https://www.taxtmi.com/css/info/rss_sitemap/rss_feed.css?v=1746094055 https://www.taxtmi.com Business/Tax/Law/GST/India/Taxation/Policies/Legal/Corporate Tax/Personal Tax/Vat Law/Legal Information/Tax Information/Legal Services/Tax Services Tax Management India. Com / MS Knowledge Processing Pvt. Ltd. All rights reserved. One stop solution for Direct Taxes and Indirect Taxes https://www.taxtmi.com/caselaws?id=759729 https://www.taxtmi.com/caselaws?id=759729 Levy of service tax on reimbursement amount based on Rule 5(1) of the Service Tax (Determination of Value) Rules, 2006 - Whether the reimbursement amount can be subjected to levy of service tax for a period prior to May, 2015? - extended period of limitation - suppression of facts or not. HELD THAT:- Section 67 of the Finance Act was considered and explained by the Supreme Court in UNION OF INDIA AND ANR. VERSUS M/S. INTERCONTINENTAL CONSULTANTS AND TECHNOCRATS PVT. LTD. [ 2018 (3) TMI 357 - SUPREME COURT] . The appellant therein was providing consulting engineering services. It received payment not only for the services provided by it but was also reimbursed for the expenses incurred by it on air travel, hotel stay, etc. It paid service tax on the amount received by it for services rendered to its clients but did not pay any service tax in respect of expenses incurred by it which were reimbursed by the clients - the service tax is on the value of taxable services and, therefore, it is the value of the services which are actually rendered which has to be ascertained for the purpose of calculating the service tax. It is for this reason that the Supreme Court observed that the expression such occurring in section 67 of the Finance Act assumes importance. It is in this context that the Supreme Court in paragraph 26 observed that the authority has to find what is the gross amount charged for providing such taxable services and so any other amount which is calculated not for providing such taxable service cannot be a part of that valuation as the amount is not calculated for providing such taxable service . This, according to the Supreme Court, is the plain meaning attached to section 67 of the Finance Act either prior to its amendment on 01.05.2006 or after this amendment and if this be so, then rule 5 went much beyond the mandate of section 67 of the Finance Act. The Supreme Court, therefore, held that the reimbursement amount cannot be treated as gross amount charged as that is not a consideration for rendering the service. It needs to be noted that it is only w.e.f. 14.05.2015 that reimbursable expenditure or cost would form part of valuation of taxable service. However, in the present case, the transaction were made before 14.05.2015. Thus, inclusion of the reimbursable cost in the value of taxable service cannot be justified. Extended period of limitation - suppression of facts or not - HELD THAT:- In the present case, the Commissioner observed that the appellant had received certain amount as reimbursement but deliberately avoided payment of service tax on the said amount with an ulterior motive to defraud the government. The Commissioner also observed that the appellant had abused the facility of self-assessment. It is for this reason that the Commissioner found that the appellant had suppressed facts with intention to evade payment of service tax. The Commissioner, therefore, could not have confirmed the demand of service tax for the extended period of limitation as the requirements of the proviso to section 73(1) of the Finance Act are not satisfied. This part of the order of the Commissioner, therefore, also deserves to be set aside - the impugned orders dated 10.10.2012, therefore, deserves to be set aside and are set aside - appeal allowed. Case-Laws Service Tax Tue, 01 Oct 2024 00:00:00 +0530