2019 (3) TMI 1218 - HC - Central Excise

Valuation - inclusion of reimbursement charges in assessable value - provision of service tax is for a consideration in money - Section 67(1)(i) of the Finance Act - Held that - Hon ble Supreme Court in the case of Intercontinental Consultants & Technocrats (P) Ltd. 2018 (3) TMI 357 - SUPREME COURT OF INDIA , where it was held that High Court was right in interpreting Sections 66 and 67 to say that in the valuation of taxable service, the value of taxable service shall be the gross amount charged by the service provider for such service and the valuation of tax service cannot be anything more or less than the consideration paid as quid pro qua for rendering such a service. The appeal filed by the Revenue is dismissed - the substantial question of law is answered against the Revenue.

Summary

Issues:
Challenge to order of Customs, Excise and Service Tax Appellate Tribunal regarding reimbursement charges not liable to Service Tax under Section 35-G of Central Excise Act, 1944.

Analysis:
The High Court of Madras heard an appeal filed by the Revenue challenging the order of the Customs, Excise and Service Tax Appellate Tribunal. The substantial question of law raised was whether reimbursement charges are liable to Service Tax under Section 67(1)(i) of the Finance Act. The respondent argued that the issue had been decided in favor of the assessee by the Supreme Court in a previous case. The High Court examined the decision of the Supreme Court in the case of Intercontinental Consultants & Technocrats (P) Ltd., which clarified the valuation of taxable services for charging service tax. The Court highlighted that the value of taxable services should be the gross amount charged by the service provider for such services, excluding any amounts not calculated for providing taxable services.

The Court emphasized that Rule 5 of the Rules, 2006, regarding reimbursable expenses, should align with the provisions of Section 67 of the Act. It was noted that the value of taxable services must be based on the consideration paid for rendering such services. The Court further explained that the amendment to Section 67 by the Finance Act, 2015, clarified that reimbursable expenses would form part of the valuation of taxable services for charging service tax. The Court rejected the argument that Section 67 is declaratory and highlighted the prospective nature of legislative changes, citing relevant legal principles.

Ultimately, the High Court dismissed the appeal by the Revenue based on the Supreme Court's decision, answering the substantial question of law against the Revenue. The judgment concluded that there was no merit in the Revenue's appeals, and no costs were awarded in this matter.