The Custom, Excise, Service Tax Appellate Tribunal (CESTAT) held that the amount collected from the clients and paid to the bank on dishonouring of Cheque is covered under reimbursable expenses.
In the case of M/s TVS Finance and Services Ltd. vs. Commissioner of Central Excise, there was the dispute pertaining to the amount collected by the appellant i.e. M/s TVS Finance and Services Ltd. from their client as much is demanded by the bank for dishonoured cheques. It was held that the amount is included in the reimbursable expenses.
The appellant namely M/s TVS Finance and Services Ltd. is engaged in providing financial services and gives loans. For the recovery of loans, the appellant collects post-dated cheques. There are instances when post-dated cheques after being presented to the bank get dishonoured. The bank collects charges for dishonouring of the cheques. Such charges are recovered by the appellant from their clients. It appeared to Revenue that such charges should be included in the assessable value for levy of service tax.
The issue raised was whether the charges collected for dishonouring of the cheques incurred by TVS Finance and Services Ltd. is liable to pay service tax or it is covered in reimbursable expenses?
The Custom, Excise, Service Tax Appellate Tribunal (CESTAT) consisting of a Judicial Member, Sulekha Beevi and a Technical Member Anil G. Shakkarwar in the light of the decision passed by the Supreme Court of India in the case of Union of India Vs M/s. Intercontinental Consultants and Technocrats Pvt. Ltd. held that the amount collected from the clients and paid to the bank on dishonouring of Cheque is covered under reimbursable expenses and it cannot be covered under assessable value and no service tax is applicable.