2023 (12) TMI 121 - AT - Service Tax

Levy of service tax - amount realised as reimbursement of expenses from the principals - period 2009-10 to 2013-14 - Extended period of limitation - HELD THAT - The present case is covered by the judgment of Hon'ble Supreme Court in the case of UOI Vs Intercontinental Consultant Technocrats (P) Ltd 2018 (3) TMI 357 - SUPREME COURT whereby the issue stands decided in favor of the Appellant as the disputed period in the present case is from 2009-10 to 2013-14 only for which it has been held that service tax is not leviable prior to 14.04.2015. It is also found that Reimbursement expenses are in relation to Freight Charges, Courier charges, Loading unloading charges/ Local cartage, Printing Stationery charges, Legal Expenses, Interest on investment and Misc expenses against copies of agreements with the principals and approves that these expenses are in the nature of reimbursement only - the disputed amounts being 'reimbursement are not includible in the taxable value and the conclusions drawn by the Ld. Commissioner is not tenable factually and legally, as per the judgment of the Larger Bench in Sri Bhagavathy Traders Vs CCE 2011 (8) TMI 430 - CESTAT, BANGALORE-LB . Extended period of Limitation - HELD THAT - Since records for the period October 2009 to March 2011 were taken for audit in August 2011 it is presumed that records up to September 2009 were taken for audit in July 2010 and earlier audits, as aforesaid. It is not a case of department that material facts of recovering reimbursement were not reflected in records for earlier period. Such information was available in records and audit had not taken any adverse observation thereon during past audits. Department therefore, is not justified to hold that the Appellant has suppressed facts. Facts of recovering reimbursement were reflected in books of account audited by audit team in past, as well. The impugned order cannot be sustained and is accordingly set aside. The appeal filed by the appellant is allowed.

Summary

Issues:
The issues involved in the judgment are the demand of service tax on reimbursement of expenses, applicability of service tax for the disputed period, and the question of suppression of facts by the appellant.

Demand of Service Tax on Reimbursement of Expenses:
The appellant, a registered service provider under "C & F Agent Service," was providing services to FMCG and Pharma companies. The appellant had signed separate agreements with these companies, agreeing to make payments on behalf of the companies and then realize the same from them as reimbursement of expenses. The appellant contended that service tax was not chargeable on the reimbursed amount. However, a notice was issued demanding service tax for the period 2009-10 to 2013-14 exclusively on reimbursement of expenses. The adjudicating authority confirmed the demand, leading to the appeal before the Tribunal.

Applicability of Service Tax for the Disputed Period:
The Tribunal found that the case was covered by the judgment of the Hon'ble Supreme Court in a specific case, which held that service tax was not leviable prior to April 14, 2015, for the disputed period of 2009-10 to 2013-14. The judgment highlighted the legislative amendment in 2015, which clarified that reimbursable expenditures would form part of the valuation of taxable services only from May 14, 2015. The Tribunal also noted that the reimbursement expenses were in relation to various charges against copies of agreements with the principals, confirming that these expenses were indeed reimbursements.

Suppression of Facts by the Appellant:
The appellant argued that the demand of service tax for a larger period was not maintainable. The Tribunal observed that the audit report, relied upon by the department, showed that the audit team had knowledge of the non-payment of service tax on reimbursement received during the relevant period. The Tribunal pointed out that the appellant's records had been audited in the past, and the information regarding the reimbursement was available in the records. Therefore, the Tribunal held that the department was not justified in alleging suppression of facts by the appellant. Consequently, the impugned order was set aside, and the appeal was allowed with consequential relief.