2019 (1) TMI 1661 - AT - Service Tax

Valuation - inclusion of reimbursable expenses in assessable value - whether the other expenses incurred by service receiver can be included in the assessable value for assessment of service tax of services provided by service provider? - HELD THAT - Supreme Court in the case of UNION OF INDIA AND ANR. VERSUS M/S. INTERCONTINENTAL CONSULTANTS AND TECHNOCRATS PVT. LTD. 2018 (3) TMI 357 - SUPREME COURT that provisions of Rule 5 of Service Tax (Determination of Value) Rules, 2006 were not in accordance with the provisions of Section 67 of Finance Act, 1994 and therefore, the reimbursable expenses paid to the service provider are not includable in the assessable value. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Whether other expenses incurred by the service receiver can be included in the assessable value for the assessment of service tax of services provided by the service provider.

Analysis:
The issue in the present appeal revolved around determining whether the other expenses incurred by the service receiver, in addition to the emoluments paid to the service provider, should be included in the assessable value for the assessment of service tax. The case involved the Central Industrial Security Force (CISF) providing security services to the Airport Authority of India. The revenue contended that expenses such as Medical Services, expenses on vehicles, Dog Squad, Stationery Expenses, Telephone Charges, and accommodation provided to CISF by the Airport Authority of India should be included in the assessable value. However, the appellant argued that except for medical expenses, all other expenses were directly incurred by the Airport Authority of India and not paid to CISF. The appellant relied on a ruling by the Hon’ble Supreme Court in a similar case and the decision of the Commissioner (Appeals) Allahabad, which held that such expenses cannot be included in the assessable value.

In the analysis, the Tribunal considered the submissions made by both sides and referred to the decision of the Hon’ble Delhi High Court in a similar case, which stated that reimbursable expenses paid to the service provider are not includable in the assessable value as per Rule 5 of Service Tax (Determination of Value) Rules, 2006. The Tribunal noted that the Hon’ble Supreme Court upheld the decision of the Hon’ble Delhi High Court, emphasizing that Section 67 of the Finance Act, 1994 only authorizes consideration received by the service provider for the assessment of service tax. Consequently, the Tribunal held that the impugned order, which sought to include additional expenses in the assessable value, was not sustainable.

Therefore, the Tribunal set aside the impugned order and allowed the appeal, ruling in favor of the appellant.