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2022 (7) TMI 305 - AT - Service TaxValuation - inclusion of reimbursement claimed by the Appellant from the clients during the course of providing the services of Customs House Agent - Rule 5 of the Service Tax Rules, 1994 - HELD THAT - The issue is no longer res integra inasmuch as the very Rule on the basis of which impugned demand has been raised has been held to be ultra vires the provisions of the Finance Act, 1994. The 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 where it was held that only with effect from May 14, 2015, by virtue of provisions of Section 67 itself, such reimbursable expenditure or cost would also form part of valuation of taxable services for charging service tax. The impugned demand raised by the Ld. Commissioner cannot be sustained, except for the short payment of service tax which has already been deposited by the Appellant - Penalty set aside - appeal allowed.
Issues:
- Confirmation of demand of service tax - Inclusion of reimbursable expenses in the value of taxable services - Applicability of Rule 5 of the Service Tax Rules, 1994 - Contest on the ground of limitation Confirmation of demand of service tax: The appeal was against the Order-in-Original confirming a service tax demand of Rs.74,93,416/- along with interest and penalty for the period from April 2003 to March 2007. The Appellant, engaged in providing 'Customs House Agent' services, contested the demand of service tax raised on the reimbursement claimed from clients during service provision. The Ld. Commissioner upheld the demand, despite the Appellant's argument that such expenses should not be part of the taxable service value. The Appellant had already deposited a portion of the demanded tax amount, which the Department claimed was short paid. Inclusion of reimbursable expenses in the value of taxable services: The Appellant argued that various Tribunal decisions supported their stance that reimbursable expenses should not be included in the value of taxable services. The Ld. Advocate highlighted that Rule 5 was considered ultra vires by the Supreme Court in a specific case. The Ld. Authorized Representative for the Department supported the Ld. Commissioner's findings. The Tribunal examined the issue, considering the interpretation of Section 67 of the Finance Act, 1994, and the subsequent amendment in 2015. The Tribunal referred to the Supreme Court's judgment, emphasizing that the value of taxable service should be the gross amount charged for providing the service, excluding reimbursable expenses. Consequently, the Tribunal concluded that the demand could not be sustained, except for the already deposited service tax amount. Applicability of Rule 5 of the Service Tax Rules, 1994: The Tribunal noted that Rule 5 of the Service Tax Rules went beyond the mandate of Section 67 of the Finance Act, 1994. The Tribunal highlighted the importance of the expression 'such' in Section 67 for valuing taxable services. The legislative amendment in 2015 explicitly included reimbursable expenses in the valuation of taxable services, but the Tribunal clarified that this change was prospective. Citing legal principles against retrospectivity, the Tribunal dismissed the appeals, setting aside the penalty imposed. Contest on the ground of limitation: The Appellant also contested the demand on the ground of limitation, but the Tribunal's decision primarily focused on the interpretation of Section 67 and the applicability of Rule 5. The Tribunal's judgment allowed the appeal, emphasizing the exclusion of reimbursable expenses from the value of taxable services, in line with the Supreme Court's interpretation.
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