2018 (2) TMI 482 - AT - Service Tax

Service tax collected by the appellant and not paid to the Government - Held that - no supporting evidence has been produced. In fact, the case has been listed on many occasions when none appeared for the appellant - considering that the main facts of the case are not in dispute with reference to liability of the appellant to pay service tax of ₹ 75,52,727/- which, in fact, they have collected from the customers, we find no reason to interfere with the findings of the original authority - demand upheld. Liability of service tax - reimbursement charges collected by the appellant - Held that - it is well settled legal position that reimbursable expenditure on actual basis which are incurred by the service provider on behalf of service recipient is not liable to be included in the taxable value of services - the demand of service tax of ₹ 2,75,561/- confirmed on reimbursement expenditure is not sustainable - demand set aside. Appeal allowed in part.

Issues:
1. Confirmation of service tax liability for the period April 2007 to February 2008.
2. Imposition of penalty on the appellant.
3. Dispute regarding the amount of service tax collected by the appellant.
4. Confirmation of demand related to reimbursement charges.
5. Interpretation of Rule 5(1) of Service Tax Valuation Rules, 2006.

Confirmation of Service Tax Liability:
The judgment confirmed the service tax liability of the appellant amounting to ?75,52,727 for the period April 2007 to February 2008. Additionally, a further amount of ?2,75,561 for the period April 2004 to February 2008 was also confirmed. The appellant had collected service tax from customers but failed to remit it to the Government. The appellant disputed the amount of tax collected, claiming it to be lower. However, the claim was rejected as the appellant failed to provide supporting evidence. Despite mentioning ongoing legal proceedings, the appellant did not appear before the tribunal, leading to the confirmation of the liability based on records and ledgers.

Imposition of Penalty:
A penalty of ?80 lakhs was imposed on the appellant for the service tax liability. The tribunal noted that the appellant had indeed collected the service tax from customers but failed to pay it to the Government. The absence of the appellant during the proceedings and the lack of supporting evidence led to the penalty being upheld along with the confirmed service tax liability.

Dispute over Amount of Service Tax Collected:
The appellant disputed the amount of service tax collected, claiming it to be lower than the confirmed liability. However, the tribunal rejected this claim due to the lack of supporting evidence. The tribunal emphasized that the appellant had collected the tax from customers but failed to provide any proof to substantiate their claim of a lower amount collected.

Confirmation of Demand Related to Reimbursement Charges:
The judgment addressed the confirmation of a demand of ?2,75,561 related to reimbursement expenditure. The original authority disallowed the appellant's claim to exclude this amount from taxable value, citing the need to consider the gross value for tax purposes. However, the tribunal clarified that reimbursable expenditure incurred by the service provider on behalf of the recipient should not be included in the taxable value of services. Consequently, the demand related to reimbursement charges was set aside.

Interpretation of Rule 5(1) of Service Tax Valuation Rules, 2006:
The tribunal referred to Rule 5(1) of the Service Tax Valuation Rules, 2006, to analyze the treatment of reimbursement expenditure for tax purposes. It was established that reimbursable expenses incurred by the service provider on behalf of the recipient should not be considered in the taxable value of services. This interpretation led to the setting aside of the demand associated with reimbursement charges.

In conclusion, the tribunal dismissed the appeal, except for granting relief on the reimbursement expenditure issue, based on the detailed analysis and findings discussed in the judgment.

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