2014 (12) TMI 1039 - AT - Service Tax

Waiver of pre deposit - Reimbursible expenses - Excess pension amount deducted - Tax on House Rent Allowance (HRA) - Held that - demand is based on the estimates prepared by M/s. RINL (service recipient) towards various expenditure including salary for the personnel of CISF (Appellant) for ensuring that security services are available. This demand also included medical expenditure incurred by M/s. RINL on CISF. The Department has contended that it is reimbursible expenditure. Prima facie, we find that this cannot be considered as reimbursible expenditure since in the first place this expenditure are not incurred by CISF at all. Therefore, prima facie, appellant has made out a case. Second demand is approximately ₹ 10.61 lakhs on the ground that the appellant has collected excess pension charges from M/s. RINL. Learned counsel submits that in respect of the amount relating to subsequent period from 1-4-2009, Service Tax has been discharged. The dispute is only for the earlier period during which the Service Tax was not paid. Since there was no liability on the service prior to 1-4-2009, we find that this claim of the appellant appears to be justifiable. The third demand is approximately ₹ 17 lakhs. M/s. RINL provides accommodation to CISF employees and in this case, no HRA is paid to CISF. Since there is no question of receipt of HRA by the appellant, there is no question of payment of Service Tax on the notional value of the HRA which is presumed to be received by the appellant for reimbursement to CISF. Therefore, in this case also, we do not find that it can be covered under reimbursible expenditure or under the category of payment for the service rendered. Prima facie, the appellant has made out a case. Accordingly, there shall be waiver of pre-deposit and stay against recovery of the adjudged dues during pendency of the appeal. - Stay granted.

Summary

Issues:
1. Demand of Service Tax and penalty imposed on the appellant.
2. Classification of demand under reimbursible expenses, excess pension amount, and Tax on House Rent Allowance (HRA).

Analysis:
1. The judgment deals with a case where a demand of Service Tax amounting to &8377; 5,99,79,100/- along with interest and penalty under Section 78 of the Finance Act, 1994, was imposed on the appellant (CISF) for the period from 1-4-2009 to 30-9-2011. The appellant challenged this demand, and a show cause notice was issued on 13-6-2012.

2. The appellant argued that the demand could be classified under three categories: (i) reimbursible expenses, (ii) excess pension amount deducted, and (iii) Tax on House Rent Allowance (HRA). The first demand of approximately &8377; 5.18 crores was based on estimates prepared by the service recipient towards various expenditures, including salaries for CISF personnel and medical expenses. The Tribunal found that this expenditure cannot be considered reimbursible as it was not actually incurred by CISF. Hence, the appellant's case was supported in this regard.

3. The second demand of approximately &8377; 10.61 lakhs was related to excess pension charges collected by the appellant. The Tribunal noted that Service Tax had been discharged for the subsequent period from 1-4-2009, and the dispute was only for the period prior to that. Since there was no liability for Service Tax before 1-4-2009, the appellant's claim was deemed justifiable by the Tribunal.

4. The third demand of approximately &8377; 17 lakhs was regarding the provision of accommodation to CISF employees by the service recipient without payment of HRA to CISF. As no HRA was paid to CISF, the Tribunal held that there was no basis for the payment of Service Tax on the notional value of HRA. Therefore, this demand was also not considered as reimbursible expenditure or payment for services rendered.

5. In conclusion, the Tribunal found that the appellant had made out a prima facie case in their favor. As a result, the Tribunal ordered a waiver of pre-deposit and granted a stay against the recovery of the adjudged dues during the pendency of the appeal.