2017 (6) TMI 1144 - AT - Service Tax

Penalty u/s 78 - valuation - reimbursable expenses - extended period of limitation - Held that - this Tribunal in the case of Amit Sales 2016 (9) TMI 98 - CESTAT NEW DELHI has clearly held that the reimbursable expenses cannot be added in the assessable value of the C & F services. Extended period of limitation - Held that - there are no grounds stated in the SCN for invoking the provisions of proviso to Sub-section(1) of Section 73. Therefore, the said SCN is not sustainable for extended period. The matter remanded to the original authority to re-determine the service tax liability taking into consideration that the assessable value should not include reimbursable expenses during the entire period for determination of service tax liability and determine service tax liability within the normal period of limitation from the date of issue of the SCN - appeal allowed by way of remand.

Summary

Issues involved:
1. Liability of service tax on reimbursable expenses
2. Liability of service tax on packaging services
3. Liability of service tax on storage and warehousing services
4. Invocation of extended period for demand

Analysis:

Liability of service tax on reimbursable expenses:
The appeal was against an Order-in-Appeal passed by the Commissioner of Central Excise, Meerut, confirming a demand for service tax on reimbursable expenses. The appellants argued that service tax should not be levied on such expenses, citing relevant case law and a ruling by the Hon'ble High Court of Delhi. The Tribunal referred to a previous case and held that reimbursable expenses cannot be added to the assessable value for C & F services. The Tribunal also found that the show cause notice did not provide grounds for invoking the extended period for demand, rendering it unsustainable. Consequently, the matter was remanded to the original authority for redetermination of service tax liability, with a direction to exclude reimbursable expenses for the entire period.

Liability of service tax on packaging services and storage and warehousing services:
The issues of liability of service tax on packaging services and storage and warehousing services were raised in the show cause notice. The Commissioner (Appeals) allowed deductions for certain expenses up to a specific date. However, the Tribunal held that deductions for reimbursable expenses should be allowed for the entire period covered by the notice. The matter was remanded to the original authority for re-determination of service tax liability, emphasizing that assessable value should not include reimbursable expenses.

Invocation of extended period for demand:
The Tribunal found that there were no grounds stated in the show cause notice for invoking the provisions of the extended period for demand. As a result, the Tribunal held that the notice was not sustainable for the extended period and directed the original authority to determine the service tax liability within the normal period of limitation from the date of issue of the notice. The appeal was remanded to the original authority after setting aside the Order-in-Appeal, with instructions not to exceed the penalties sustained in the impugned order.