2024 (4) TMI 862 - AT - Service Tax

Short/non-payment of service tax - Jurisdiction to raise the Demand - amount reimbursed by ABP to the Appellant on actual basis towards the direct cost of ABP operations in terms of the written agreement - relevant period is July 2004 to March 2007 - invocation of Extended period of Limitation - HELD THAT - The demand is made clearly indicating the Service Tax payable, Service Tax paid and short payment of Service Tax. For the period 2004-2005 and 2005-06, they have held that no Service Tax is paid for the period 2006-2007. They have taken into account the Service Tax paid by the Kolkata unit and have arrived at the short payment of Service Tax. It is seen from the record that the Appellants were not registered at Kolkata during the period 2004- 2005 and 2005-2006 towards the billing done during this period. The Appellants have provided all the Service Tax details to the Department for the transactions carried out by Mumbai Unit. During that period, they have paid the Service Tax and filed their Returns at Mumbai. In the present case, Kolkata Revenue officials did not have the jurisdiction to demand the Service Tax amount when Service Tax was paid at Mumbai and Returns were being filed over there. In view of the same, the confirmed demand of Rs. 51,43,753/- for the period 2004-2005 and 2005-2006 is legally not sustainable. We set aside the impugned Order and allow the Appeal to this extent. Service Tax paid/payable during the period 2006-2007 - HELD THAT - The Agreement very clearly specifies that the consideration to be paid to the Appellants are under different headings and they were to be re-reimbursed the direct cost incorporated by them. Accordingly, they have engaged PP Enterprises and for the payment made to them, the Appellants have raised Debit Note for getting the re-imbursement from ABP. This exact amount paid by Appellant to PPE is being reimbursed by ABP. It is found from Annexure C of the Show Cause Notice that Re-imbursement payment is not included in the Trial Balance . This shows that this amount is not being treated as part of the income (consideration) by the Appellant. Therefore, the amount paid by ABP for PpE transactions are on account of re-imbursement of expenses only. Hence, the entire confirmed demand is not sustainable on merits. Extended period of Limitation - HELD THAT - Admittedly, the Appellants were registered with the Central Excise Department either at Mumbai or at Kolkata and they have been paying the Service Tax on the commission amount received by them and also filing their ST-3 Returns. All the transactions have been properly recorded in their Books of Account and the values have been derived by the Department from their Balance Sheet, P L Account and Trial Balance - the confirmed demand for the extended period is set aside on account of time bar. Appeal allowed on merits as well as on limitation.

Summary

Issues Involved:

1. Whether the amount reimbursed by ABP to the Appellant towards the direct cost of ABP operations is leviable to Service Tax u/s 67 of the Finance Act, 1994 read with Rule 5(1) of the Service Tax Determination of Value Rules, 2006.
2. Whether the confirmed demand for the extended period is time-barred.

Summary:

Issue 1: Levy of Service Tax on Reimbursed Amounts

The core issue in the appeal is whether the amount reimbursed by ABP to the Appellant on an actual basis towards the direct cost of ABP operations shall be leviable to Service Tax in terms of Section 67 of the Finance Act, 1994 read with Rule 5(1) of the Service Tax Determination of Value Rules, 2006. The Appellant argued that the reimbursed amounts were purely in the form of reimbursement of cost of resources deployed for ABP as per the agreement, and no Service Tax is payable on such reimbursements. The Appellant relied on the Delhi High Court's decision in Intercontinental Consultants and Technocrats Pvt. Ltd. Versus UOI. & Anr [2012 (12) TMI 150], which held Rule 5(1) of the valuation rules as ultra vires. The Tribunal agreed with the Appellant, noting that the Appellant had collected the exact amount paid to PP Enterprise without any markup and that the reimbursement of expenses was not included in the Trial Balance, thus not treated as part of the income (consideration). Consequently, the Tribunal held that the entire confirmed demand is not sustainable on merits.

Issue 2: Time-Barred Demand for Extended Period

The Appellant contended that the extended period cannot be invoked as there was no evidence of fraud, collusion, suppression of fact, wilful misstatement, or contravention of any provision of the Act or Rules with the intent to evade payment of Service Tax. The Appellant cited the Supreme Court's decision in PADMINI PRODUCTS VERSUS COLLECTOR OF C. EX. [1989 (8) TMI 80 - SUPREME COURT], which established that when the matter involves interpretation of statutory provisions, the extended period of limitation cannot be invoked. The Tribunal found merit in the Appellant's submission, noting that the Appellant was duly registered with the Central Excise Department, filed regular ST-3 Returns, and all transactions were properly recorded in their Books of Account. The Tribunal also observed that the Appellant could have held a bona fide belief that no Service Tax was required to be paid on reimbursements, supported by the Intercontinental Consultants case law. Therefore, the Tribunal set aside the confirmed demand for the extended period on account of time bar.

Conclusion:

The Tribunal allowed the appeal both on merits and on account of limitation, setting aside the impugned Order and confirming that the Appellant would be entitled to consequential relief as per law.