2023 (11) TMI 1130 - AT - Service Tax

Levy of Service tax - reimbursement of expenses - inclusion in the assessable value or not - appellant provided services of promotion, marketing of petroleum products, customer care and other auxiliary services on behalf of their client M/s BPCL - HELD THAT - It is found that the appellant was only operating the BPCL filling stations which was COCO outlet and were getting reimbursement of expenses as shown by them in their monthwise statement annexed at page 76 to 81 of the paper book. Further, it is found that the Chartered Accountant has also certified that the appellant was only getting reimbursement of expenses viz. salary/wages for manpower, conveyance, tea and coffee remuneration of operator. In view of 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 reimbursible expenditure is not includable in the taxable value. We also find that once the appellant has deposited to Rs. 2,40,598/- before the issuance of show cause notice vide two TR6 challans both dated 31.05.2007 which is also noted in the show cause notice then in that situation the show cause notice should not have been issued. Further, it is also found that the imposition of penalty under both the Sections 76 78 is also not tenable in law. The impugned order is not sustainable in law - Appeal allowed.

Summary

Issues involved:
The issues involved in this case include confirmation of demand, imposition of penalties under various sections, applicability of service tax, interpretation of business auxiliary service, invocation of extended period, and justification of penalties.

Confirmation of demand and imposition of penalties:
The appeal was filed against an order confirming a demand of Rs. 1,70,589/- along with interest and penalties under sections 76, 78, and 77. The appellant operated a BPCL filling station and was responsible for accountal of petroleum products and other operational aspects. The Commissioner (Appeals) upheld the demand and penalties, leading to this appeal.

Applicability of service tax and business auxiliary service:
The appellant also ran a Health Club & Fitness Centre and paid service tax until its closure. A show cause notice alleged provision of services on behalf of BPCL, invoking service tax liability under business auxiliary service. The demand was confirmed under Section 73 of the Finance Act, along with interest and penalties. The appellant argued for exemption under Notification 6/2005-ST due to the value of services not exceeding Rs. 4 lakhs.

Invocation of extended period and penalties justification:
The extended period was invoked for demanding service tax under Health Club and Fitness Centre services. The appellant contested the imposition of penalties under sections 76 & 78, citing lack of intention to evade and changes in the definition of business auxiliary service over time. The appellant had also deposited a significant amount before the issuance of the show cause notice.

Judgment and reasoning:
After considering submissions and evidence, the Tribunal found that the appellant operated the filling station on a reimbursement basis for expenses. Citing the precedent of Union of India Vs. Intercontinental Consultants and Technocrats Pvt. Ltd., the Tribunal held that reimbursable expenditures are not included in taxable value. The Tribunal also noted the early deposit made by the appellant before the show cause notice, questioning its issuance. Additionally, the imposition of penalties under sections 76 & 78 was deemed untenable, referencing a judgment of the Punjab and Haryana High Court.

Conclusion:
Based on the findings, the Tribunal concluded that the impugned order was not sustainable in law. Therefore, the appeal was allowed, and the order was set aside. The judgment was pronounced in open court on 28.11.2023.