Reverse charge valuation excludes direct hotel and travel paid to third-party service providers for foreign consultants.

Amounts paid directly to hotels and rent-a-cab operators for foreign consultants' stay and travel were not includible in the taxable value for reverse charge service tax. The management consultancy fee paid to the foreign consultants had already suffered tax under Section 66A of the Finance Act, 1994, while the lodging and travel charges were paid to independent service providers who separately discharged tax on their own services. Those expenses were not amounts payable to the foreign consultants, and the valuation provision could not be used to add them again. The position was stated to be consistent with the Delhi High Court ruling in Intercontinental Consultants and Technocrats Pvt. Ltd.

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Issues: Whether the amounts paid directly to hotels and rent-a-cab service providers towards stay and travel expenses of foreign consultants were includible in the taxable value and liable to service tax under reverse charge in the hands of the assessee.

Analysis: The contractual amount paid to the foreign consultants for management consultancy had already been subjected to service tax under the reverse charge mechanism under Section 66A of the Finance Act, 1994. The stay, lodging, boarding and travel expenditure was not paid to the foreign consultants but to independent service providers such as hotels and rent-a-cab operators, who had separately discharged tax on their own services. Such actual expenses were therefore not amounts payable to the foreign consultants and could not be added again for reverse charge taxation. The valuation provision relied upon for such inclusion could not sustain the demand in the light of the Delhi High Court ruling in Intercontinental Consultants and Technocrats Pvt. Ltd.

Conclusion: The impugned additions were not taxable in the hands of the assessee under reverse charge, and the demand could not be sustained.

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