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CESTAT held that reimbursable expenses incurred by service provider for client during 2006-07 are not taxable. Relying on SC judgment in Intercontinental Consultants case, the tribunal affirmed that Rule 5(1) of Service Tax Valuation Rules, 2006 was ultra vires Sections 66 and 67 of the Finance Act. The 2015 amendment including reimbursable expenditure in taxable value is prospective and does not impact liability for earlier periods. Consequently, service tax demand, interest, and penalties on reimbursed expenses prior to 2015 amendment stand quashed. Appeal allowed.
CESTAT held that reimbursable expenses incurred by service provider for client during 2006-07 are not taxable. Relying on SC judgment in Intercontinental Consultants case, the tribunal affirmed that Rule 5(1) of Service Tax Valuation Rules, 2006 was ultra vires Sections 66 and 67 of the Finance Act. The 2015 amendment including reimbursable expenditure in taxable value is prospective and does not impact liability for earlier periods. Consequently, service tax demand, interest, and penalties on reimbursed expenses prior to 2015 amendment stand quashed. Appeal allowed.
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