By TIOL News Service

CHENNAI, JULY 20, 2017: THE assessees are engaged in rendering service such as promotion/marketing of various loans given by M/s. ABN Amro Bank classifiable under BAS.

The assessees received retainer-ship fee as well as out-of-pocket reimbursable expenses and they had discharged service tax only on the retainer-ship fees.

SCN was issued to recover service tax to the tune of Rs.24,31,949/- along with interest and to impose penalties.

The demands were confirmed along with penalties and interest. The Commissioner(A) dropped only the penalty imposed u/s 76 of FA, 1994.

The appellant as well as the Revenue are before the CESTAT.

It is submitted by the appellant that they had filed declaration on 28.10.2004 declaring the amount received as retainer fee and also discharged the service tax liability under Extraordinary Taxpayers' Friendly Registration Scheme and had also mentioned about the reimbursable out-of-pocket expenses received by them.

Nonetheless, the appellant averred that out-of-pocket expenses are not includible in the gross value of taxable services in view of the decision in Bhaven Desai - 2016-TIOL-508-CESTAT-MUM , as well as the Delhi High Court decision in Intercontinental Consultants & Technocrats Pvt. Ltd. Vs. Union of India - 2012-TIOL-966-HC-DEL-ST and Malabar Management Services Pvt. Ltd. - 2007-TIOL-1949-CESTAT-MAD.

Moreover, on account of the declaration made by them, the demand is time barred, the appellant added.

The AR justified the demand and also submitted that appeal against the Delhi High Court decision (supra) and CESTAT, Madras has been admitted by the Supreme Court.

The Bench extracted the cited decisions and observed –

"6. …the coordinate bench of the Tribunal in the case of Bhaven Desai (supra) has also analyzed and discussed the very same issue with respect to another service provider to the very same service recipient / ABN Amro Bank and held that reimbursable out-of-pocket expenses need not be included in the gross value of taxable services…"

Noting that the judgments appealed against before the Supreme Court have not been stayed, the CESTAT, following judicial discipline, held that the appellants are not liable to pay service tax on the reimbursable out-of-pocket expenses.

The impugned order was set aside and the appeal of the assessee was allowed with consequential reliefs, and the department's appeal was dismissed.

(See 2017-TIOL-2503-CESTAT-MAD)