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2019 (4) TMI 1268 - AT - Service TaxValuation - Market Research Agency Service - inclusion of amount recovered under Actuals in the consideration for payment of service tax - HELD THAT - This amount was received for hiring of hotel rooms gift purchasing product samples etc.; These amounts have been claimed from customers on actuals duly supported by vouchers. The question whether such reimbursable expenses should form part of the taxable value has been decided by the Hon ble Supreme Court in the case of UNION OF INDIA AND ANR. VERSUS M/S. INTERCONTINENTAL CONSULTANTS AND TECHNOCRATS PVT. LTD. 2018 (3) TMI 357 - SUPREME COURT OF INDIA where it was held that the value of taxable services in terms of Section 67 does not include reimbursable expenses for providing such service until May 2014-15 when Section 67 was suitably amended to make provision for the same - the demand for service tax made on this ground is set aside. Demand for service tax on amounts received from foreign clients - N/N. 6/99 (ibid) - HELD THAT - It is not in dispute that the appellant has received payment for services provided to foreign clients either in foreign exchange or in Indian Rupees (for Nepal customer). Evidently the payment for taxable services provided to foreign clients have been received and such amounts cannot be charged to service tax since they are in the nature of Export of Services . It is on record that the appellant has made certain remittances in foreign currency for purchase of software licences and other expenses connected with providing services to foreign clients. We are of the view that such remittances will not incur the mischief of the proviso in Notification Nos.6/99 21/03 - In any case the appellant was fully entitled to make remittances in foreign exchange outside the country for legitimate business expenses as permitted by RBI from time to time. In the result we find no justification to order payment of service tax on the export proceeds. CENVAT Credit - duty paying documents - credit is denied for the reason that this has been availed on the basis of photo copies of the original documents - HELD THAT - There are no allegations have been made by the Revenue of any fraud or mis-use. No doubts have been cast on the authenticity of the photo copies based on which credit have been availed - there is no reason to deny the cenvat credit on such flimsy grounds. Appeal allowed - decided in favor of appellant.
Issues Involved:
1. Non-payment of service tax on reimbursement of out-of-pocket expenses. 2. Non-payment of service tax on certain foreign currency receipts. 3. Non-payment of service tax on payments received from clients in Nepal. 4. Disallowance of service tax credit availed and utilized. Issue-wise Detailed Analysis: 1. Non-payment of service tax on reimbursement of out-of-pocket expenses: The appellant argued that expenses incurred on behalf of clients, such as boarding, travel, lodging, hiring of hotel rooms, gifts, and purchasing product samples, were reimbursed by clients on an actual basis supported by vouchers. They relied on the CBEC Circular F.No.B/11/1/98-TRU dated 07.10.1998 and the Supreme Court decision in Union of India Vs. Intercontinental Consultants and Technocrats Pvt. Ltd., which clarified that reimbursable expenses should not be included in the taxable value of services. The Tribunal agreed, citing that Section 67 of the Finance Act, 1994, as interpreted by the Supreme Court, excludes reimbursable expenses from the taxable value until the amendment in 2015. Thus, the demand for service tax on this ground was set aside. 2. Non-payment of service tax on certain foreign currency receipts: The appellant received payments in foreign exchange for services provided to clients outside Nepal and in Indian Rupees for clients in Nepal. They claimed exemption from service tax on these receipts, citing Notification No.6/99-ST and Notification No.21/2003-ST, which exempted services paid in convertible foreign exchange. The Department's contention that remittances in foreign exchange for business expenses constituted repatriation was rejected. The Tribunal, guided by the CBEC Circular No.56/5/2003 and supported by case laws like CST Vs. SGS India Pvt. Ltd., held that such receipts are in the nature of "Export of Services" and not liable for service tax. Therefore, the demand for service tax on these foreign currency receipts was set aside. 3. Non-payment of service tax on payments received from clients in Nepal: The Tribunal considered payments received in Indian Rupees from Nepal-based clients as permitted by RBI as part of the "Export of Services." Following the same rationale applied to other foreign currency receipts, these payments were also exempt from service tax. The demand for service tax on payments from Nepal was thus set aside. 4. Disallowance of service tax credit availed and utilized: The appellant faced disallowance of cenvat credit for using photocopies of documents instead of originals, which were retained at regional offices. The Tribunal noted no allegations of fraud or misuse and no doubts on the authenticity of the photocopies. Citing the Jammu & Kashmir High Court's decision in Shivam Electrical Industries, the Tribunal found no reason to deny cenvat credit on such grounds. Therefore, the disallowance of service tax credit was set aside. Conclusion: The Tribunal set aside the impugned order and allowed the appeal, ruling in favor of the appellant on all issues. The judgment emphasized that reimbursable expenses, foreign currency receipts for export services, and payments from Nepal-based clients are not liable for service tax. Additionally, cenvat credit should not be denied based on the use of photocopies when originals are retained at regional offices. The decision was pronounced in the open court on 06.12.2018.
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