2018 (2) TMI 142 - AT - Service Tax

Liability of service tax - reimbursement expenses incurred towards catalogue printing charges, cost of tender document, crane charges, legal opinion charges, freight charges, vendor registration charges etc. - Held that - the amounts received are actual reimbursements of specified expenditure, no service tax can be charged on the same. As such, the amount is only being reimbursed to them, hence the judgment of the Hon ble Madras High Court in the case of Commissioner of Service Tax Vs. Sangamitra Services Agency 2013 (7) TMI 862 - MADRAS HIGH COURT would be squarely covered in favor of them, where it was held that if a receipt is for reimbursing the expenditure incurred for the purpose, the mere act of reimbursement, per se, would not justify the contention of the Revenue that the same, having the character of the remuneration or commission, deserves to be included in the sum amount of remuneration / Commission - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Applicability of service tax on reimbursement expenses not included in taxable value.

Analysis:
The case involved the appellant, registered under Business Auxiliary Services, who received reimbursement expenses from clients but did not include them in the taxable value for service tax purposes. The department issued a show cause notice demanding service tax, interest, and penalties for the period between 19.4.2006 and 18.9.2007. The adjudicating authority confirmed the demand, which was upheld by the Commissioner (Appeals) except for the penalty under section 76 of the Finance Act.

During the hearing, the appellant's consultant argued that the amounts received were reimbursements of specified expenditure and not subject to service tax. The consultant cited the judgment of the Hon'ble Madras High Court in a similar case, Commissioner of Service Tax Vs. Sangamitra Services Agency, and also referred to Board's Circular No.334/4/2008 and previous decisions of the Tribunal in their favor. On the other hand, the respondent supported the impugned order, mentioning that the issue was pending before the Hon'ble Supreme Court in Union of India Vs. Intercontinental Consultants & Technocrats Pvt. Ltd.

After hearing both sides and examining the records, the Bench relied on previous Tribunal decisions and the judgment of the Hon'ble High Court of Madras in the case of Sangamitra Services Agency. The Bench concluded that the demand for service tax on reimbursement expenses was unsustainable. Consequently, the impugned order was set aside, and the appeal was allowed with any consequential relief if applicable. The decision was dictated and pronounced in open court.