2009 (3) TMI 375 - AT - Service Tax

Valuation of the taxable services - issue for determination in this case is whether the reimbursable expenditure incurred by the appellant is chargeable to service tax or not. - . On perusal of the returns it appears that they had indicated this amount against the column marked as amount billed for exempted services other than export . It is also undisputed that the appellant has been taking this stand before the lower authorities that the amounts are reimbursable expenses. It was the claim of the appellant that they had received reimbursement charges during the course of rendering taxable services under the consulting engineer services. As such the said expenses are liable to be deducted from the gross value of the tax able service.- Since the issue is now squarely covered in favour of the appellant as regards the non-includibility of the reimbursable expenses in the value of the services provided, we find that the impugned order of the learned Commissioner (Appeals) is not correct and legal.

Summary

Issues:
Appellant contesting service tax liability on reimbursement expenses, inclusion of reimbursable expenses in gross value for service tax liability, eligibility of reimbursable expenses for deduction, applicability of previous tribunal decisions, chargeability of reimbursable expenditure to service tax, interpretation of notifications exempting certain services from service tax.

Analysis:
The case involves the appellant contesting show cause notices alleging non-discharge of service tax liability on reimbursement expenses collected from clients. The issue revolves around whether the reimbursable expenses should be included in the gross value for service tax liability calculation. The appellant argued for deduction of such expenses, but the adjudicating authority and Commissioner (Appeals) upheld the inclusion. The appellant cited previous tribunal decisions in their favor, emphasizing that reimbursement of expenses cannot be included for service tax liability calculation.

The key point of contention is whether the reimbursable expenditure incurred by the appellant is chargeable to service tax. The appellant claimed that the expenses were reimbursed during the course of rendering taxable services under consulting engineer services and should be deducted from the gross value of taxable service. The tribunal examined the returns and submissions, noting the appellant's consistent stand on the nature of these expenses.

The tribunal referred to previous decisions by the bench, which established that demanding tax on gross receipts without excluding reimbursable expenses is incorrect. These decisions highlighted the exemption of certain reimbursable expenses from service tax based on specific notifications. The tribunal emphasized that the appellant's case falls within the scope of these exemptions and, therefore, the inclusion of reimbursable expenses in service tax liability calculation is not justified.

Considering the precedents and the specific nature of the appellant's services, the tribunal concluded that the impugned order upholding the inclusion of reimbursable expenses in the gross value for service tax liability was incorrect and legally unsustainable. As the issue was settled in favor of the appellant, the tribunal set aside the Commissioner (Appeals) order and allowed the appeal with consequential relief, if any.