2009 (1) TMI 35 - AT - Service Tax

Whether the amount paid by appellant(LIC) to the club agents in the name of club expenses and gratuity have to be included in the gross value of taxable service - original authority did not consider that payment of gratuity was under Welfare Scheme of LIC - appellants should be given an opportunity to produce evidence in terms of the Circular F.No.246/01/2002-CX-4 where it is clarified that out of pocket expenses which are reimbursable on actual basis will not be subject to tax - case remanded

Summary

Issues:
1. Inclusion of amount paid to club agents in the gross value of taxable service.
2. Tax demand related to payment of gratuity to agents.

Analysis:
The judgment by the Appellate Tribunal CESTAT NEW DELHI involved appeals arising from a common Order in Appeal passed by the Commissioner (Appeals), Jaipur. The primary issue revolved around whether the amount paid by the appellant to club agents for club expenses and gratuity should be included in the gross value of taxable service. The Commissioner (Appeals) had noted the lack of documentary evidence from the appellant to substantiate the reimbursement of expenses to their agents for traveling, boarding, or lodging. However, the appellant's Advocate referenced a Board Circular stating that out-of-pocket expenses reimbursed on an actual basis, such as traveling, boarding, and lodging, would not be subject to service tax if certain conditions were met.

During the proceedings, the Advocate did not dispute the requirement for evidence of reimbursable pocket expenses on an actual basis. Instead, the Advocate requested an opportunity to present such evidence. Additionally, it was highlighted that the adjudicating authority had upheld a tax demand concerning the payment of gratuity to agents, which the Advocate argued was part of a Welfare Scheme of LIC. Notably, the Commissioner (Appeals) had not provided any findings on this specific issue.

In consideration of the arguments presented and to ensure justice, the Appellate Tribunal decided to allow the appeals by way of remand. The Tribunal directed that the impugned order be set aside, and the matter be sent back to the adjudicating authority for further examination. The adjudicating authority was instructed to consider the Advocate's submissions on the payment of gratuity and to assess the evidence regarding reimbursable pocket expenses in accordance with the Board Circular dated 9.2.2004. This decision aimed to provide the appellants with an opportunity to produce the necessary evidence and have their case reviewed based on the relevant legal provisions and circulars.

Overall, the judgment focused on ensuring procedural fairness and adherence to the applicable legal guidelines regarding the inclusion of payments to agents in the taxable service value and the tax implications related to gratuity payments, emphasizing the importance of substantiating expenses and complying with the conditions outlined in the relevant circulars.