2026 (3) TMI 749 - AT - Service Tax

Reimbursable Expenditures excluded from Assessable Value; interest and penalties waived where tax remitted only after receipt amid genuine dispute.

Non-monetary reimbursements paid directly by the service receiver and not received as consideration by the service provider are not includable in ... Service Tax liability on the nonmonetary consideration received - assessable value - security services to Public Sector Undertakings (PSUs) / Airports / Other client organizations - demand for delayed payment of Service Tax - violation of Section 70 - levied for the delay in filing the ST-3 Returns along with a penalty - Reimbursable non-monetary consideration - includable in assessable value for service tax - HELD THAT:- The Tribunal applied the ratio of the Supreme Court in Union of India v. Intercontinental Consultants & Technocrats Pvt. Ltd.[2018 (3) TMI 357 - SUPREME COURT] and subsequent tribunal precedents to hold that facilities received by the appellant in the nature of reimbursements (such as accommodation, medical expenses, vehicles, telephone, stationery, dog squad, insurance and other statutory charges) are not consideration received by the service provider and therefore are not to be included in the assessable value for service tax. Relying on the cited decisions and following the Central Industrial Security Force [2019 (1) TMI 1661 - CESTAT ALLAHABAD] and other tribunal orders, the demand founded on inclusion of such non-monetary consideration was held unsustainable. [Paras 7, 8] The demand of service tax confirmed on account of non-monetary consideration is set aside. Interest leviable where delay in deposit was due to delayed receipt from service receiver amid genuine confusion on liability - HELD THAT:- The Tribunal found on the record that the appellant raised deployment cost bills to the Airports Authority of India and received remittances as per budgetary/funds availability; taxes were remitted immediately upon receipt. Given the established confusion during the period about liability to service tax on security services and precedents of this Tribunal on similar facts, the delay (if any) in deposit was not attributable to the appellant and interest confirmed in the impugned order was set aside. [Paras 9] The interest demand confirmed for delay in payment of Service Tax is set aside. Waiver of late fee and penalty may be warranted in light of immediate remittance on receipt and contemporaneous confusion on tax liability - HELD THAT:- Considering that the appellant remitted service tax as and when amounts were received from the Airports Authority of India and that there existed genuine confusion during the disputed period on the liability to service tax for the services rendered, the Tribunal exercised a lenient view and annulled the late fee and penalty imposed in the impugned order. [Paras 9] The late fee and penalty imposed in the impugned order are set aside. Final Conclusion: The appeal is allowed: the confirmed demand of service tax based on non-monetary reimbursements, the interest for delayed payment, and the late fee and penalty imposed in the impugned order are set aside; consequential reliefs, if any, to follow as per law. Issues: (i) Whether non-monetary consideration/reimbursable expenditures received by the service provider from the service receiver are includable in assessable value for levy of service tax; (ii) Whether interest confirmed for delayed payment of service tax is sustainable where receipt from the service receiver was delayed and liability was under dispute; (iii) Whether late fee and penalty imposed for delay/non-compliance should be sustained.Issue (i): Whether non-monetary consideration/reimbursable expenditures received by the appellant from Airports Authority of India are includable in assessable value for levy of service tax.Analysis: The Tribunal examined prior authoritative rulings including the decision of the Hon'ble Supreme Court on the interpretation of Section 67 and the Service Tax (Determination of Value) Rules which held that reimbursable expenses paid to the service provider are not includable in assessable value. The Tribunal also considered decisions of other benches of the Tribunal applying the same principle to security services provided to airport authority, and noted that the facilities in question were in the nature of reimbursements and their monetary value was not part of the consideration received by the service provider.Conclusion: Non-monetary consideration in the nature of reimbursable expenditures is not includable in the assessable value. The demand of service tax of Rs.80,98,449/- confirmed on this count is set aside in favour of the assessee.Issue (ii): Whether the interest demand for delayed payment of service tax is sustainable given that the appellant remitted tax only after receipt from the service receiver and the liability was under dispute.Analysis: The Tribunal found that the appellant deposited the tax immediately upon receipt of the amounts from the Airports Authority of India, and that during the relevant period there was genuine uncertainty and dispute regarding liability to service tax on the services. The Tribunal applied earlier Tribunal precedent where interest was set aside in comparable factual circumstances and held that delay, if any, was not attributable to the appellant.Conclusion: The interest demand of Rs.21,02,016/- for delayed payment is not sustainable and is set aside in favour of the assessee.Issue (iii): Whether late fee and penalty imposed under the statute should be sustained.Analysis: Having found that tax was remitted promptly upon receipt from the service receiver and recognizing the confusion prevailing during the period about liability, the Tribunal exercised leniency. It considered the factual matrix and relevant precedents in which similar levies were reconsidered in comparable cases involving the appellant organisation.Conclusion: The late fee of Rs.33,500/- and penalty of Rs.10,000/- imposed under the statute are set aside in favour of the assessee.Final Conclusion: The impugned adjudication order confirming demand of service tax, interest, late fee and penalty is set aside and the appeal is allowed, resulting in complete relief to the appellant on the decided issues.Ratio Decidendi: Reimbursable or in-kind expenditures borne directly by the service receiver and not received as consideration by the service provider are not includable in the assessable value for service tax under Section 67 of the Finance Act, 1994; where tax is remitted only upon receipt from the receiver and liability was genuinely disputed, interest and penalisations are not sustainable and may be waived.