2024 (12) TMI 1182 - HC - GST

SC Rules Finance Act 2015 Amendment on Taxable Services is Prospective; Pre-May 14, 2015, Demands Quashed.

The SC upheld the HC's decision regarding the inclusion of reimbursable expenses in the valuation of taxable services under the Finance Act, 1994, ... Inclusion of reimbursable expenses incurred by the petitioner by providing taxable services under the provisions of the Finance Act, 1994 - HELD THAT:- The Hon'ble Supreme Court while upholding the decisions of the Delhi High Court in Intercontinental Consultants & Technocrats Pvt. Ltd. Vs. Union of India [2012 (12) TMI 150 - DELHI HIGH COURT] has ultimately held that 'only with effect from May 14, 2015, by virtue of provisions of Section 67 itself, such reimbursable expenditure or cost would also form part of valuation of taxable services for charging service tax. Though, it was not argued by the learned counsel for the Department that Section 67 is a declaratory provision, nor could it be argued so, as we find that this is a substantive change brought about with the amendment to Section 67 and, therefore, has to be prospective in nature.' Both the learned counsel for the petitioner and the learned counsel for the respondent confirms that there are no other disputes in the impugned order. Since, the issue is now covered in favour of the petitioner for the period prior to 14.05.2015, the demand confirmed vide impugned order to that extent is liable to be quashed and is accordingly quashed. Petition allowed. Issues:Challenge to Order-in-Original regarding reimbursible expenses for taxable services under Finance Act, 1994.Analysis:The petitioner challenged Order-in-Original No.26-30/2022(c) dated 29.04.2022 confirming demands on reimbursible expenses for specific periods. The Court noted the decision in Union of India Vs. M/s.Intercontinental Consultants and Technocrats Pvt. Ltd. The writ petition was partially dismissed with liberty to appeal to the Appellate Body for the period between 14.05.2015 to June 2017. The petitioner complied and filed an appeal for that period. The dispute revolves around the inclusion of reimbursable expenses for taxable services under the Finance Act, 1994.The Supreme Court upheld the decisions of the Delhi High Court and highlighted the amendment to Section 67 by the Finance Act, 2015. This amendment included reimbursable expenditure in the valuation of taxable services from May 14, 2015, making it prospective in nature. The Court emphasized the importance of legislative interpretation and the presumption against retrospective operation of laws. The principle of fairness underlies the rule against retrospectivity, ensuring existing laws govern current activities and protect accrued rights.Both counsels confirmed no other disputes in the impugned order. As the issue is resolved in favor of the petitioner for the period before 14.05.2015, the demand confirmed in the impugned order for that period is quashed. The writ petition is allowed to that extent with no costs incurred. Connected Miscellaneous Petitions are closed.