Service tax valuation excludes reimbursable expenses; extended limitation needs wilful intent to evade tax.

Reimbursable miscellaneous expenses incurred for security services are not includible in gross assessable value under service tax valuation where they do not form part of the consideration for the taxable service; Rule 5 of the Service Tax (Determination of Value) Rules, 2006, was treated as inconsistent with Section 67 to that extent. The extended period of limitation cannot be invoked merely for suppression or a valuation dispute; it requires wilful intent to evade tax, which was absent on the stated facts.

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Issues: (i) Whether reimbursable miscellaneous expenses incurred in relation to security services were includible in the gross assessable value for levy of service tax. (ii) Whether the extended period of limitation could be invoked on the facts of the case.

Issue (i): Whether reimbursable miscellaneous expenses incurred in relation to security services were includible in the gross assessable value for levy of service tax.

Analysis: Section 67 of the Finance Act, 1994 authorises levy on the consideration received for the taxable service. Rule 5 of the Service Tax (Determination of Value) Rules, 2006, to the extent it sought inclusion of reimbursable expenses, was held not to be in conformity with Section 67 and ultra vires. The disputed expenses were reimbursable outlays and not part of the consideration for the service itself.

Conclusion: The reimbursable miscellaneous expenses were not includible in the gross assessable value and the demand on that basis was unsustainable, in favour of the assessee.

Issue (ii): Whether the extended period of limitation could be invoked on the facts of the case.

Analysis: Invocation of the extended period under Section 73(1) of the Finance Act, 1994 requires wilful intent to evade tax and not mere suppression or a difference of interpretation. The dispute arose from a valuation question and there was no evidence of deliberate suppression or mala fide intent to evade tax.

Conclusion: The extended period of limitation was not invocable, in favour of the assessee.

Final Conclusion: The demand was set aside and the appeals were allowed because the reimbursable expenses were not taxable and the extended limitation period was wrongly applied.

Ratio Decidendi: Reimbursable expenses are not includible in service tax valuation unless they form part of the consideration, and the extended period cannot be invoked absent wilful suppression or intent to evade tax.

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