2017 (9) TMI 90 - AT - Service Tax

Valuation of services - reimbursement of expenses - includibility - appellant is in the business of providing services as Recovery Agent to various nationalized banks for the past many years - Held that - the excludability of any expenses claimed to be reimbursed depends on the facts and circumstances of each case and the terms of the agreement relevant to the said case - In the present appeal, the appellant categorically claimed that in terms of the agreement with client banks, they are incurring various expenses during the course of providing service as recovery agent. These expenses were reimbursed to them on actual basis. This aspect can be verified in terms of the agreement, documents/invoices supporting the claim of the appellant - matter on remand. Time limitation - the period involved is 1.5.2006 to 31.3.2009 and the notice was issued on 8.10.2010 - Held that - the appellants maintained records of all the expenses and the present demand was based on such records. In such situation, the demand cannot be invoked by alleging willful misstatement, fraud and intention to evade payment of tax - the extended period was invoked on the ground that the information was not disclosed to the Department. When there is a bonafdide doubt based on the interpretation of the legal provisions, the question of suppression and willful misstatement cannot be sustained - appeal allowed. Appeal allowed in part and part matter on remand.

Summary

Issues:
Valuation of taxable services provided by the appellant, question of limitation.

Valuation of Taxable Services:
The appellant, a recovery agent for nationalized banks, claimed that certain expenses like parking charges, security arrangements, insurance premiums, etc., were reimbursed by the banks based on their agreement and should not be included in the service tax valuation. The disagreement between the members of the Division Bench centered on whether these reimbursable expenses should be excluded from the taxable service value. The Tribunal noted that the decision in Bhagvathy Traders did not set a precedent for disallowing such expenses and emphasized that the excludability of expenses depends on the specific circumstances of each case and the terms of the agreement. The Tribunal also highlighted the relevance of verifying the agreement and supporting documents to determine the validity of the appellant's claim regarding the reimbursement of expenses.

Question of Limitation:
The period in question for the demand of service tax was from 1.5.2006 to 31.3.2009, with a notice issued on 8.10.2010. The Tribunal observed that the issue of including or excluding expenses in the service valuation had been a subject of various litigations, including references to the Larger Bench of the Tribunal and a judgment by the Delhi High Court. The Tribunal noted that the demand for service tax was based on records maintained by the appellant and that the extended period of limitation was invoked due to alleged non-disclosure of information to the Department. However, the Tribunal concluded that in the absence of willful misstatement, fraud, or intent to evade tax, the extended period of limitation could not be sustained. The Tribunal highlighted that when there is a genuine doubt based on legal interpretation, allegations of suppression and willful misstatement are not justified.

Conclusion:
The Tribunal resolved the differences of opinion by ruling that the reimbursable expenses claimed by the appellant could be excluded from the assessable value, subject to verification of agreements and supporting documents. Additionally, the Tribunal held that the extended period of limitation could not be upheld in the circumstances of the case, emphasizing the lack of willful misstatement or intent to evade tax.