All. HC: No Authority to Additional Chief Medical Officer to File Complaint Under PCPNDT Act  ||  Kar. HC: Cannot Prosecute Second Spouse or Their Family for Bigamy Under Section 494 IPC  ||  Calcutta High Court: Person Seeking to Contest Elections is Deemed Public Interest  ||  Mad HC: In Absence of Prohibitory Order u/s 144 CrPC People Assembling and Demonstrating Not Offence  ||  Bom. HC: Legal Action to be Taken Against Doctor for Gross Negligence in Conducting Postmortem  ||  Bom. HC: Husband Directed to Pay Wife Compensation of Rs. 3 Crore for DV & Calling Her ‘Second-Hand’  ||  Delhi High Court Declines Relief to Chief Minister Arvind Kejriwal in Liquor Policy Scam Case  ||  Bom. HC: Banks to Show Evidence to Borrowers Before Invoking Circular on Wilful Default  ||  Calcutta HC: Husband and Wife Collectively Responsible for Creating Congenial Atmosphere  ||  Madras High Court: Hostel Services for Girl Students and Working Women Exempted from GST Regime    

N.R. Management Consultants India (P) Ltd. Vs. CST, New Delhi - (Customs, Excise and Service Tax Appellate Tribunal) (08 Dec 2017)

Reimbursable cost of expenditure is to be treated as a consideration for taxable services

MANU/CE/0986/2017

Service Tax

Instant appeals are against the common impugned order of Commissioner of Service Tax. Both Revenue as well as the Assesses preferred appeal. The Appellant-Assesses are engaged in providing management or business consultant service liable to tax under Section 65(105)(r) of the Finance Act, 1994 read with Section 65(65). Proceedings were initiated against the Appellant-Assesses by way of issue of SCN. The demand is for recovery of service tax under the category of Management or Business Consultant Service for the relevant period. A total demand of Rs. 1,15,05,871/- was made in the notice. An amount of Rs. 2,710/- was also sought to be recovered as in-eligible Cenvat credit. The Appellant-assesses contested the demand. The original authority held that, the Appellants are liable to pay service tax of Rs. 21,32,201/-. He dropped a demand for Rs. 93,73,670/-, which is attributable towards reimbursable expenditure incurred by appellant-assesses while providing service. He also ordered recovery of Rs. 2,710/- towards irregular Cenvat credit availed by the Appellant-assesses. Penalties were imposed under Sections 77 & 78 of Finance Act, 1994.

The Appellant-assesses entered into an agreement and in pursuance of such agreement, they have to collect various details regarding policies, plans and priorities relating to Gujarat forestry sector. They are also required to collect documents, data and information relating to laws, orders, guidelines of such sector. Based on all the collected data and information, they were required to review and analyze the current status of social development in Gujarat to identify constraints and potential of GFDB. It is clear that though the data information and other analysis is collected and done by the Appellant-Assesses in India, same is in terms of an agreement with a foreign based company. The foreign based client paid consideration inconvertible foreign exchange. The nature of service being such, the same is for consumption and benefit of the foreign client. Service tax being consumption/destination based tax, services rendered by the Appellant-Assesses are, in fact, to be considered as export. Ratio laid-down by the Tribunal in M/s. Gap International Sourcing (India) Pvt. Ltd, M/s. Microsoft Corporation (I)(P) Ltd., M/s. Paul Merchants (P) Ltd.- are squarely applicable to the present case. Said ratio has been upheld by the Delhi High Court in M/s. Verizon Communication India (P) Ltd. As such, Appellant-assesses are not liable to service tax on this service.

There is no categorical finding as to how the expenditure incurred in foreign exchange can be considered as a payment towards specific category of taxable service and thereafter can be subjected to tax at the hands of the Appellant on reverse charge basis. There is considerable force in appellant-assessee's plea with reference to presumptive nature of the demand for service tax attributable to expenditure in foreign currency. In fact, the nature of services received by the appellant-assesses with supporting evidence has not been analyzed at all. Finding recorded by the impugned order suffers from serious legal infirmity. The demand for extended period cannot be sustained in the facts and circumstances of the present case.

With reference to appeal filed by the Revenue, same is against dropping of demand by the original authority, attributable to reimbursable expenditure. In terms of Rule 5 of Valuation Rules, reimbursable cost of expenditure is to be treated as a consideration for taxable services. Admittedly, the reimbursable expenditure incurred by the Appellant is as per pre-arrangement and reimbursed by the client on actual basis. The non-includability of reimbursable expenditure in the taxable value has been upheld in large number of decisions by this Tribunal also. There no merit in the present appeal by the Revenue. The appeal of the appellant-assesses is allowed and that of the Revenue is dismissed.

Relevant : M/s. Gap International Sourcing (India) Pvt. Ltd.- 2014-TIOL-465-CESTAT-DEL, M/s. Microsoft Corporation (I)(P) Ltd.-MANU/CE/0438/2014 : 2014 (36) STR 766 (Tri. Del.), M/s. Paul Merchants (P) Ltd.- MANU/CE/0501/2012: 2013 (29) STR 257 (Tri.-Del.), M/s. Verizon Communication India (P) Ltd.- MANU/DE/2736/2017: 2017-TIOL-1863-HC-Del.-ST.

Tags : DEMAND   CONFIRMATION   VALIDITY  

Share :        

Disclaimer | Copyright 2024 - All Rights Reserved