2015 (11) TMI 1356 - AT - Service Tax

Adjustment of excess payment of service tax with short payment - prescribed procedure of intimation to superintendent not followed - valuation - inclusion of reimbursement of expenses - held that - Any expenses, which is reimbursed in connection with the provision of Consultancy Engineering Services should not be included in the gross value of taxable services. From the records and documents produced by the appellant, reimbursement portion and services charges of the services are clearly and distinctly identifiable. For that reason also the service tax is chargeable only on the gross value of taxable services which shall not include the reimbursement of various expenses. Evan as per the Valuation Rules, it is the gross value of the taxable services which shall be chargeable to the service tax. Gross value of taxable could not be interpreted in a manner by which other expenses which is over and above the distinct services charges can included in the gross value. This Tribunal and Hon ble Courts in the cited judgments have clearly held that reimbursement of various expenditures incurred by the service provider should not be included in the gross value of service. Respectfully following ratio of judgments cited by the Ld. Counsel and as per our above observations, we are of the considered view that reimbursement shall not be taxable and demand on such reimbursement is not sustainable. Even though appellant have not specifically intimidated to the Superintendent in this regard but adjustment was declared in their ST3 returns, accordingly intimation of such adjustment stand made to the department. Even if it is considered that the said procedure was not strictly adhered to, at the most it is a procedural lapse, merely for this procedure lapse the fact that the excess amount was paid could not be deviated. Moreover, amount which was paid in excess, is neither the service tax nor an amount which was payable by the appellant, therefore in any case the said amount cannot be permitted to be retained by the government. The only option is either to refund that amount or allow adjustment. In our view, the adjustment is very appropriate and favourable to Revenue as compared to the refund. - Adjustment is legal - Decided in favour of assessee.

Summary

Issues:
1. Whether certain expenses reimbursed by the appellant should be included in the gross value of taxable services.
2. Whether the adjustment of excess paid service tax by the appellant was done in compliance with the relevant rules.

Analysis:
Issue 1:
The appellant, a provider of Consulting Engineer services, was found to have recovered expenses like Traveling expenses, Hostel accommodation, and Telephone charges from clients through separate bills. The contention was whether these reimbursable expenses should be part of the taxable value of services provided. The appellant argued that as per Trade Notice No. 53/97, such reimbursable expenses are excluded from the gross value of taxable services. The Tribunal agreed, citing various judgments that supported excluding reimbursement from taxable value. It was held that service tax should only apply to the gross value of taxable services, not additional expenses reimbursed by clients. Therefore, the demand on such reimbursement was deemed unsustainable.

Issue 2:
Regarding the adjustment of excess paid service tax by the appellant in subsequent months, the Revenue argued that the appellant failed to comply with the procedural requirement of intimating the Jurisdictional Superintendent within 15 days of adjustment. However, the Tribunal found that the adjustment was in line with Rule 6 of Service Tax Rules, which allows for such adjustments. Even though the specific intimation to the Superintendent was lacking, the adjustment was declared in the appellant's ST-3 returns, effectively informing the department. The Tribunal considered this a procedural lapse rather than a substantive issue, emphasizing that the excess amount paid should not be retained by the government without refund or adjustment. Citing precedents where similar adjustments were permitted, the Tribunal concluded that the adjustment of excess paid service tax was valid and appropriate, providing relief to the appellant.

In conclusion, the Tribunal set aside the impugned order and allowed the appeal, providing consequential relief in accordance with the law.