2008 (8) TMI 168 - AT - Service Tax

CHA service - assessee claimed deduction of reimbursable expenses - allegations that the appellants have not spent amounts on reimbursement and have not made payment towards tax on input service, are not sustainable - ST-3 returns and also the Cenvat credit returns have been filed regularly by the appellant - In view of this, the larger period cannot be invoked revenue not proved that expenses reimbursed were not actually incurred - there is no any suppression of facts demand is time barred

Summary

Issues:
1. Service tax payment and input credit irregularities for the period 2001-2005.
2. Allegation of wrongful availment of input credit.
3. Time-barred demand.
4. Interpretation of Board's Circular on reimbursable expenses.
5. Denial of credit for input services.
6. Imposition of penalties.

Analysis:

Service Tax Payment and Input Credit Irregularities:
The appellants, registered as "Custom House Agent" and GTA, were accused of underpaying service tax and irregularly availing input credit for the period 2001-2005. The Adjudicating Authority confirmed the amounts due, including service tax and penalties under relevant sections of the Finance Act, 1994.

Time-Barred Demand:
The appellant argued that the demand was time-barred, emphasizing that they had regularly filed ST-3 and Cenvat credit returns, providing detailed accounts of taxable value and input credit utilization. The Tribunal agreed, granting the benefit of time bar except for December 2005, where demands were confirmed.

Interpretation of Board's Circular on Reimbursable Expenses:
The appellant contended that the demand was unjust as they followed the Board's Circular, which allowed deductions for reimbursable expenses and permitted an 85% deduction for lump sum charges. The Tribunal found in favor of the appellant, stating that the department failed to verify expenses or prove non-payment of reimbursements, shifting the burden of proof to the department.

Denial of Credit for Input Services:
The Commissioner denied input service credits citing reasons like services not used, payments not made by importers/exporters, and lack of evidence on credit utilization. The appellant argued that credit denial was extraneous to the relevant rules and should not be based on suspicion, especially when they had paid service tax on input services.

Imposition of Penalties:
The Tribunal set aside penalties, noting that the appellant's compliance with filing returns regularly and the lack of evidence supporting the allegations of non-payment or suppression of facts. Only the demand for December 2005 was upheld, along with interest, while the appeal was allowed with consequential relief.

This detailed analysis of the judgment highlights the key issues, arguments presented, and the Tribunal's findings, providing a comprehensive overview of the legal proceedings and decision.