2009 (1) TMI 39 - AT - Service Tax

Whether the amount paid by appellant (LIC) to 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. Whether club expenses and gratuity are to be included in the gross value of taxable service.

Analysis:
The appellant filed appeals against an Order in Appeal related to the demand of service tax on club expenses and gratuity. The main issue in these appeals was whether the amounts paid to club agents for office and telephone expenses, as well as gratuity, should be part of the taxable service value. The Commissioner (Appeals) noted the lack of documentary evidence from the appellant regarding reimbursements to agents for expenses like traveling, boarding, or lodging. The appellant's Advocate cited a Board Circular stating that reimbursable out-of-pocket expenses, if supported by evidence, are not subject to service tax. The Advocate requested an opportunity to provide evidence on this matter. Additionally, the Advocate argued that the payment of gratuity to agents was part of a Welfare Scheme of LIC, which was not considered by the original authority or addressed by the Commissioner (Appeals).

The Tribunal found that the appellants should be allowed to present evidence as per the Board's Circular to ensure justice. Therefore, the impugned order was set aside, and the case was remanded to the adjudicating authority for reconsideration. The authority was directed to review the appellant's submissions regarding gratuity payment in compliance with the law and to examine evidence related to reimbursable pocket expenses, as outlined in the Board Circular of 2004. Consequently, all the appeals were allowed through remand, providing the appellants with an opportunity to present necessary evidence for a fair assessment of the tax liability.