2018 (8) TMI 24 - AT - Service Tax

Demand of Service tax - difference between the figures in ST-3 Returns and their Profit and Loss account - POT Rules - insurance commission and recovery towards reimbursement of expenses - Held that - The issue of calculation of service tax as per balance sheet prepared on accrual basis for the period prior to 01.04.2011 is not legally sustainable as the Point of Taxation Rules 2011 came into effect on 01.04.2011. The issue of includability of reimbursible expenses or cost in value of taxable services prior to May 14 2015 has been held in favor of the assessee by the Hon ble Supreme Court in the case of U.O.I vs. M/s Intercontinenatal Consultants and Technocrats Pvt Ltd 2018 (3) TMI 357 - SUPREME COURT OF INDIA . Demand set aside - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Demand of service tax, interest, and penalty on a public sector bank for the period 2004 to 2008.
2. Legality of calculation of service tax as per balance sheet prepared on accrual basis.
3. Includability of reimbursible expenses or cost in value of taxable services prior to May 14, 2015.

Issue 1: Demand of service tax, interest, and penalty
The petitioner, a public sector bank, faced a demand for service tax, interest, and penalty amounting to &8377; 54,552/-, with a confirmed demand of &8377; 47,908/- along with interest and equivalent penalty under Section 78 of the Finance Act, 1994. Penalties under Sections 76 and 77 were also imposed initially, but were later set aside in appeal.

Issue 2: Legality of calculation of service tax
The appellant's representative argued that the demand was primarily due to discrepancies between ST-3 Returns and the Profit and Loss account, as well as for insurance commission and expenses reimbursement. The legality of calculating service tax based on the balance sheet prepared on an accrual basis before April 1, 2011, was challenged. The Department's acceptance of this position was highlighted, supported by a judgment of the Hon'ble Supreme Court in a related case.

Issue 3: Includability of reimbursible expenses in taxable services
The Revenue's representative reiterated the findings of the Commissioner (Appeals). However, the Tribunal noted that the issue of including reimbursible expenses or costs in the value of taxable services before May 14, 2015, had been decided in favor of the assessee by the Hon'ble Supreme Court in a specific case. Consequently, the Tribunal found in favor of the petitioner, leading to a complete waiver of pre-deposit of service tax, interest, and penalty, with a stay on recovery during the appeal's pendency.

In conclusion, the judgment by the Appellate Tribunal CESTAT CHANDIGARH addressed the demand for service tax, interest, and penalty on a public sector bank for the period 2004 to 2008. The Tribunal examined the legality of calculating service tax based on the balance sheet prepared on an accrual basis before April 1, 2011, and the includability of reimbursible expenses in the value of taxable services before May 14, 2015. Ultimately, the Tribunal ruled in favor of the petitioner, ordering a waiver of pre-deposit and a stay on recovery during the appeal process based on the legal positions and precedents cited.