2017 (7) TMI 450 - AT - Service Tax

Valuation - Reimbursement expenses - reimbursements received from the service-recipient - includibility - business, auxiliary services - repair and maintenance service - Held that - In every service which is provided to the service recipient the contribution of the manpower always exist. Without the manpower no service can be provided. Therefore, the so-called reimbursable expenses are part and parcel of the gross value of the service. Therefore, the same is includible in the gross value of the service and chargeable to service tax - appeal dismissed - decided against appellant-

Summary

Issues:
- Appellant received reimbursement charges for services to a related party without discharging service tax
- Show cause notice issued, order-in-original confirmed demand
- Appeal filed before Commissioner (Appeals) challenging order-in-original
- Commissioner (Appeals) upheld order-in-original, except setting aside penalty
- Appellant aggrieved by impugned order, filed appeal before Appellate Tribunal CESTAT MUMBAI

Analysis:
The case involved the appellant receiving reimbursement charges for providing services to a related party without discharging service tax. A show cause notice was issued, leading to an order-in-original confirming the demand. The appellant then filed an appeal before the Commissioner (Appeals) challenging the order-in-original. The Commissioner (Appeals) upheld the order-in-original, except for setting aside the penalty imposed. Subsequently, the appellant, being aggrieved by the impugned order, filed an appeal before the Appellate Tribunal CESTAT MUMBAI.

During the proceedings, the appellant argued that the reimbursements received were actually expenditures reimbursed by the related party and thus should not be subject to service tax. The appellant relied on specific judgments to support their argument. On the other hand, the Assistant Commissioner representing the Revenue reiterated the findings of the impugned order, stating that the expenses in question were part of the gross value of services provided and therefore chargeable to service tax.

Upon careful consideration of the submissions from both sides and examining the records, the Tribunal found that the appellant provided business auxiliary services and management, maintenance, and repair services to the related party. The Tribunal noted that the expenses claimed as reimbursable were incurred through the appellant's manpower used in providing the services. The Tribunal concluded that these reimbursable expenses were integral to the gross value of the services provided and hence subject to service tax.

Regarding the judgments cited by the appellant, the Tribunal clarified that those judgments applied to cases where expenses were supposed to be borne by the service-recipient but were temporarily borne by the service-provider. In the present case, the expenses in question were meant to be borne by the service provider, and the service recipient was only concerned with the ultimate service provided. Therefore, the cited judgments were deemed irrelevant to the current case. Consequently, the Tribunal upheld the order-in-appeal and dismissed the appellant's appeal. The judgment was pronounced on 28/06/2017.