2015 (3) TMI 873 - AT - Service Tax

Failure to pay service tax on the expenses recovered from the service-recipient - reimbursement of expenses - appellant had incurred travel expenses while providing output service and the said travel expenses were recovered from the service-recipient - contravention of the provisions of Section 68(1) read with Section 66 of the FINANCE Act - Held that - A perusal of the sample invoice produced by the learned counsel, it indicates separately the inspection and service charges as also the to-and -fro actual charges for travelling. We find that there is no dispute as to the fact that the appellant discharged appropriate service tax liability on the service charges billed by them for rendering services to the client. The amount which has been collected by the appellant seems to be travelling expenses incurred by the appellant s engineers to visit the site of the client. We find force in the contention of the learned counsel that the issue is covered by the order of the coordinate bench of the Tribunal in the case of Reliance Industries Ltd. (2008 (6) TMI 78 - CESTAT AHMEDABAD). - impugned order is unsustainable in law and is liable to be set aside - Decided in favour of assessee.

Summary

Issues:
- Failure to pay service tax on travel expenses recovered from service-recipient
- Interpretation of Section 67 of the Finance Act, 1994
- Applicability of judicial precedents on reimbursable expenses for service tax liability

Issue 1: Failure to pay service tax on travel expenses recovered from service-recipient
The appeal was against an Order-in-Appeal passed by the Commissioner of Central Excise, Pune, alleging contravention of provisions of Section 68(1) read with Section 66 of the Finance Act, 1994. The appellant had incurred travel expenses, recovered from the service-recipient, but failed to pay service tax on these expenses. A show cause notice was issued demanding service tax amounting to Rs. 1,11,103 along with interest and penalties under Sections 73(1), 75, 76, 77, and 78 of the Finance Act. The appellant appealed the order before the first appellate authority, which upheld the original order, leading to the current appeal.

Issue 2: Interpretation of Section 67 of the Finance Act, 1994
The appellant contended that the reimbursed travel expenses incurred by employees for providing services should not be included in the service tax liability. The appellant cited sample invoices and referred to a tribunal decision and a judgment by the Hon'ble Delhi High Court to support their argument. The Departmental Representative argued that as per Section 67 of the Finance Act, the gross amount charged for services should be considered for service tax liability, including any amount collected over and above the billed service charges.

Issue 3: Applicability of judicial precedents on reimbursable expenses for service tax liability
The Tribunal analyzed the sample invoice showing separate charges for inspection, service, and actual travel expenses. Referring to a previous tribunal order, the Tribunal noted that reimbursable travel expenses need not be included in the service tax liability. The Tribunal cited various decisions and Board instructions supporting this view. It was emphasized that the impugned order was unsustainable in law, and the appeal was allowed with consequential relief, if any, based on the judicial pronouncements and precedents cited.

This comprehensive analysis of the judgment highlights the issues involved, the arguments presented by both parties, and the legal interpretation and application of relevant provisions and judicial precedents.