2018 (9) TMI 180 - AT - Service Tax

Valuation - inclusion of certain amounts recovered by them from the service recipients - reimbursements or not? - Held that - Admitted the period in dispute is prior to the introduction of the Service Tax Valuation Rules. However, as per Section 67, the Service Tax is liable to be paid on gross amount charged for providing these services. None of these expenditures are a liability of service recipient. All of them are essential ingredients necessary to provide the service. Thus, the same cannot be termed as reimbursements . The impugned order is upheld on merits. However, benefit of limitation is extended to the appellant. The penalties are also set aside - appeal allowed in part.

Summary

Issues:
Confirmation of demand of service tax on certain amounts recovered by the appellant from service recipients not included in assessable value.

Analysis:
The appeals were filed against the confirmation of demand of service tax on amounts recovered by the appellant from service recipients. The appellant argued that the recovered amounts were reimbursements not included in the assessable value. The appellant relied on a circular of CBEC dated 02.07.1997 permitting deductions from the value of taxable service. The Commissioner (Appeals) admitted the amounts to be reimbursements, contrary to the original adjudicating authority's decision. The appellant also cited a Tribunal decision in the case of Bax Global India Pvt. Ltd. 2009 (9) STR 412 to support their argument.

Analysis:
The respondent argued that the amounts claimed as reimbursements were for various expenses such as travel, food, accommodation, office furniture, stationery, etc., necessary for providing consultancy services. The respondent contended that these expenses did not qualify as reimbursements as they were essential for service provision. The respondent relied on a Tribunal decision in the case of Adarsh Agency vs CCE 2017 (6) GSTL 157 to support their argument.

Analysis:
The Tribunal examined the submissions and noted that the period in dispute was before the introduction of the Service Tax Valuation Rules. Section 67 stipulates that service tax is payable on the gross amount charged for services provided. The Tribunal found that the expenditures in question were essential ingredients necessary for service provision and not liabilities of the service recipient. Citing the case of Adarsh Agency (supra), the Tribunal held that expenses required for providing output services should be included in the gross value of services. The Tribunal upheld the impugned order on merits but extended the benefit of limitation to the appellant and set aside the penalties. The appeals were partly allowed in the specified terms.