2018 (2) TMI 1050 - AT - Service Tax

Valuation - non-inclusion of certain considerations received by the appellants, which they claimed to the reimbursement expenses - Held that - Admittedly, the legal position is that reimbursement expenses made on actual basis are not to be included in the gross taxable value. This aspect can be verified with the basic documents, which are available with the appellant and list of such expenses are already submitted before the jurisdictional authorities. This requires cross verification with the documents. Penalty - Held that - Mere failure to pay tax or failure to comply with any provisions without any intention to evade tax will not attract Section 78 - penalty set aside. Matter remanded to the original authority for decision on the claim of the appellant regarding correct classification as well as exclusion of reimbursement expenses and value of sale of goods - appeal allowed by way of remand.

Summary

Issues:
1. Classification of services under event management service
2. Inclusion of reimbursement expenses in the taxable value
3. Penalty imposition under Section 78

Classification of Services under Event Management Service:
The appellant, a registered Service Tax assessee, contested the tax liability under event management service, claiming that their activities were of a miscellaneous nature and not covered under this tax category. The appellant argued that the expenses incurred as reimbursement by the client should not be included in the taxable value. The Tribunal noted the diverse nature of the appellant's activities, including prize distribution, computer literacy programs, and manpower supply, and emphasized the need for a proper classification based on the terms of arrangement with clients. The Tribunal directed the Revenue to examine the appellant's submission for correct classification and subsequent taxation, highlighting the necessity for scrutiny based on relevant documents.

Inclusion of Reimbursement Expenses in the Taxable Value:
The appellant contended that expenses incurred on behalf of clients and later reimbursed should not be part of the taxable value. The Tribunal referred to established legal principles and recent decisions supporting the exclusion of reimbursable expenses from the gross taxable value. Noting that the appellant had submitted a detailed list of such expenses, the Tribunal emphasized the verification of these expenses with supporting documents to determine their eligibility for exclusion. The Tribunal highlighted the need for cross-verification and upheld the legal position that reimbursement expenses made on an actual basis should not be considered in the taxable value.

Penalty Imposition under Section 78:
The original authority imposed penalties under Section 77 & 78 of the Finance Act, 1994, citing a short payment of Service Tax. However, the Tribunal found the original authority's findings contradictory, noting that the appellant did not engage in any fraudulent activities or willful misstatements to evade tax. The Tribunal clarified that mere failure to comply with tax obligations without intent to evade tax does not warrant a penalty under Section 78. Consequently, the Tribunal deemed this aspect of the original authority's findings unsustainable and advised a reconsideration of the penalty imposition.

In conclusion, the Tribunal allowed the appeal by remanding the matter to the original authority for a decision on the correct classification of services and the exclusion of reimbursement expenses from the taxable value. The Tribunal emphasized the need for a prompt resolution due to the prolonged dispute period, advising the original authority to decide the case preferably within three months.