2023 (11) TMI 1129 - AT - Service Tax

Levy of service tax - amounts collected as reimbursement of electricity charges - reimbursement of air conditioning charges - invocation of Extended period of Limitation - penalty - HELD THAT - Reimbursable expenses have been held to be not consideration for service by the High Court of Delhi in case of INTERCONTINENTAL CONSULTANTS AND TECHNOCRATS PVT. LTD. VERSUS UOI. ANR. 2012 (12) TMI 150 - DELHI HIGH COURT - thus, no service tax can be charged on the reimbursable expenses which the appellant had collected towards providing electricity and air conditioning. Invocation of Extended period of Limitation - HELD THAT - Since the issue decided on merits in favour of the appellant insofar as the demand of service tax on these two expenses is concerned, and since the appellant is not contesting the rest of the demand, the question of invoking extended period of limitation need not be examined. Levy of penalty - HELD THAT - The appellant had reasonable cause for failure to pay service tax and, therefore, by invoking section 80, the penalties are set aside. The appeal is partly allowed by setting aside the demand of service tax on reimbursable expenses towards electricity and air conditioning collected by the appellant and upholding the rest of the demand with interest.

Issues Involved:

1. Demand of service tax on reimbursable expenses for electricity and air conditioning.
2. Invocation of extended period of limitation.
3. Imposition of penalties under sections 76, 77, and 78 of the Finance Act, 1994.

Summary:

1. Demand of service tax on reimbursable expenses for electricity and air conditioning:

The appellant, M/s Varun Estates (P) Limited, provides housekeeping and maintenance services in a Mall and has been paying service tax on common area maintenance charges. The dispute arose regarding the amounts collected as reimbursement for electricity and air conditioning charges. The appellant contended that these amounts are not exigible to service tax based on the judgment of the High Court of Delhi in Intercontinental Consultants & Technocrats Pvt. Limited vs. Union of India, which held that service tax can only be charged on the amounts for providing such service and not on reimbursable expenses. The Supreme Court upheld this view, stating that the amendment to Section 67 of the Finance Act, 2015, which included reimbursable expenses as consideration, is prospective and does not apply to past cases. Consequently, the Tribunal decided that no service tax can be charged on the reimbursable expenses for electricity and air conditioning.

2. Invocation of extended period of limitation:

The show cause notice dated 23.04.2013 invoked the extended period of limitation under the proviso to section 73. However, since the issue of service tax on reimbursable expenses was decided in favor of the appellant on merits, the Tribunal did not examine the question of invoking the extended period of limitation.

3. Imposition of penalties under sections 76, 77, and 78 of the Finance Act, 1994:

The Tribunal noted that during the relevant period, section 80 of the Finance Act, 1994, was in force, which allows for penalties to be waived if the assessee proves reasonable cause for failure to pay service tax. Given the factual matrix, the Tribunal found that the appellant had reasonable cause for the failure and invoked section 80 to set aside the penalties under sections 76, 77, and 78.

Conclusion:

The appeal was partly allowed by setting aside the demand of service tax on reimbursable expenses for electricity and air conditioning and upholding the rest of the demand with interest. All penalties were set aside by invoking section 80 of the Finance Act.

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