2020 (3) TMI 1183 - AT - Service Tax

Valuation - bank collects charges for dishonouring of the cheques, which are recovered by the appellant from their clients - inclusion of such reimbursable charges in assessable value or not - Rule 5(1) of Service Tax Determination of Value Rules, 2006 - period involved is From Sept. 04 to Jun. 09 - HELD THAT - There is dispute with the amount collected by the appellant from their clients is equal to the amount that the appellant pays to the bank due to dishonouring of cheques. Therefore, we are satisfied that the said expenses are reimbursable expenses. By applying the rule of Hon ble Supreme Court in the case of UNION OF INDIA AND ANR. VERSUS M/S. INTERCONTINENTAL CONSULTANTS AND TECHNOCRATS PVT. LTD. 2018 (3) TMI 357 - SUPREME COURT it is held that the demand against the appellant is not sustainable. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Inclusion of charges for dishonoured post-dated cheques in assessable value for service tax levy.

Analysis:
The case involved the appellant, a provider of financial services giving loans, who collected post-dated cheques for loan recovery. The Revenue contended that charges for dishonoured cheques should be part of the assessable value for service tax levy. The period in question was from Sept.'04 to Jun.'09, with Rule 5(1) of Service Tax [Determination of Value] Rules, 2006 being invoked for raising the demand. The impugned order confirmed the demands, leading the appellant to appeal before the Tribunal.

During the proceedings, the appellant argued that the amounts collected from clients equaled the charges paid to the bank for dishonoured cheques, making them reimbursable expenses. Reference was made to a Supreme Court ruling in Union of India Vs M/s. Intercontinental Consultants and Technocrats Pvt. Ltd., which deemed certain provisions ultra vires of the Finance Act, 1994. The Authorized Representative, however, supported the impugned order's findings, claiming the issue was settled by the Supreme Court.

After considering both sides' submissions and reviewing the records, the Tribunal found that the appellant's collected amounts matched the payments to the bank for dishonoured cheques, establishing them as reimbursable expenses. Citing the Supreme Court's ruling in M/s. Intercontinental Consultants and Technocrats Pvt. Ltd., the Tribunal concluded that the demand against the appellant was not sustainable. Consequently, the impugned order was set aside, and the appeal was allowed with any consequential relief for the appellant.