2017 (4) TMI 389 - AT - Service Tax

Non-payment/short payment of service tax - reimbursable expenses on actual basis relating to travel and accommodation of some of their employees - Held that - similar set of facts were subject matter of decision in the case of Engineers India Ltd. 2016 (12) TMI 1530 CESTAT, New Delhi, where it was held that the provisions of Section 5 (1) as ultra virus and accordingly, held that reimbursable expenditure cannot form part of taxable value in terms of Section 67 - demand set aside. Utilisation of CENVAT credit to pay service tax liability - Held that - when the appellant have discharged service tax on eligible input service, they are entitled for credit and for further utilization for discharging duty liability on taxable output services. This can be verified by the jurisdictional authorities, based on the documents produced before him - appeal allowed by way of remand. Appeal allowed - decided in favor of assessee.

Summary

Issues:
1. Non-payment/short payment of service tax for various taxable services rendered by the appellant.
2. Service tax liability related to reimbursable expenditure for consulting engineer service.
3. Denial of cenvat credit for discharging tax liability.

Analysis:

Issue 1: Non-payment/short payment of service tax
The appeal challenges the order of the Commissioner (Appeals) regarding the non-payment or short payment of service tax by the appellant for various taxable services provided. The appellant contests two specific issues in this appeal.

Issue 2: Service tax liability on reimbursable expenditure
The primary contention revolves around the service tax liability attributed to reimbursable expenses incurred by the appellant in connection with providing consulting engineer services. The appellant argues that expenses reimbursed on an actual basis should not be included in the taxable value. Citing a precedent from the Hon'ble High Court, the appellant asserts that such reimbursable expenses cannot form part of the taxable value.

Issue 3: Denial of cenvat credit
Regarding the denial of cenvat credit for discharging the tax liability, the appellant clarifies that the lower authorities based their decision on the improper reflection of credit details in the ST-3 Returns. The appellant rectified the error by filing a revised return, emphasizing that the credit, which is eligible otherwise, should not be denied due to a bona fide mistake.

The Tribunal, after considering the arguments presented by both sides, ruled in favor of the appellant on both issues. On the first issue, the Tribunal noted the decision of the Hon'ble Delhi High Court and various Tribunal cases, which established that reimbursable expenses should not be part of the taxable value. Consequently, the impugned order was deemed unsustainable on this matter.

Regarding the entitlement to cenvat credit, the Tribunal found that the original and appellate orders lacked clear reasons for disallowing the appellant from utilizing the credit. Emphasizing the appellant's right to credit for eligible input services, the Tribunal directed the jurisdictional authorities to verify the documents provided by the appellant for utilizing the credit to discharge duty liability on taxable output services.

In conclusion, the Tribunal allowed the appeal based on the arguments presented and disposed of the miscellaneous application as well.