2017 (1) TMI 501 - AT - Service Tax

Short payment of tax - Management Consultancy Services - classification of services - Held that - the services rendered by the appellant may be classifiable under Public Relation Services from the date of their application for registration, this by itself does not mean the services not covered under any other taxable service earlier. The learned Commissioner (Appeals) put the responsibility of classification only on the appellant without giving his finding on the claim made by the appellants - the matter needs reconsideration. Non-inclusion of reimbursable expenditures in taxable value - Held that - the appellants have submitted sample documents of invoices with corroborative supportive entries in their account to state that various expenses like conveyance, photocopying, courier, fax, telephone charges etc. were claimed as reimbursable expenditure on actual basis, with supporting evidence of each, in terms of a contract with the clients - these aspects requires verification with documentary support submitted by the appellant. Appeal allowed by way of remand.

Summary

Issues:
1. Classification of services rendered by the appellant.
2. Inclusion of reimbursable expenditures in taxable value.
3. Time bar for the demand.

Classification of services rendered by the appellant:
The appeal challenged an order confirming a service tax demand against the appellants for the period 01/10/2002 to 01/03/2006. The appellants argued that they were providing services under the category of Public Relation Service, not Management Consultancy Service as classified. The Commissioner (Appeals) did not give a clear finding on this issue, stating that the responsibility of classification rested on the appellant. The tribunal noted the lack of a proper conclusion on this crucial claim and emphasized the importance of correctly classifying the services to determine tax liability and the treatment of reimbursable expenditures. The tribunal found the impugned order lacking in a detailed examination of this issue.

Inclusion of reimbursable expenditures in taxable value:
The appellants contended that the short payment of tax was due to reimbursable expenditures like incidental charges, translation works, telephone service, photocopying, etc., which should not be included in the gross value under Section 67 of the Finance Act, 1994. They provided sample documents and supporting evidence to show that these expenses were claimed as reimbursable based on contracts with clients. The tribunal acknowledged the legal principle of excluding reimbursable expenditures from taxable value, citing relevant case laws. It highlighted the need for verification of the documentary evidence submitted by the appellant to support their claim.

Time bar for the demand:
The appellants raised the issue of the demand being barred by limitation, arguing that the classification and taxability of reimbursable expenditures were subject to interpretation and dispute, without any allegations of fraud or willful misstatement. The tribunal, while remanding the matter back to the Original Authority for a fresh decision on all issues, directed the Original Authority to also examine the aspect of time bar as pleaded by the appellant. The tribunal allowed the appeal by way of remand, granting the appellant an opportunity to present their case adequately in the proceedings.