2024 (11) TMI 666 - AT - Service Tax

Service tax demand on considerations received on account of reimbursable expenditure - HELD THAT - We find that the appellant has been reimbursed all the medical expenses. In case of the dog squad expenses, the dogs belonged to M/s. NRL and the maintenance cost towards the squads has been reimbursed by M/s. NRL. Similarly, in the case of donation/financial grants received for celebration of Republic Day and Independence Day, whatever expenses were incurred by CISF/appellant, were reimbursed by M/s. NRL. These details show that the amounts paid to the appellant were not in the nature of any consideration towards any of the said services provided by them. The issue is squarely covered by the decision of the Hyderabad Bench of the CESTAT in their own case 2024 (5) TMI 565 - CESTAT HYDERABAD wherein as held that reimbursement expenses are not to be added to the gross value for arriving at the Service Tax payable. Extended period of limitation - Also see considerable force in the argument of the Appellant that the confirmed demand for the extended period is hit by time bar. The Appellant is a reputed Government of India Undertaking, working under the Ministry of Home Affairs. They cannot be said to have any intention to evade the Service Tax payment. Thus the appeal filed by CISF has been allowed on merits and also on account of limitation.

Summary

Issues:
- Whether the appellant is required to pay Service Tax on amounts received from the client?
- Whether the reimbursements received by the appellant are part of the consideration for Service Tax purposes?
- Whether the Show Cause Notice issued to the appellant is time-barred?
- Whether the confirmed demand for the period in question is legally sustainable?

Analysis:
The judgment involves a case where the appellant, an Assistant Commandant providing security services, was issued a Show Cause Notice for not paying Service Tax on amounts received from the client. The appellant contested the demand of Rs. 3,50,922, arguing that reimbursements for medical expenses, dog squad expenses, and donations/grants were not part of the consideration for Service Tax. The appellant relied on a Supreme Court judgment and a Tribunal decision in their own case to support their argument that reimbursements are not subject to Service Tax. The appellant also contended that the Show Cause Notice was time-barred due to a bona fide belief that no Service Tax was payable on reimbursements. The Revenue authority, however, supported the lower authorities' findings.

Upon examination, the Tribunal found that the reimbursements received by the appellant were not part of the consideration for services provided. The Tribunal referenced a Hyderabad Bench decision that held similar expenses are not to be included in the gross value for Service Tax calculation. The Tribunal also noted that the confirmed demand for the period in question was time-barred, considering the appellant's status as a Government Undertaking under the Ministry of Home Affairs. Citing Supreme Court decisions, the Tribunal concluded that the demand for the period was not legally sustainable.

In line with the Hyderabad Bench decision and considering the appellant's bona fide belief and government status, the Tribunal allowed the appeal both on merits and limitation. The appellant was deemed eligible for any consequential reliefs as per the law. The judgment highlighted the importance of distinguishing between reimbursements and consideration for Service Tax purposes, ultimately ruling in favor of the appellant based on legal precedents and the specific circumstances of the case.