2018 (5) TMI 1233 - AT - Service Tax

Liability of service tax - inclusion of reimbursable expenses - Held that - Reimbursable expenses cannot be considered as amount charged by service provider, for providing the taxable service . Since, the appellant was entitled for receiving the actual expenses incurred by it, the same should not be included in the gross value for the purpose of payment of service tax, inasmuch as, such amount is not towards the consideration received for providing the taxable service - appeal allowed - decided in favor of appellant.

Summary

Issues:
Service tax liability on reimbursable expenses incurred by the appellant for providing event management services.

Detailed Analysis:
The appellant, registered with the Service Tax Department for event management services, received retainership fees and fixed mechanical income, on which appropriate service tax was discharged. However, the appellant did not pay service tax on reimbursable expenses incurred on actual basis. The Service Tax Department observed this during an audit and initiated show cause proceedings, resulting in a demand of service tax, interest, and penalties. The appellant contested the inclusion of reimbursable expenses in the gross value for service tax payment, arguing that such expenses received from clients on an actual basis should not be part of the taxable value.

Upon reviewing the service agreements, the Tribunal found that the client was obligated to reimburse the appellant for extraordinary expenses incurred on an actual basis. The Tribunal determined that reimbursable expenses should not be considered as part of the amount charged by the service provider for providing taxable services. Since the appellant was entitled to receive the actual expenses incurred, such amounts should not be included in the gross value for service tax payment, as they were not part of the consideration received for providing taxable services.

After considering the arguments from both sides and examining the case records, the Tribunal concluded that the impugned order did not have merit. Consequently, the Tribunal set aside the order and allowed the appeal in favor of the appellant, ruling that reimbursable expenses should not be included in the gross value for service tax calculation.

This judgment highlights the importance of distinguishing between reimbursable expenses and consideration for taxable services in determining service tax liability for event management services. The Tribunal's decision clarifies that amounts received for reimbursable expenses on an actual basis should not be treated as part of the taxable value for service tax payment, as they do not constitute consideration for the services provided.