Service tax valuation excludes genuine reimbursements, but tax collected and not remitted remains recoverable.

Service tax collected from customers but not remitted to the Government remained payable, as the appellant's own records supported the demand and no material was produced to dispute the liability. By contrast, reimbursement expenditure incurred by the service provider on behalf of the service recipient was held not to form part of the taxable value, since genuine reimbursable expenses are excluded from valuation. The principal demand for unremitted tax was therefore maintained, while the demand relating to reimbursement was set aside.

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Issues: (i) Whether the demand of service tax collected from customers and not remitted to the Government was liable to be sustained; (ii) Whether reimbursement expenditure incurred on behalf of the service recipient was includible in the taxable value for service tax.

Issue (i): The appellant had collected service tax from customers but failed to pay it to the Government. No supporting material was produced to dislodge the figures taken from the appellant's own records, and the factual liability was not shown to be in dispute.

Conclusion: The confirmation of service tax demand relating to tax collected and not paid was sustained.

Issue (ii): The demand relating to reimbursement expenditure was tested against the principle that actual reimbursable expenses incurred by a service provider on behalf of the service recipient are not part of the taxable value. The authority below had relied on Rule 5(1) of the Service Tax Valuation Rules, 2006, but the exclusion of genuine reimbursements was held to be settled law.

Conclusion: The demand on reimbursement expenditure was set aside as unsustainable.

Final Conclusion: The appeal succeeded only to the limited extent of the reimbursement component, while the principal demand for tax collected and not remitted was maintained.

Ratio Decidendi: Actual reimbursable expenditure incurred by a service provider on behalf of the service recipient is not includible in the taxable value for service tax.

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