2016 (12) TMI 857 - AT - Service Tax

Non-payment of tax during the period April 2004 to March 2006 - the appellant had collected the service tax component from their customers and not deposited the same with the Government of India - Held that - The appellant having collected service tax from their customers was duty bound to deposit the same with the Government of India. Having not done so, they have erred on the wrong side of law - the appellant should have been more diligent in depositing the service tax liability collected by them from their clients, having undergone identical investigation from the department. In view of the above we do not find any merits in the arguments put forth by the Learned Counsel that the service tax liability having been discharged, penalties should be set aside. Error in the calculation of tax liability - Held that - when confronted with investigation the appellants have filed service tax returns and which according to them was correct. But subsequently, after a period of almost two years, they cannot revise the returns stating that they have committed an error in the earlier returns. Service tax liability on the amount received as reimbursements for the food of the employees - Held that - while conducting the event management, transportation charges, we find from the debit notes that these amounts are collected at actual and there is no markup. The agreements which was produced before us indicate reimbursement of the amounts at actual for the food and other expenses incurred by the appellant for conducting the event management - the issue now stands squarely covered by the decision of the Hon ble High Court of Delhi in the case of Intercontinental Consultants & Technocrats Pvt. Ltd 2012 (12) TMI 150 - DELHI HIGH COURT , where it was held that expenditure or costs incurred by the service provider in the course of providing the taxable service can never be considered as part of gross amount charged by the service provider for the service provided and reimbursement of expenditure for air travel, hotel stay, etc. may also lead to double taxation - Accordingly, we set aside the demand of service tax liability along with interest thereof and the amount of penalty imposed on them on this issue. Appeal disposed off - decided partly in favor of appellant.

Summary

Issues:
- Failure to file returns and pay service tax liability for the period April 2004 to March 2006.
- Demand of service tax liability on amounts not included in the valuation for event management services.
- Appellant's liability for penalty and interest.

Analysis:

Issue 1: Failure to file returns and pay service tax liability
The appellant failed to file returns and pay service tax for the period April 2004 to March 2006. The investigation revealed discrepancies, leading to the issuance of a show cause notice demanding service tax liability. The appellant argued that the non-payment was due to financial crisis and that they paid the liability before the notice was issued. However, the tribunal held that collecting service tax from customers but not depositing it with the government was a violation of the law. The tribunal noted the appellant's past non-compliance and upheld the penalties imposed.

Issue 2: Demand of service tax liability on unvalued amounts
The appellant contested the demand related to amounts reimbursed through debit notes for expenses like food, transportation, and event management. The appellant argued that these reimbursements should not be considered part of the gross amount charged for services, citing legal precedents. The tribunal agreed with the appellant, referencing judgments that expenses incurred in providing taxable services should not be included in the service provider's gross amount. Consequently, the demand for service tax liability on these reimbursements was set aside.

Issue 3: Appellant's liability for penalty and interest
The tribunal rejected the appellant's argument regarding errors in tax liability calculations and revising returns after investigation. The appellant's attempt to revise returns after two years was dismissed, and the tribunal upheld the penalties. However, regarding the reimbursement of expenses for food and transportation, the tribunal relied on legal precedents to set aside the demand for service tax liability, interest, and penalties. The tribunal disposed of the appeals accordingly, considering the arguments and legal principles presented during the proceedings.