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2016 (2) TMI 806 - AT - Service TaxDemand of service tax - valuation - reduction of reimbursement of expenses - seeking benefit of 'cum-tax' valuation and dropping of penalty under section 76 of Finance Act, 1994 - business auxiliary service being provided by the Bank - wrongful classification of service - Held that:- An existing service provider may, additionally, be required to operate a 'front office' of the client to reinforce the credibility of the financial products. These may be mandates of the client for which the client may have to make a separate payment - whether these are for actual or on lumpsum is a matter of commercial agreement. To the extent that compliance with these mandates are liable to classified only within services that are 'as yet' not taxable, it would be contrary to legislative sanction to determine tax liability on such receipts. The confirmation of demand, and approval thereof, by the lower authorities, thus, exceed limits envisaged by the legislature. We notice that the bulk of the expenses have been incurred on salaries, telephones, office space and advertisements, all of which may be considered to be essential to bringing the banking institution to the doorstep of the customer and is, thereby, inextricably enmeshed with the financial product offered by the bank. The costs claimed to be reimbursibles are, therefore, not attributable to the 'business auxiliary service' rendered by the assessee but to the cost of the product itself. Not surprisingly, the bank reimburses these expenses. Therefore, these fall outside the scope of inclusion within the meaning of 'gross amount charged' in section 67 of Finance Act, 1994 in the context of the identified taxable service. The assessee's claim of reimbursable expenses having been evidenced except for ₹ 52,96,730/- and the tax having been paid on the unevidenced portion of receipts, further demand of tax envisaged in the show cause notice fails to survive. It would appear that the adjudicating authority was itself not unambiguously certain about the taxability and its scope; the assessee cannot be placed on a higher pedestal of more exacting standards of comprehension and compliance. Invoking of section 73(4) of Finance Act, 1994 is, therefore, not warranted. The first appellate authority has dropped the penalty under section 76 of Finance Act, 1994.There is no justification for having continued with, the adjudication after the tax liability had been discharged. - Decided against the revenue and in favor of assessee.
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