2025 (2) TMI 1108 - AT - Service Tax

Court Rules No Service Tax on Reimbursable Expenses for Insurance Surveyors; Follows Supreme Court Precedent

M/s Rajiv Dausage Versus Commissioner, Customs, CGST & Central Excise, Jabalpur (M.P.)

M/s Rajiv Dausage Versus Commissioner, Customs, CGST & Central Excise, Jabalpur (M.P.) - TMI The issues presented and considered in the legal judgment are as follows:1. Whether service tax could be charged on the reimbursements of expenses received by the service provider during the relevant period.2. Whether the judgment of the Supreme Court in Intercontinental Consultants and Technocrats Pvt. Ltd. versus Union of India should be applied in determining the liability for service tax on reimbursable expenses.Issue-wise detailed analysis:The relevant legal framework and precedents:The case involves a dispute regarding the liability for service tax on reimbursable expenses received by an insurance surveyor during the financial year 2012-2013. The appellant argued that the reimbursable expenses should not be subject to service tax based on the judgment of the Delhi High Court and the Supreme Court in Intercontinental Consultants and Technocrats Pvt. Ltd. versus Union of India.Court's interpretation and reasoning:The Court analyzed the provisions of Section 67 of the Finance Act, 1994, which govern the valuation of taxable services for charging service tax. The Court referred to the judgment of the Supreme Court in Intercontinental Consultants, emphasizing that the gross amount charged by the service provider for providing taxable services should be the basis for calculating service tax. The Court held that reimbursable expenses not directly related to providing taxable services should not be included in the valuation for service tax.Key evidence and findings:The appellant, an insurance surveyor, received reimbursement of expenses such as conveyance, halting charges, and photocopy charges in addition to surveyor fees during the financial year 2012-2013. The department issued a show cause notice demanding service tax on the total receipts of the appellant, including the reimbursable expenses.Application of law to facts:The Court applied the principles established in the judgment of the Supreme Court to determine that service tax should not be charged on reimbursable expenses received by the service provider. The Court found that the Commissioner (Appeals) erred in upholding the demand for service tax based on the inclusion of reimbursable expenses in the value of taxable services.Treatment of competing arguments:The appellant argued that the law as applicable during the relevant period did not allow for service tax on reimbursable expenses, citing the judgment of the Supreme Court. The Revenue representative reiterated the impugned order demanding service tax on the total receipts of the appellant.Significant holdings:The Court held that the impugned order demanding service tax on reimbursable expenses was erroneous and set it aside. The Court allowed the appeal, stating that service tax should not be charged on expenses not directly related to providing taxable services.Core principles established:- The valuation of taxable services for charging service tax should be based on the gross amount charged for providing taxable services.- Reimbursable expenses not calculated for providing taxable services should not be included in the valuation for service tax.Final determinations on each issue:The Court determined that service tax should not be charged on reimbursable expenses received by the service provider during the relevant period. The impugned order demanding service tax on the total receipts of the appellant, including reimbursable expenses, was set aside, and the appeal was allowed.