Tribunal rules reimbursements not includable in service tax assessable value. Department appeal rejected.

The tribunal upheld the impugned order, confirming that reimbursements received by the Respondent are not includable in the assessable value for service tax purposes. The appeal filed by the department was rejected.

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Issues Involved:
1. Whether the reimbursement of expenses received by the Respondent are includable in the assessable value for the purpose of payment of service tax.
2. Whether the extended period for issuing the show cause notices was rightly invoked.

Summary:

Issue 1: Includability of Reimbursement of Expenses in Assessable Value for Service Tax
The appeal concerns the inclusion of reimbursements in the assessable value for service tax purposes. The Respondent, a Clearing and Forwarding (C&F) Agent, argued that they paid service tax on remuneration/commission received but not on reimbursements for expenses such as salaries, rent, and telephone expenses. They relied on the Board Circular F. No. B.43/7/97-TRU dated 11th July 1997, which clarified that reimbursements are not part of the gross value for service tax computation.

The tribunal noted that the Service Tax (Determination of Value) Rules, 2006 introduced the concept of 'Pure Agent,' where expenditures incurred as a 'Pure Agent' are excluded from the assessable value. The Respondent acted as a 'Pure Agent' by recovering the same amount paid on behalf of the client, supported by documentary evidence.

The tribunal also referenced the case of INTERCONTINENTAL CONSULTANTS & TECHNOCRATS PVT. LTD. Versus UNION OF INDIA, where the Hon'ble Delhi High Court and Supreme Court held that only the consideration for the taxable service should be included in the assessable value, not the reimbursements. Therefore, the tribunal upheld the adjudicating authority's decision to drop the demand for service tax on reimbursements.

Issue 2: Invocation of Extended Period for Issuing Show Cause Notices
The Appellant contended that the Respondent did not disclose the receipt of reimbursements, justifying the extended period for issuing show cause notices. However, the tribunal found that the Respondent had a bona fide belief that reimbursements were not subject to service tax, based on the Board Circular and prevailing judicial decisions.

Conclusion:
The tribunal upheld the impugned order, confirming that reimbursements received by the Respondent are not includable in the assessable value for service tax purposes and rejected the appeal filed by the department.

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