2019 (2) TMI 686 - AT - Service Tax

Valuation - includibility - inclusion of reimbursable expenses in the taxable value in assessable value - Held that - The Hon ble Apex Court in the decision cited by the Ld. Advocate in the case of Intercontinental Consultants and Technocrats Pvt. Ltd. 2018 (3) TMI 357 - SUPREME COURT OF INDIA has categorically held that the reimbursable expenses are not includable in the taxable value - demand do not sustain. Outdoor catering service - abatement under N/N. 1/2006 denied - Held that - The appellant has availed the credit on input services which makes them ineligible for availing the benefit of abatement however, it is brought out by the Ld. Counsel that they have reversed the credit. Taking note of this, if the credit has been reversed the appellant would be eligible for the benefit of abatement - for the limited purpose of verifying that the appellant has been reversed the credit, the matter is required to be sent back to the adjudicating authority - matter on remand. Appeal allowed in part and part matter on remand.

Summary

Issues:
1. Inclusion of reimbursable expenses in taxable value for service tax liability.
2. Eligibility for abatement under Notification No. 1/2006 for outdoor catering service.

Analysis:
1. The appellants provided housekeeping services and paid service tax only on service charges, excluding reimbursable expenses from the taxable value. The department alleged underpayment of service tax amounting to &8377; 45,77,465 for the period April 2006 to November 2009. The adjudicating authority confirmed the demand, interest, and imposed penalties. The appellant argued citing the decision of the Hon'ble Apex Court in UOI Vs. Intercontinental Consultants and Technocrats Pvt. Ltd. that reimbursable expenses should not be included in the taxable value. The Tribunal agreed with this argument, setting aside the demand related to reimbursable expenses.

2. The second issue concerned the appellant's eligibility for abatement under Notification No. 1/2006 for outdoor catering services. The appellant initially availed Cenvat credit on input services but later reversed the credit, which the Tribunal noted as tantamount to non-availment of credit. The Tribunal held that if the credit has been reversed, the appellant would be eligible for abatement. However, to verify this reversal, the matter was remanded back to the adjudicating authority for further examination.

In conclusion, the Tribunal partly allowed the appeal by setting aside the demand related to reimbursable expenses and remanded the issue of abatement eligibility for further verification. The decision was pronounced in open court on 31.01.2019.