Reimbursable expenditure excluded from service tax value after Rule 5(1) was held ultra vires, with stay granted.

In a service tax valuation dispute, reimbursable expenditure was treated as not prima facie includible in taxable value under Rule 5(1) of the Service Tax (Determination of Value) Rules, 2006 because the rule had already been struck down as ultra vires Section 67 of the Finance Act, 1994. On that binding basis, the applicant established a prima facie case against inclusion of such amounts in the demand. Predeposit of the adjudged dues was therefore waived and recovery was stayed pending the appeal.

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Issues: Whether the applicant was entitled to waiver of predeposit and stay of recovery in a service tax dispute concerning inclusion of reimbursable expenditure in the taxable value under Rule 5(1) of the Service Tax (Determination of Value) Rules, 2006.

Analysis: The cited valuation rule had been struck down by the Delhi High Court as ultra vires Section 67 of the Finance Act, 1994. In view of that binding development, the applicant established a prima facie case that the amounts claimed as reimbursable expenditure could not be included in the gross taxable value for the purpose of the demand.

Conclusion: The predeposit of the adjudged dues was waived and recovery was stayed during the pendency of the appeal.

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