2007 (10) TMI 135 - AT - Service Tax

Service tax not leviable on the payments received by appellant from ICICI Bank by way of reimbursements of expenses - reimbursements of actual expenses are not subjected to tax - differential tax raised by the Commissioner in respect of Business Auxiliary Service rendered to Bank is not sustainable

Summary

Issues:
1. Challenge against demand of service tax on Business Auxiliary Service.
2. Penalties imposed under various provisions of the Finance Act, 1994.
3. Valuation dispute regarding reimbursements received from the bank.
4. Applicability of the extended period of limitation.

Analysis:

Issue 1:
The appellants contested a demand of service tax on Business Auxiliary Service for the period July '03 to March '05, confirmed by the Commissioner of Service Tax, Chennai. Additionally, a similar demand for the period 2005-06 was also challenged. The appellants were registered as providers of Business Auxiliary Service and voluntarily paid service tax. The service provided to ICICI Bank fell within the ambit of Business Auxiliary Service as defined under Section 65(19) of the Finance Act, 1994.

Issue 2:
Penalties were imposed on the appellants under various provisions of the Finance Act, 1994. The show cause notices invoked the extended period of limitation under the proviso to Section 73(1) on the ground of "suppression of facts with intent to evade service tax." The appellants contested the proposals in the show cause notices, leading to adjudication by the Commissioner.

Issue 3:
A valuation dispute arose regarding whether reimbursements received by the appellants from the bank, including salaries and infrastructural expenses, should be included in the taxable value of Business Auxiliary Service for service tax payment. The Tribunal examined relevant case laws and circulars to determine that reimbursements of expenses were not subject to service tax, supporting the appellants' contention.

Issue 4:
The question of whether the extended period of limitation was invocable in this case was considered. However, based on the finding that service tax was not leviable on reimbursements received by the appellants, the Tribunal concluded that the demand of differential service tax could not be sustained. Consequently, the impugned orders were set aside, and both appeals were allowed, disposing of the stay application as well.

This detailed analysis of the judgment from the Appellate Tribunal CESTAT, Chennai, provides a comprehensive understanding of the issues involved, the arguments presented, and the final decision rendered by the Tribunal.