2013 (12) TMI 1066 - AT - Service Tax

Tribunal upholds tax demand, emphasizes evidence requirements

M/s ASSOCIATED CLEARING AND FORWARDING AGENCY Versus COMMISSIONER OF SERVICE TAX, CHENNAI

The Tribunal upheld the tax demand on the applicant for alleged non-inclusion of income in taxable value, under the proviso to Section 73(1) read with ... Penalty u/s 77 and 78 - Inclusion of reimbursable surplus in taxable value - Held that:- applicant failed to co-relate expenses and the receipts. It appears that the extra amount received by them was shown as ‘profit' in the Profit and Loss Account - Therefore, conditional stay granted. Issues: Alleged non-inclusion of income in taxable value, demand of service tax under Business Auxiliary Service, demand of tax on reimbursable expenses, applicability of Valuation Rules, evidence requirement for reimbursable expenses, sharing of discount with principal, factual dispute on expenses and receipts, pre-deposit amount for appeal.Alleged non-inclusion of income in taxable value:The judgment revolves around the applicant's alleged failure to include various income/receivable attributable to reimbursable surplus and promotion/marketing of service in their taxable value. The Commissioner confirmed the tax demand under the proviso to Section 73(1) read with 73(2) of the Finance Act, 1994, along with interest and penalties. The applicant contended that the demand on reimbursable expenses post-introduction of Valuation Rules was unsustainable citing legal provisions and court decisions. They argued that no legal requirement existed to prove reimbursable expenses on an actual basis. The Tribunal directed the applicant to deposit a specific amount pending appeal, considering the factual dispute on the issue.Demand of service tax under Business Auxiliary Service:A demand of Rs.7.12 lakhs was made on the applicant for collecting a 2% discount from steamer agents for their service, shared with the principal. The applicant argued that this demand under Business Auxiliary Service was unsustainable, referencing a Tribunal decision. The Revenue reiterated the Commissioner's findings, emphasizing the lack of proof of reimbursable expenses and the need for evidence on actual expenses to avail benefits. The Revenue contended that the decision cited by the applicant did not apply to the present case, asserting that the demand was raised on CHA service and tax demanded under Business Auxiliary Service.Demand of tax on reimbursable expenses and evidence requirement:The major amount involved in the case related to reimbursable expenses, with the applicant arguing that the demand post-Valuation Rules introduction was not sustainable. They highlighted the legal provisions and court decisions supporting their stance on not needing to prove reimbursable expenses on an actual basis. The Revenue stressed the necessity of evidence on actual expenses to claim benefits, pointing out that no demand was made where actual expenses were produced. The Tribunal noted a factual dispute on expenses and receipts, directing the applicant to deposit a specific amount pending appeal.Factual dispute on expenses and receipts, pre-deposit for appeal:The Tribunal observed that the applicant failed to co-relate expenses and receipts, leading to the extra amount received being shown as profit in the accounts. A factual dispute existed regarding reimbursable expenses, which would be examined during the appeal hearing. The Tribunal directed the applicant to deposit a specific sum within a set period, with the pre-deposit of the balance amounts of tax, interest, and penalty waived pending appeal. Compliance was required to be reported on a specified date.