2019 (2) TMI 2002 - AT - Service Tax

Valuation - inclusion of reimbursable expenses paid by the service recipient to appellant in the form of wages to labourers supplied by the appellants in the assessable value - July, 2012 to March, 2014 - HELD THAT - As per facts on record, appellant provided Manpower Recruitment or Supply Agency Services and have paid service tax on the component excluding the wages paid to the labourers. It was the opinion of Revenue that wages paid to the labourers should have been included in the assessable value. Therefore, proceedings were initiated and culminated into passing of the impugned Order-in-Appeal wherein the learned Commissioner (Appeals) has upheld the Order-in-Original wherein the Original Authority has relied on the provisions of Rule 5 of the Service Tax Valuation Rules, 2006 to arrive at the conclusion that wages reimbursed by service recipient to the appellant were liable to be included in the assessable value. For the period involved in the present appeal is prior to 14 May, 2015 therefore by relying on the ruling of the Hon ble Supreme Court of India in the case of Intercontinental Consultants Technocrats Pvt. Ltd. 2018 (3) TMI 357 - SUPREME COURT , it is held that since prior to 14 May, 2015 reimbursable expenses were not includible in the assessable value, impugned order is not sustainable. Appeal allowed - decided in favor of appellant.

Summary

Issues:
Whether reimbursable expenses paid by the service recipient to the appellant in the form of wages to labourers supplied by the appellants are liable to be included in the assessable value for the assessment of service tax for the period from July, 2012 to March, 2014.

Analysis:
The case involved a dispute regarding the inclusion of reimbursable expenses, specifically wages paid to labourers, in the assessable value for service tax assessment from July 2012 to March 2014. The appellant, a provider of 'Manpower Recruitment or Supply Agency Services,' had paid service tax excluding the wages of the labourers. The Revenue contended that these wages should have been included in the assessable value, leading to the initiation of proceedings. The Order-in-Appeal upheld the Order-in-Original, which relied on Rule 5 of the Service Tax Valuation Rules, 2006 to include the reimbursed wages in the assessable value.

The appellant argued, citing a ruling by the Hon'ble Supreme Court in the case of Intercontinental Consultants & Technocrats Pvt. Ltd., that reimbursable expenses could only be included in the assessable value from 14 May 2015 onwards. The Revenue, however, supported the impugned Order-in-Appeal. Considering the period in question was prior to 14 May 2015, the Tribunal referred to the Supreme Court's ruling and determined that reimbursable expenses were not includible in the assessable value before that date. Consequently, the Tribunal found the impugned order unsustainable and set it aside, ultimately allowing the appeal.

This judgment clarifies the treatment of reimbursable expenses in the assessable value for service tax assessment, aligning with the Supreme Court's interpretation that such expenses were not to be included before 14 May 2015. The ruling provides important guidance on the application of rules and precedents in determining tax liabilities related to reimbursable expenses in service transactions.