2018 (5) TMI 1674 - AT - Service Tax

Valuation - Cargo Handling Services - non inclusion of reimbursable expenses - demand differential service tax - Held that - The issue regarding the inclusion of re-imbursable expenses into the value of consideration for payment of service tax was the subject matter in the case of Union of India Vs. M/s.International Consultants and Technocrafts Pvt. Ltd. 2018 (3) TMI 357 Supreme Court of India , wherein held that the inclusion of such reimbursable expenditure was not justified and Rule 5 of the Service Tax Rules which was held to be un-constitutional and ultra virues of the provisions of Section 66 and 67 of the Finance Act, 1994 - Decided against Revenue.

Summary

Issues:
1. Inclusion of reimbursable expenses in the total consideration for service tax calculation.

Analysis:
The case involved a dispute regarding the inclusion of reimbursable expenses in the total consideration for the payment of service tax by a company providing "Cargo Handling Services." The Revenue initiated show cause proceedings to demand differential service tax, claiming that certain expenses reimbursed by clients should be included in the total consideration received by the company. However, both lower authorities ruled against the Revenue, stating there was no justification for including such reimbursable expenses in the service tax calculation. The Revenue appealed this decision.

During the hearing, both parties presented their arguments. The Tribunal noted that a similar issue was addressed by the Supreme Court in the case of Union of India Vs. M/s. International Consultants and Technocrafts Pvt. Ltd., where it was held that the inclusion of reimbursable expenses in the service tax calculation was not justified. The Supreme Court also found Rule 5 of the Service Tax Rules to be unconstitutional and ultra vires of the provisions of the Finance Act, 1994.

Based on the Supreme Court's decision in the aforementioned case, the Tribunal dismissed the Revenue's appeal, following the precedent set by the higher court. The order was dictated and pronounced in open court, upholding the decision that reimbursable expenses should not be included in the calculation of service tax.