2016 (8) TMI 14 - AT - Service Tax

Valuation - inclusion of value towards reimbursement of expenses - extended period of limitation - whether certain elements like freight charges and other expenses reimbursed by the principal to the appellants are to be included in the value of taxable service of C & F or not? - Held that - We have found enough truth and justification in the pleadings of the appellants that the demands under consideration are time barred, when the subject show-cause notices were issued after the expiry of one year from the relevant date. Consequently, the lower authorities orders in these two appeal cases are held to be non-sustainable and the subject demands are held as time barred on the face of the provisions of Section 73 of the Finance Act, 1994. In other words, the show-cause notices issued to these appellants do not fulfil the criteria provided in Section 73(4) of the Finance Act, 1994. The facts in respect of these two appellants do not come within the mischief of provisions of Section 73(4) of the Finance Act, 1994. When we have held above that subject demands are time barred, we are not further discussing the issue of liability of service tax on the amounts categorised as reimbursable expenses by the appellants and whether these reimbursable expenses have to be treated as part of value of taxable service of C & F Agency service. Demand set aside - Decided in favor of assessee.

Summary

Issues: Determination of whether certain elements like freight charges and other expenses reimbursed by the principal to the appellants are to be included in the value of taxable service of C & F or not.

Analysis:
1. Time Barred Demands: The appellants, M/s. Raja s Enterprises and M/s. Rajvinayaka Pharmaceuticals, contended that the show-cause notices issued beyond one year from the relevant date are time-barred under Section 73 of the Finance Act. They cited the Hon'ble Madras High Court's decision in CST vs. Sangamitra Services Agency to support their argument. The appellants provided certificates from clients to prove that expense reimbursements were not part of the taxable service. The Revenue, represented by Shri Parashiva Murthy, argued that the expenses should be included in the taxable service. However, the tribunal found that there was no evidence of fraud, collusion, wilful misstatement, or contravention of provisions to evade service tax. Therefore, the demands were held as time-barred and not sustainable under Section 73(4) of the Finance Act.

2. Reimbursable Expenses: The Revenue claimed that the expenses reimbursed to the appellants were part of the C & F Agent's service and should be included in the taxable value. They relied on previous decisions like M/s. Shri Bhagavathy Traders vs. CCE, Cochin and CESTAT Delhi's decision in CCE, Chandigarh vs. Team S & S. However, the appellants argued that the reimbursable expenses were not taxable as per the Hon'ble Madras High Court's decision and CESTAT Bangalore's decision in the case of Sri Sastha Agencies Pvt. Ltd. The tribunal agreed with the appellants, stating that the demands were time-barred, and did not delve further into the issue of the liability of service tax on reimbursable expenses.

3. Conclusion: The tribunal allowed both appeals, considering the demands as time-barred under Section 73 of the Finance Act, 1994. The orders of the lower authorities were deemed non-sustainable, and the demands were held to be time-barred. The tribunal did not address the issue of the liability of service tax on reimbursable expenses due to the time-barred nature of the demands. The consequential relief, if any, was granted to the appellants.