2025 (2) TMI 1017 - AT - Service Tax

Levy of service tax on reimbursement - reimbursable expenses received by the appellant as consideration towards rendering of the taxable service of supply of manpower - time limitation - HELD THAT - The personnel engaged are the employees of the appellant company and the appellant is paying all salaries etc. to such employees. Only cost of salary of such employees are reimbursed by the JV on actual basis. Thus it is observed that the whole arrangement between the appellant and the JV does not fall under the taxable service of manpower supply service as defined under rule 2(g) of the Service Tax Rules. Accordingly the reimbursements received by the appellant cannot be considered as consideration towards any taxable service. The instant case is squarely covered by the decision of the Hon ble Apex Court in COMMISSIONER OF CGST DELHI SOUTH Versus BOEING INDIA DEFENSE PVT. LTD. 2023 (12) TMI 239 - SC ORDER where it was held that The issues which arise in these appeals are covered by the judgment of this Court in 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 only with effect from May 14 2015 by virtue of provisions of Section 67 itself such reimbursable expenditure or cost would also form part of valuation of taxable services for charging service tax. Time Limitation - HELD THAT - In the instant case the Show Cause Notice dated 16-09-2014 has been issued by invoking the larger period under proviso to the Section 73(1) of the Act whereas the activity of the appellant is well within the knowledge the of the respondent when first Show Cause Notice dated 09- 04-2013 was issued. Hence the whole demand is barred by limitation. Conclusion - i) The reimbursements received by the appellant cannot be considered as consideration towards any taxable service. ii) The demand is barred by limitation. The impugned order is set aside - appeal allowed.

Summary

The case involves an appeal filed by M/s. Assam Gas Company Ltd. ("the appellant") against a demand for service tax imposed by the Commissioner of Central Excise & Service Tax, Dibrugarh. The core issue in this case is whether service tax is payable on reimbursable expenses received by the appellant from a joint venture partner, considering such reimbursement as 'consideration' for providing service under the category of 'Manpower Supply Agency Service.'The appellant, engaged in the business of transmission of natural gas, had a joint venture with Num Aligarh Refinery Ltd. (NRL) and Oil India Limited (OIL). The appellant, as the lead JV partner, had technical and non-technical personnel engaged in project execution, with the costs reimbursed by the JV partners. The department considered these reimbursements as 'consideration' for 'supply of manpower' service, leading to the demand for service tax.The appellant argued that the reimbursements were not 'consideration' under Section 67 of the Finance Act, as the personnel were employees of the appellant, and the reimbursement was for actual costs incurred. The appellant also contended that the demand was time-barred and cited relevant case law to support their arguments.The Tribunal analyzed the facts and legal arguments presented by both parties. It noted that the personnel were employees of the appellant, and the reimbursement was for actual costs, not for the provision of a service. The Tribunal found that the arrangement did not fall under the taxable service of manpower supply service as defined in the Service Tax Rules.The Tribunal referenced decisions of the Hon'ble Apex Court to support its findings. It noted that the case was similar to previous judgments where reimbursable amounts were not considered 'consideration' for taxable services. The Tribunal also distinguished the present case from a case cited by the Authorized Representative, stating that the facts were different.Regarding the issue of limitation, the Tribunal held that the demand was barred by limitation, citing relevant Supreme Court precedent. Consequently, the Tribunal set aside the demand for service tax, interest, and penalties, as it was not sustainable on merits or limitation grounds.In conclusion, the Tribunal allowed the appeal filed by the appellant and set aside the impugned order, providing consequential relief as per the law.The Tribunal's decision was pronounced in open court on 25.02.2025.