2019 (2) TMI 1564 - AT - Service Tax

Valuation - inclusion of reimbursable expenses in assessable value - Held that - The appellant has to furnish necessary documents to establish that reimbursable expenses have been included in the taxable value. For this limited purpose, the matter requires to be remanded to the adjudicating authority who shall consider whether any reimbursable expenses are to be excluded from the taxable value that has been arrived by the adjudicating authority. Penalties - Held that - The appellants were under bonafide belief that the said activity did not fall under BAS. From the litigations taken up by the appellant, the said contention requires to be considered - penalties not warranted and is set aside. Appeal allowed by way of remand.

Summary

Issues:
1. Demand of service tax under Business Auxiliary Service for a specific period.
2. Inclusion of reimbursable expenses in the taxable value.
3. Penalties imposed under sections 77 and 78 of the Finance Act, 1994.

Analysis:

Issue 1: Demand of service tax under Business Auxiliary Service
The appellant received a show cause notice demanding service tax for a particular period, which was confirmed by the original authority along with interest and penalties under sections 77 and 78 of the Finance Act, 1994. The Commissioner (Appeals) upheld the decision, leading to the appeal before the Tribunal.

Issue 2: Inclusion of reimbursable expenses in the taxable value
The appellant, while accepting that their activity falls under Business Auxiliary Service, contested the inclusion of certain reimbursable expenses in the taxable value. The appellant argued that reimbursable expenses, which were in the nature of wages and remuneration paid to employees, should not be included based on a precedent. The Tribunal directed the appellant to provide evidence regarding these expenses and remanded the matter to the adjudicating authority for consideration.

Issue 3: Penalties imposed under sections 77 and 78 of the Finance Act, 1994
The appellant argued that the penalties imposed were unwarranted as they believed in good faith that their activity did not fall under Business Auxiliary Service. The Tribunal found merit in this argument and set aside the penalties, noting that the appellant's contention required further consideration. Consequently, the penalties were revoked entirely.

In conclusion, the Tribunal remanded the matter to the adjudicating authority to determine the exclusion of reimbursable expenses from the taxable value. The penalties were set aside entirely based on the appellant's good faith belief. The appeal was partly allowed with consequential relief, if any, as per the law.