2022 (6) TMI 44 - AT - Service Tax

Non-payment of service tax - reimbursement of expenses like conveyance, travelling and mobile expenses - chartered accountant services - HELD THAT - The issue, in respect of reimbursable expenses has been considered and decided by the Supreme Court in UNION OF INDIA AND ANR. VERSUS M/S. INTERCONTINENTAL CONSULTANTS AND TECHNOCRATS PVT. LTD. 2018 (3) TMI 357 - SUPREME COURT where it was found that High Court was right in interpreting Section 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. Thus, service tax could not have been levied on the reimbursed expenses - the Commissioner (Appeals), therefore, was not justified in holding that the reimbursable expenses would be subjected to service tax. Appeal allowed - decided in favor of appellant.

Summary

Issues:
Quashing of order upholding non-payment of service tax on reimbursable expenses.

Analysis:
The appellant provided "chartered accountant services" and disputed the non-payment of service tax on expenses like conveyance, travelling, and mobile expenses. A show cause notice was issued in 2008, alleging non-payment of service tax on reimbursed expenses. The Assistant Commissioner confirmed the demand, stating that the appellant undervalued its income by not including reimbursed amounts in gross value. The Commissioner (Appeals) upheld this decision, noting the lack of direct nexus between reimbursed expenses and services provided, and the failure to reflect expenses in returns or invoices.

The Tribunal adjourned the matter when the appellant did not appear, and later decided the case in favor of the Department. The issue of reimbursable expenses was analyzed in light of the Supreme Court judgment in Union of India vs. Intercontinental Consultant and technocrats. The Court clarified that service tax could not be levied on reimbursed expenses, as they do not form part of the value of taxable services. Therefore, the Commissioner (Appeals) erred in subjecting reimbursable expenses to service tax. The order upholding the non-payment of service tax on reimbursable expenses was set aside, and the appeal was allowed.