By TIOL News Service

MUMBAI, NOV 25, 2015: THE appellants are engaged in providing services of ‘Consulting Engineer'. It was observed that the appellants had recovered Travelling expenses, Hostel accommodation and Telephone charges etc. incurred for visit to the site of their customers for collection of inputs and providing on-site services by issue of separate bills over and above the taxable amount charged for the services rendered.

It is the case of the department that the appellant contravened the provision of Section 67(3) of the FA, 1994 and Rules 5(1) and 5(2) of the Service Tax (Determination of Value) Rules, 2006.

The service tax, allegedly short paid, for the period from 2005-06 to September, 2007 is Rs.92,230/-. It was further noticed that the appellants had paid excess service tax in the months of May 2006, June 2006 and July 2006 which was adjusted in the month of August, 2006. Since there was no provision in the STR, 1994 to make such adjustment the amount of Rs.88,882/- was also alleged to be recoverable alongwith interest.

The lower authorities confirmed the allegations leveled and, therefore, the appellant is before the CESTAT.

As regards inclusion of the reimbursed expenses the appellant referred to Trade Notice No. 53/97 dt. 4/7/1997 wherein in para 4.5 it was clarified that in case of Consulting Engineer, gross amount charged to the client for services rendered shall be taxable and amount incurred for other expenses which was reimbursed on actual basis shall be excluded. Reliance is also placed on a host of decisions in support viz. AurobindoPharma Ltd. - 2008-TIOL-679 CESTAT-BANG; Reliance Industries ltd. - 2008-TIOL-283-CESTAT-AHM; Mckinsey & Company Inc - 2007-TIOL-583-CESTAT-MUM; Rolex Logistics Pvt. Ltd. - 2009-TIOL-270-CESTAT-BANG; C.J. Shah & Co. - 2014-TIOL-1412-CESTAT-AHM; Kirloskar Pneumatic Co. Ltd. - 2015-TIOL-538-CESTAT-MUM & Intercontinental Consultants &Technocrafts Pvt. Ltd. - 2012-TIOL-966-HC-DEL-ST.

As regard the second issue of adjustment of excess payment of service tax, it is submitted that the Commissioner had upheld the demand on the basis that the appellant has not complied with the procedure inasmuch as they have not intimated the details and reasons for such adjustment to their Jurisdictional Superintendent within the period of 15 days from the date of such adjustment as prescribed in Rule 6 of Service Tax Rules. Inasmuch as since the excess payment made during the quarter May, 2006-July 2006 had been adjusted in the next month i.e. August, 2006 and which was declared in their ST-3 returns, the procedure prescribed broadly stood complied. The following case laws were cited in support -2005-TIOL-1267-CESTAT-DEL, 2009-TIOL-650-CESTAT-MAD, 2014-TIOL-1207-CESTAT-DEL, 2014-TIOL-1684-CESTAT-DEL & 2014-TIOL-1870-CESTAT-DEL.

The AR supported the order of the lower authorities.

The Bench observed that as regards reimbursed expenses, the bills for such reimbursement were separately raised and in view of the Trade Notice No.53-C.E. (Service Tax)/97, any expenses, which is reimbursed in connection with the provision of Consulting Engineer Services was not required to be included in the gross value of taxable services. And that the case laws cited had clearly held that reimbursement of various expenditures incurred by the service provider should not be included in the gross value of service.

In the matter of adjustment of excess paid Service Tax, the Bench reproduced sub-rule 4(A) of Rule 6 of Service Tax Rules, 1994 and observed that even if it is considered that the procedure stipulated was not strictly adhered to, at the most it was a procedural lapse and,in any case, the said amount could not be permitted to be retained by the government and, therefore, the adjustment is very appropriate and favourable to Revenue as compared to refund. The Bench also noted that the case laws cited supported the claim of the appellant.

In fine, the impugned order was set aside and the appeal was allowed with consequential relief.

(See 2015-TIOL-2497-CESTAT-MUM)