2018 (4) TMI 1173 - AT - Service Tax

Valuation - inclusion of certain expenses incurred by the appellant to depute employees and other incidental expenses - Section 67 of Finance Act, 1994 - Erection, Commissioning or Installation services - Held that - the reimbursable expenses incurred by service provider, which are reimbursed by the recipient of services on actual basis has been a subject-matter of various decisions of the Tribunal also - It is held that such expenses cannot form part of the gross value which is relatable to only services provided - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Service tax liability on expenses incurred for deputing employees and rendering taxable services of "Erection, Commissioning or Installation."

Analysis:
The Appellate Tribunal CESTAT CHENNAI addressed the issue of service tax liability on expenses incurred by the appellant for deputing employees and other incidental expenses related to providing taxable services. The impugned order upheld the service tax liability, considering all amounts, including such expenses, as part of the gross taxable value in accordance with section 67 of the Finance Act, 1994 and the Service Tax Valuation Rules, 2006.

Upon hearing both sides and examining the appeal records, the Tribunal noted that the expenses in question were reimbursed on an actual basis. Citing the case law of Commissioner of Service Tax, Chennai Vs M/s. Sangamitra Services Agency, the Tribunal emphasized that reimbursable expenses incurred by the service provider, which are reimbursed by the recipient on an actual basis, should not be included in the taxable value. The Tribunal highlighted that the gross amount reimbursement/commission should not include the expenditure incurred by the service provider for rendering the services, as clarified by various Tribunal decisions.

Based on the legal precedent and established principles, the Tribunal concluded that the impugned order confirming tax liability on such expenses was without merit. Therefore, the Tribunal set aside the order and allowed the appeal in favor of the appellant. The judgment clarified that reimbursable expenses on an actual basis should not be considered as part of the taxable value solely related to the services provided, in line with the legal position established by previous decisions.