2019 (2) TMI 1838 - AT - Service Tax

Valuation - Supply of man power services - inclusion of components like, reimbursement of actual wages payable, PF contribution, EPF contribution and contract liaison charges in assessable value - HELD THAT - The Ld. Consultant is correct in his assertion that both the lower authorities have not considered the plea of reimbursable expenses only because necessary documentary evidence has not been produced. This being so and also considering the request of the Ld. Consultant, in the interest of justice, we remand the matter back for de novo consideration. In such de novo consideration, appellant shall produce all the documentary evidence before the original authority who shall also give them sufficient opportunity to present their case. Penalty - HELD THAT - The amount of ₹ 20,16,669/- had been paid by them proximate to the investigation by D.R.I. vide challan dt. 31.3.2010 relating to the period 30.06.2005 to 30.11.2009. It is also pertinent to note that the issue concerning reimbursable expenses was very much in dispute during the impugned period. This being so, there is a case for invocation of Section 80 ibid. Appeal is partly allowed on above terms by way of remand.

Summary

Issues involved:
1. Service tax liability under Supply of Manpower Agency Service.
2. Denial of benefit of reimbursable expenditure.
3. Penalty imposed under Section 78 of the Finance Act, 1994.

Analysis:

Issue 1: Service tax liability under Supply of Manpower Agency Service
The appellant, a proprietary concern providing manpower services, was in dispute with the Department regarding the service tax liability on the supply of manpower to a specific company. The Department contended that the taxable value should have included components such as reimbursement of actual wages, PF contribution, EPF contribution, and contract liaison charges. The original authority and the Commissioner (Appeals) denied the benefit of reimbursable expenditure due to lack of evidence provided by the appellants. The matter was brought before the Tribunal for consideration.

Issue 2: Denial of benefit of reimbursable expenditure
During the hearing, the appellant's consultant highlighted that they had received service charges of 9% as their income, and other components like ESI contribution were reimbursed by the client company. The consultant acknowledged the lack of documentary evidence presented before the lower authorities and requested a remand to produce the required proof. The Tribunal observed that the lower authorities had not considered the plea of reimbursable expenses due to the absence of necessary documentary evidence. In the interest of justice, the matter was remanded back for a fresh consideration, directing the appellant to provide all documentary evidence before the original authority.

Issue 3: Penalty imposed under Section 78 of the Finance Act, 1994
Regarding the penalty imposed under Section 78 of the Finance Act, 1994, the Tribunal noted that a significant amount had been paid by the appellant during the investigation period. Considering the disputed nature of the reimbursable expenses during that period, the Tribunal referred to a judgment of the jurisdictional High Court and invoked Section 80 of the Finance Act, 1994. Consequently, the penalties imposed by the original authority and upheld in the impugned order were set aside, and the appeal was partly allowed on the terms of remand for further consideration.

This detailed analysis of the judgment addresses the issues of service tax liability, denial of reimbursable expenditure benefit, and the penalty imposed under Section 78 of the Finance Act, 1994, providing a comprehensive understanding of the Tribunal's decision and the reasons behind it.