2017 (9) TMI 1440 - AT - Service Tax

Taxability - reimbursable expenditure - Held that - the appellant did not produce sufficient evidences before the Adjudicating Authority in order to indicate that the subject amount on which the Dept. issued the demand of Service Tax is actually under the category of reimbursable expenses . When it is so, the subject matter is remanded back to the Original Adjudicating Authority who shall decide if the subject amount is under the category of reimbursable expenses or not - matter on remand. Demand of Service Tax on the amount of TDS - Held that - The appellant, in this regard, pleads that this demand is time barred and therefore, there is no liability of payment of Service Tax against them - this issue also needs to be decided afresh by the Original Adjudicating Authority, to whom the matter is being remanded. Appeal allowed by way of remand.

Issues involved:
- Demand of Service Tax on differential income for Consulting Engineering Services
- Taxability of reimbursable expenses
- Taxability of TDS deducted by the client

Analysis:

Issue 1: Demand of Service Tax on differential income for Consulting Engineering Services
The appellant, M/s Louis Berger International Inc., was engaged in providing Technical Consultancy Services (TCS) for various projects in India. The Department observed that the appellant did not discharge Service Tax liability on the differential amount of realized professional income for Consulting Engineering Services provided during the financial years 2001-02 to 2005-06. The appellant argued that the differential income received was considered as reimbursable expenses reimbursed by the client. However, the Department issued a Show Cause Notice demanding Service Tax of ?80,77,598/- along with interest and penalty. The Tribunal remanded the matter back to the Original Adjudicating Authority to determine if the subject amount qualifies as reimbursable expenses, requiring the appellant to provide necessary evidence and opportunity for a personal hearing.

Issue 2: Taxability of reimbursable expenses
The appellant contended that reimbursable expenses are not taxable as per CBEC Circular No F 43/5//9/97. They argued that they had complied with the circular by billing fee and out-of-pocket expenses separately, thus fulfilling the conditions of the circular. The appellant further stated that the client, a Government agency, had verified all reimbursable expenses and made payments accordingly. The Tribunal acknowledged the arguments but emphasized the need for the appellant to provide sufficient evidence to establish that the subject amount indeed falls under the category of reimbursable expenses, directing the Adjudicating Authority to reexamine the issue.

Issue 3: Taxability of TDS deducted by the client
Another issue raised was the Department's demand for Service Tax on the TDS amount deducted by the client, which allegedly was not paid by the appellant. The appellant contended that this demand was time-barred, absolving them of the liability. The Tribunal, considering the facts and circumstances, directed the Original Adjudicating Authority to reevaluate this issue as well, giving the appellant an opportunity for a personal hearing and to present evidence to determine if the demand was indeed time-barred.

In conclusion, the Tribunal set aside the impugned order and remanded the matter back to the Original Adjudicating Authority for fresh adjudication within four months, allowing the appellant to present their case and evidence for a reconsideration of the tax liabilities related to both the reimbursable expenses and the TDS amount.

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