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2023 (6) TMI 148 - AT - Service TaxValuation of services - Business Auxiliary Service - cost of raw material and other reimbursable charges are not includable in the taxable value - Rule 5 (1) of Service Tax Valuation Rules - time limitation - HELD THAT - As the issue involved in this matter has been settled by the decision of the Hon ble Apex 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 wherein it has been held that reimbursable expenses are not to be included in valuation of taxable service therefore, the reimbursable expenses cannot be includble in the assessable value of taxable service provided by the Appellant. Further the amount retained by the brand owner is also not includble in taxable value of service as per CBEC Circular dated 30th October 2009. Therefore, the impugned order is set aside and Appeal is allowed. Time Limitation - HELD THAT - As the impugned period is 2015-17, wherein the Show Cause Notice has been issued to the Appellant on 20th October 2020, which is highly time barred as earlier. As earlier show Cause Notice of the same issue had been issued to the appellant on 16/09/2014. Therefore, the Show Cause Notice is barred by limitation. Accordingly, Appeal succeeds on limitation. Appeal allowed.
Issues involved:
The issues involved in this case are the demand of Service Tax under the category of "Business Auxiliary Service" for manufacturing Indian Made Foreign Liquor (IMFL) under a job work arrangement, including the inclusion of raw material and packing material costs, reimbursable expenses, and brand owner surplus in the taxable value of service provided by the Appellant. Issue 1: Inclusion of raw material and packing material costs in taxable value: The Appellant, engaged in manufacturing IMFL as a Contract Bottling Unit (CBU) for the Brand Owner, argued that the cost of raw material and packing material should not be included in the taxable value under "Business Auxiliary Service." The Advocate relied on CBEC Circular and legal precedents to support the contention that only job charges are taxable service, not the cost of inputs like raw material and packing material. Issue 2: Treatment of reimbursable expenses and brand owner surplus: The Appellant contended that reimbursable expenses paid by the brand owner to the CBU should not be liable for Service Tax, citing legal precedents and a Tribunal decision that such expenses are cost and expenditure under Service Tax Valuation Rules. Additionally, the Appellant argued that the brand owner surplus, remitted to the brand owner, should not be included in the taxable value of service provided by the Appellant. Separate Judgement: In Appeal No. ST/75793/2015, the Tribunal held that reimbursable expenses and brand owner surplus cannot be included in the assessable value of taxable service provided by the Appellant, in line with the decision of the Hon'ble Apex Court. The impugned order in this appeal was set aside and the appeal was allowed. Separate Judgement: In Appeal No. ST/75951/2021, the Tribunal found the Show Cause Notice issued on 20th October 2020 to be time-barred as an earlier notice on the same issue was issued in 2014. Consequently, the Tribunal held that the Show Cause Notice was barred by limitation and set aside the impugned order, allowing the appeal with consequential relief. In conclusion, both appeals were allowed based on the arguments presented, with one appeal succeeding on the grounds of limitation and the other on the merits of including reimbursable expenses and brand owner surplus in the taxable value of service provided by the Appellant.
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