Reimbursed expenses excluded from service tax value where only consideration for the service can be taxed.

Only the consideration for the taxable service forms part of value under Section 67 of the Finance Act, 1994, so reimbursed expenditure incurred by a service provider cannot be added to the taxable base. Rule 5(1) of the Service Tax (Determination of Value) Rules, 2006, to the extent it sought to include such reimbursable expenses, was inconsistent with the parent statute and could not be applied. Accordingly, reimbursement amounts were not includible in service tax valuation, and the demand based on that inclusion was unsustainable.

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Issues: Whether reimbursed expenditure incurred by a service provider can be included in the taxable value for service tax under Rule 5(1) of the Service Tax (Determination of Value) Rules, 2006.

Analysis: Section 67 of the Finance Act, 1994 taxes only the gross amount charged for the service actually provided, that is, the consideration for such service. Reimbursement of expenses incurred by the service provider, being amounts not charged for rendering the service itself, cannot enlarge the taxable value. Rule 5(1) of the Service Tax (Determination of Value) Rules, 2006, to the extent it sought to include such reimbursable expenditure in the valuation base, was inconsistent with the parent statute and could not be applied.

Conclusion: Reimbursement amounts were not includible in the taxable value, and the demand sustained on that basis was unsustainable.

Final Conclusion: The impugned order confirming service tax on reimbursed expenditure could not be sustained, and the appellant succeeded.

Ratio Decidendi: Only consideration for the taxable service can form part of the value under Section 67, and subordinate valuation rules cannot include reimbursable expenses that are not charged for the service rendered.

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