Service tax valuation excludes reimbursable expenses after Rule 5(1) was struck down, supporting waiver of pre-deposit.

Reimbursable expenses such as labour charges, conveyance and actual charges were treated as outside the taxable value of services where they were claimed as pure-agent or reimbursement amounts. The valuation dispute arose under the Finance Act, 1994 and the Service Tax Valuation Rules, but the Tribunal noted that Rule 5(1) had been struck down by the Delhi High Court and could not be used to mechanically add such amounts to taxable value. On that basis, the assessee established a prima facie case for interim relief, and waiver of pre-deposit was granted with recovery stayed pending the appeal.

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Issues: Whether the amounts recovered towards labour charges, conveyance and actual charges were includible in the value of taxable services for the purpose of service tax, and whether waiver of pre-deposit was warranted.

Analysis: The dispute turned on valuation of the taxable service under Section 66 and Section 67 of the Finance Act, 1994. The demand had been confirmed by applying Rule 5(1) of the Service Tax Valuation Rules on the footing that the amounts collected were part of the taxable value and not payments received as a pure agent. The Tribunal held that the controversy was covered by the Delhi High Court decision striking down Rule 5(1), and that there was presently no basis to re-work or re-determine the taxable value by including such reimbursable expenses. In light of that position, the appellant was found to have established a prima facie case for interim relief.

Conclusion: The reimbursements were not treated as includible in the taxable value for the purpose of the stay application, and waiver of pre-deposit was granted with recovery stayed pending disposal of the appeal.

Ratio Decidendi: Reimbursable expenses cannot be mechanically added to the value of taxable services under Rule 5(1) once the rule has been struck down, and a prima facie challenge on that basis justifies waiver of pre-deposit.

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