2016 (9) TMI 136 - AT - Service Tax

Valuation - import of services - inclusion of reimbursement of expenses - Commercial training and coaching service management consultancy services stay and out of pocket expenses - travel, lodging and boarding expenses - reverse charge mechanism - Section 66A of the Finance Act, 1994 Held that - since the amounts paid by the appellant to the hotels and the rent-a-cab services, etc. are actual expenses, these amounts cannot be considered as an amount which are to be taxed under reverse charge mechanism. Further, the contractual obligations between the appellant and foreigners for payment of services provided by them is already taxed under reverse charge mechanism. There is no other amount which has been paid by the appellant to the foreigners as is evident from the records. Also, the said amount being paid directly to the hotels and rent-a-cab operators, it cannot, by any stretch of imagination, be considered as an amount to be paid or payable to the foreigners who rendered the services of management consultancy and the hotel and rent-a-cab has already discharged their tax liability appellant not liable to pay any amount - appeal allowed decided in favor of appellant.

Summary

Issues:
Service tax liability on services under 'Commercial Training and Coaching' and 'Management Consultancy' categories.

Analysis:
The appeal challenged the Order-in-Appeal passed by the Commissioner of Central Excise regarding service tax liability. The issue revolved around the appellant's engagement of foreigners for management consultancy services and the subsequent service tax liability. The Revenue contended that expenses incurred by the appellant for the foreigners' stay and travel in India should be included in the service value, triggering service tax liability. The appellant argued that such expenses were paid directly to service providers like hotels and cab services, already taxed, and adding them for reverse charge would result in double taxation.

The Tribunal examined the submissions and records. It noted that the service tax liability on the amount paid to foreigners for services had been discharged under reverse charge mechanism. The Tribunal found no additional payments to foreigners beyond the contracted service fees. The expenses for stay and travel were considered incidental payments to service providers, not part of the service fees to foreigners. It was acknowledged that the service providers had already paid service tax on these expenses, precluding double taxation under reverse charge.

Consequently, the Tribunal held that the service tax liability on expenses paid to hotels and cab services by the appellant was not applicable under reverse charge. It emphasized that these expenses were the actual costs incurred during the foreigners' stay and service provision, not subject to reverse charge taxation. Referring to relevant legal judgments, the Tribunal set aside the impugned order, allowing the appeal in favor of the appellant.