Appeal partially allowed, service tax upheld on expenses claimed as reimbursement. Penalty set aside.

The Tribunal partly allowed the appeal, upholding the demand for service tax on expenses claimed as reimbursement from the principal by the appellant. The appellant's argument that these expenses should not be included in the assessable value for service tax calculation was rejected. The Tribunal held the appellant liable to pay the demanded service tax, citing a previous Larger Bench decision. However, the penalty imposed was set aside under Section 80 of the Finance Act, 1994.

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Issues:
Demand of service tax on certain expenses claimed as reimbursement from the principal by the appellant.

Analysis:
The appeal was filed against the demand of service tax amounting to &8377; 58,29,459/- along with interest and penalty imposed by the Ld. Commissioner of Service Tax, Kolkata, for the period October 2001 to March 2005. The appellant, engaged in rendering Clearing and Forwarding services, received a Show Cause Notice for non-payment of service tax on various expenses sought to be claimed as reimbursement from the principal. The department contended that these expenses were necessary for providing the services and could not be artificially bifurcated to claim deduction from the assessable value for service tax purposes.

The appellant argued that service tax had been correctly paid on the remuneration for services provided, and the expenses recovered from the principal should not be included in the assessable value for service tax calculation. The appellant also challenged the demand on the grounds of time bar and imposition of penalty. The department, however, relied on a Larger Bench decision which held that such expenses could not be considered as reimbursement for exclusion from the value of taxable services.

After hearing both parties and examining the records, the Tribunal found that the issue had already been settled by the Larger Bench decision in the case cited by the department. Consequently, the appellant was held liable to pay the demanded service tax as the claimed deduction was not permissible. The plea of limitation raised by the appellant was rejected due to non-disclosure of the recovered expenses. Regarding the penalty imposed, the Tribunal granted relief to the appellant under Section 80 of the Finance Act, 1994, and set aside the penalty.

In conclusion, the appeal was partly allowed, with the Tribunal upholding the demand for service tax on the disputed expenses but waiving the penalty imposed on the appellant.

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