Ultimately, the appeal filed by the Appellant was disposed of with these directions, ensuring a fair and just reconsideration of the tax demand.