2017 (3) TMI 1460 - AT - Service Tax

Valuation - includability - out of pocket expenses incurred by the appellant and reimbursed by the service recipient - Held that - It is fairly well settled that service tax is liable only on the value of consideration received for providing the services. Out of pocket expenses which are in the nature of the conveyance, travel, mobile expenses etc. cannot be included for purpose of levy of service tax - issue needs to be remanded to the original adjudicating authority who is directed to consider the documents which will be submitted by the appellant and extend the benefit of deduction of out of pocket expenses after verification of the original documents - appeal allowed by way of remand.

Summary

Issues:
1. Dispute over service tax demand on out of pocket expenses reimbursed by the service recipient.
2. Whether out of pocket expenses can be included for the payment of service tax.
3. Applicability of deduction on out of pocket expenses in service tax calculation.

Analysis:

1. The appeal was filed against the order of the Commissioner (A) Delhi regarding a service tax demand of &8377;1,09,257 for the period July 2005 to September 2005. The dispute arose from the reimbursement of out of pocket expenses by the service recipient to the appellant, a management consultant. The original authority confirmed the service tax demand, but the Commissioner (A) found that the appellant failed to provide sufficient evidence to prove the actual incurrence of these expenses. The Commissioner directed the original adjudicating authority to verify the service tax liability on the claimed out of pocket expenses. The Tribunal noted the need for verification of original documents and remanded the issue back to the original adjudicating authority for further examination.

2. The central issue revolved around whether out of pocket expenses, such as conveyance, travel, and mobile expenses, could be included in the calculation for service tax payment. The Tribunal emphasized that service tax is levied only on the consideration received for services provided, excluding out of pocket expenses. The appellant had submitted bills as evidence of these expenses, leading to the conclusion that such expenses should not be considered for service tax calculation. The Tribunal directed the original adjudicating authority to review the documents provided by the appellant and decide on the deduction of out of pocket expenses after thorough verification.

3. The Tribunal acknowledged the settled legal position that out of pocket expenses cannot be incurred for the payment of service tax. The appellant's representative argued for the allowance of deduction based on the documents already submitted. The Tribunal, after considering the submissions from both sides, decided to remand the issue to the original adjudicating authority for a detailed examination. The authority was instructed to verify the documents, address the specific points raised by the Commissioner (A), and complete the review within two months from the date of the Tribunal's order. The appellant was granted the opportunity to submit additional evidence as per legal provisions.

In conclusion, the Tribunal allowed the appeal by way of remand, emphasizing the need for a thorough verification of documents related to out of pocket expenses before determining the service tax liability.