2019 (1) TMI 1302 - AT - Service Tax

Management Consultancy Service - non-payment of service tax - no discussion made out on the merits of the case - Held that - The learned Commissioner of Service Tax has not discussed the merits of the case in respect of the demand proposed for recovery under the show-cause notice dated 03.04.2009 - Since the appellant specifically did not contest the demand as per the show-cause notice dated 03.04.2009 and accepted its liability, the amount paid by the appellant and appropriated in the impugned order towards the respective liabilities cannot be interfered. Reverse charge mechanism - demand as per the show-cause notice dated 17.03.2009 - Held that - The appellant was not liable to pay any service tax, as a recipient of taxable service under reverse charge mechanism, in terms of Section 66A of the Act, which was inserted in the statute book only with effect from 18.04.2006. By referring to the statutory amendments and various judgments of Hon ble Supreme Court, the CBEC vide Circular No. 276/8/2009-CX., 8A dated 26.09.2011 has clarified that service tax liability on any taxable service provided by a non-resident or a person located outside India, to a recipient in India, would arise w.e.f. 18.04.2006, i.e. the date of enactment of Section 66A of the Act. Non-submission of break-up of amount from the total service tax liability cannot be a defensible ground to demand service tax, for which no sanctity was provided in the statute. Valuation - reimbursement of expenses made by the appellant to its over-seas clients in respect of various charges incurred by the latter - Held that - The law is well settled that under both the un-amended and amended provisions of Section 67 of the Act, gross amount charged by the service provider for providing only such service should be considered as taxable value for payment of service tax. Since reimbursement of expenses cannot qualify as a separate taxable service, such amount should not be included in the gross value for payment of service tax - the impugned order confirming the service tax demand on the appellant on reimbursement of expenses is not legally sustainable. Appeals disposed off.

Summary

Issues:
1. Confirmation of service tax demand for Management Consultancy Service.
2. Confirmation of service tax demand for reimbursement of expenses made to overseas entity.
3. Applicability of service tax on import of service prior to 18.04.2006.
4. Inclusion of reimbursement of expenses in the value of taxable service for service tax liability computation.

Analysis:
1. The appeals were against the order passed by the Commissioner of Service Tax regarding the non-payment of service tax on Management Consultancy Service. The appellant did not contest the demand and accepted the liability. The adjudicating authority confirmed the demand and interest amount, dropping the proposed penalties. The Tribunal held that the confirmation of the demand by the authority was valid since the appellant did not dispute it.

2. Regarding the service tax demand for reimbursement of expenses made to the overseas entity, the Commissioner confirmed the demand, interest, and imposed a penalty. The Tribunal observed that the appellant was not liable to pay service tax as a recipient of service under reverse charge mechanism before 18.04.2006. The authority's decision to confirm the demand for the entire period was found to be contrary to statutory provisions. The Tribunal referred to statutory amendments and judgments to clarify that service tax liability arose only from 18.04.2006, and non-submission of a break-up of the amount for the period before that date was not a valid ground for demanding service tax.

3. The appellant argued that no service tax was payable on the import of service before 18.04.2006, citing judgments and circulars. The Tribunal noted the legal position and clarified that the appellant was not liable to pay service tax before the specified date. The Tribunal upheld the appellant's argument based on legal precedents and circulars issued by CBEC.

4. The issue of whether reimbursement of expenses should be included in the value of taxable service for service tax computation was also addressed. The Tribunal referred to a judgment of the Delhi High Court and the Supreme Court, stating that under the provisions of the Act, only the gross amount charged for providing the service should be considered as taxable value for service tax payment. Since reimbursement of expenses does not qualify as a separate taxable service, it should not be included in the gross value for service tax payment. Therefore, the Tribunal held that the confirmation of service tax demand on reimbursement of expenses was not legally sustainable.

In conclusion, the Tribunal sustained the service tax demand for a specific period while allowing the appeal in favor of the appellant for the demands confirmed for another period. The judgment clarified the legal positions regarding service tax liabilities, import of service, and the inclusion of expenses in the taxable value for service tax computation.