2024 (2) TMI 1133 - AT - Service Tax

Valuation of service - consulting engineering service - non-inclusion of value of expenses incurred by them for accommodation, travelling and foods expenses which were incurred on the visiting engineers of the service provider - HELD THAT - The matter is no longer res-integra as Hon ble Delhi High Court in the case of INTERCONTINENTAL CONSULTANTS AND TECHNOCRATS PVT. LTD. VERSUS UOI. ANR. 2012 (12) TMI 150 - DELHI HIGH COURT where it was held that What is brought to charge under the relevant Sections is only the consideration for the taxable service. By including the expenditure and costs, Rule 5(1) goes far beyond the charging provisions and cannot be upheld. The above order of Hon ble Delhi High Court has also been endorsed by 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 value of free supplies of diesel and explosives would not warrant inclusion while arriving at the gross amount charged on its service tax is to be paid. The impugned order-in-appeal is not sustainable and therefore set aside - appeal allowed.

Summary

Issues:
The issues involved in the judgment are the inclusion of expenses incurred by the appellant for accommodation, travelling, and food expenses of visiting engineers in the taxable value of consulting engineering services received by them, as well as the applicability of penal provisions and interest charges.

Details of the Judgment:

Issue 1: Inclusion of Expenses in Taxable Value
The appellant received consulting engineering services from outside India and incurred expenses on accommodation, travelling, and food for visiting engineers of the service provider. The department contended that these expenses should have been included in the taxable value of the services received by the appellant. The Adjudicating Authority confirmed the charges, but the appellant appealed. The Hon'ble Delhi High Court and the Supreme Court held that the value of taxable services can only be the gross amount charged for the service provided, and any additional expenses not directly related to providing the service cannot be included. The Courts emphasized that rules cannot go beyond the statute, and the legislation itself was amended in 2015 to clarify the inclusion of reimbursable expenses in the valuation of taxable services. Therefore, the expenses incurred by the appellant for the visiting engineers should not be included in the taxable value of the consulting engineering services received.

Issue 2: Applicability of Penal Provisions and Interest Charges
The department issued a show cause notice demanding service tax, penal provisions, and interest charges. However, based on the above interpretation of the law by the Hon'ble Courts, it was determined that the expenses in question should not be included in the taxable value. As a result, the impugned order-in-appeal, which upheld the department's decision, was set aside, and the appeal of the appellant was allowed. The judgment was pronounced on 23.02.2024 by the Appellate Tribunal CESTAT AHMEDABAD.

This summary provides a detailed overview of the issues involved in the judgment and the comprehensive details of the judgment for each issue, highlighting the legal interpretation and decisions made by the Hon'ble Courts.