2023 (5) TMI 240 - AT - Service Tax

Tribunal excludes reimbursable expenses from Service Tax assessable value per Rule 5(1)

M/s. MMTC Limited Versus Commissioner of Central Excise & Service Tax, Bhubaneswar-I

The Tribunal held that reimbursable expenses should not be included in the assessable value for Service Tax purposes, citing the Delhi High Court's ruling ... Valuation - inclusion of reimbursable expenses in the assessable value or not - Rule 5(1) of Service Tax (Determination of Value) rules, 2006 - HELD THAT:- The said issue came up before the Hon’ble Delhi High Court in the case of INTERCONTINENTAL CONSULTANTS AND TECHNOCRATS PVT. LTD. VERSUS UOI. & ANR. [2012 (12) TMI 150 - DELHI HIGH COURT], wherein the Hon’ble High Court has declared Rule 5(1) of the said Rules is ultra vires - The re-imbursable expenses are not includible in the assessable value in terms of Rule 5(1) of Service Tax (Determination of Value) Rules, 2006. CENVAT Credit on the services tax of paid reimbursable expenses - HELD THAT:- It is not a case of the Department that the appellant was availing inadmissible CENVAT Credit. The reimbursable expenses are not includible in the taxable value of the service provided by the Appellant. Therefore, the impugned orders are set aside - Appeal allowed. Issues involved:The judgment deals with the inclusion of reimbursable expenses in the assessable value for Service Tax purposes.Summary:The Appellant, appointed as a sole selling agent, received a fee from M/s. NINL and incurred expenses on their behalf, which were reimbursed. The Revenue contended that these reimbursable expenses should be included in the assessable value. The Appellant argued that Rule 5(1) had been struck down by the Delhi High Court and the Supreme Court, making the issue settled. The Department argued that reimbursements should be included as part of the service provided. The Tribunal had to decide whether reimbursable expenses should be included in the gross value of the service as per Rule 5(1) of the Service Tax Valuation Rules, 2006.The Tribunal noted the Delhi High Court's ruling that Rule 5(1) was ultra vires, as it sought to tax more than the consideration for the taxable service. Therefore, the Tribunal held that reimbursable expenses are not includible in the assessable value. The Department's argument about CENVAT Credit was rejected as there was no case of inadmissible credit. Consequently, the impugned orders were set aside, and the Appeals were allowed with any consequential relief.Separate Judgement:No separate judgment was delivered by the judges in this case.