2019 (5) TMI 259 - AT - Service Tax

Valuation - inclusion of reimbursable expenses in assessable value - Rule 5(1) of the Service Tax (Determination of Value) Rules - HELD THAT - This issue is no more res integra and has been settled by the Apex Court in 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 plain meaning which is to be attached to Section 67 (unamended, i.e., prior to May 01, 2006) or after its amendment, with effect from, May 01, 2006. Once this interpretation is to be given to Section 67, it hardly needs to be emphasised that Rule 5 of the Rules went much beyond the mandate of Section 67. Appeal allowed - decided in favor of appellant.

Summary

Issues:
- Confirmation of service tax amount under Section 73(2) of the Finance Act, 1994
- Appropriation of paid amount against confirmed demand
- Liability for interest under Section 75 and penalties under Sections 76 and 78
- Taxability of reimbursable expenses
- Interpretation of Rule 5 of the Service Tax (Determination of Value) Rules, 2006

Confirmation of Service Tax Amount:
The appeal challenged an order confirming a service tax amount of &8377; 82,20,813 under Section 73(2) of the Finance Act, 1994. The Commissioner also imposed interest under Section 75 and penalties under Sections 76 and 78. The appellant, a Customs House Clearing Agency, believed they were not required to include reimbursements from clients for 3rd party services in their service tax payments.

Taxability of Reimbursable Expenses:
The appellant contended that the impugned order failed to justify the taxability of reimbursable expenses and did not consider the treatment of such expenses in their accounts. They argued that the Commissioner incorrectly included certain expenses as part of the taxable service, contrary to Rule 5(2) of the Service Tax (Determination of Value) Rules, 2006. The appellant relied on judicial decisions, including a Supreme Court ruling, to support their position.

Interpretation of Rule 5 of the Service Tax Rules:
The appellant cited a Supreme Court decision related to the valuation of taxable services and the inclusion of reimbursable expenses. They argued that the impugned order did not align with the legal principles established in the mentioned ruling. The Tribunal found the issue to be settled by the Supreme Court decision, leading to the setting aside of the impugned order and allowing the appeal.

Conclusion:
After considering submissions and legal precedents, the Tribunal found the impugned order unsustainable in law. Citing the Supreme Court decision on the valuation of taxable services, the Tribunal allowed the appeal, setting aside the order and providing consequential relief to the appellant.