2018 (3) TMI 351 - AT - Service Tax

Valuation - pure agent - includibility - reimbursable expenses - Held that - Revenue is unable to establish that sharing of charges is in connection with provision of infrastructure support service. There is also no agreement between subsidiary company and the respondent for procurement of any services - also, the recovery is no more or no less than the actual expenditure with no consideration involved. This is certified by Chartered Accountant. The respondent has not engaged in the provision of business support service as alleged and this challenge to the impugned order is without merit - appeal dismissed - decided against Revenue.

Summary

Issues:
Setting aside of demand, reliance on previous decision, exclusion of reimbursable expenses from taxable service, provision of infrastructure support service, nature of expenses incurred, role of the appellant as an agent, lack of evidence of taxable service provided.

Analysis:
The judgment concerns the appeal by Revenue against the setting aside of a demand along with interest and penalty imposed under section 78 of the Finance Act, 1994. The appeal challenges the reliance placed by the first appellate authority on a previous decision, which the Revenue argues is inappropriate due to a pending appeal before the High Court. The central issue revolves around the exclusion of reimbursable expenses from the taxable service provided by the respondent, who incurred expenses for subsidiary companies on various charges. The Revenue asserts that the respondent was engaged in rendering business support service to their subsidiaries, making the amount collected chargeable to tax under the Finance Act, 1994.

The respondent, represented by a Chartered Accountant, argues that the issue aligns with previous Tribunal decisions and that no taxable service was provided to the subsidiaries. The Tribunal's consistent stand, as reflected in previous decisions, emphasizes that reimbursement of expenses without any service rendered does not attract service tax. The judgment cites various cases to support this position, highlighting instances where acting as an agent or trustee does not constitute providing a taxable service. The judgment also notes that the Revenue failed to establish a connection between the charges shared and the provision of infrastructure support service, emphasizing that no agreement existed for procurement of services between the respondent and the subsidiaries.

Ultimately, the Tribunal finds that the respondent did not engage in providing business support service as alleged by the Revenue. The judgment dismisses the Revenue's appeal, concluding that the challenge to the impugned order lacks merit. The decision underscores the importance of substantiating the provision of taxable services and clarifies that mere reimbursement of expenses, without actual service provision, does not attract service tax liability.