2023 (11) TMI 682 - AT - Service Tax

Service Tax Not Payable on Foreign Experts' Lodging Expenses; Tribunal Rules in Favor of Appellant, Penalties Set Aside.

The Tribunal set aside the impugned order, ruling that service tax was not payable on expenses for board and lodging of technical experts from a foreign ... Levy of Service Tax - Inclusion of expenses on board and lodging incurred by the appellant for the visiting technical experts from Honda Motors, Japan. as consideration for their services or not - Extended period of limitation - HELD THAT:- This issue is no longer res integra. It has been decided by the Hon’ble High Court of Delhi in INTERCONTINENTAL CONSULTANTS AND TECHNOCRATS PVT. LTD. VERSUS UOI. & ANR. [2012 (12) TMI 150 - DELHI HIGH COURT] that reimbursable expenses are not exigible to Service Tax. This decision was upheld by the Supreme Court. It is to be noted that the expenses on travelling, lodging and boarding were specifically considered in the aforesaid judgment and it has been held that no Service Tax is payable on them. Since the issue found in favour of the appellant on merits, the matter of extended period of limitation need not be looked into - The demand cannot be upheld - the penalties imposed on appellants also need to be set aside - appeal allowed. Issues involved:The appeal challenges the Order in Appeal upholding the Order in Original, rejecting the appellant's appeal regarding service tax on expenses for board and lodging of technical experts from a foreign service provider.Details of the Judgment:Issue 1: Classification of expenses as consideration for servicesThe appellant, engaged in manufacturing scooters and motorcycles, availed CENVAT Credit on services from foreign providers classified as 'Intellectual Property services.' The expenses for board and lodging of technical experts were not included in taxable value, leading to a demand for service tax. The appellant argued that these expenses were not part of consideration for services, citing the agreement with Honda, Japan, and legal precedents stating reimbursable expenses are not subject to service tax. The Tribunal agreed, setting aside the impugned order as no service tax was payable on these expenses.Issue 2: Extended period of limitation and penaltiesThe appellant contended that the extended period of limitation was not applicable as returns were filed properly, and the service tax amount was available as CENVAT credit. The Tribunal, finding in favor of the appellant on the merits, did not address the limitation issue. Consequently, penalties imposed on the appellant were also set aside, and the appeal was allowed with consequential relief to the appellant.(Order dictated and pronounced in the open court)