Any Expenditure Incurred by service provider in course of providing Taxable Service should be Treated as Taxable Service u/r 5 of Service Tax Rules: CESTAT [Read Order]

The Chennai bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) held that any expenditure incurred by the service provider in-course of providing taxable services should be treated as taxable services under rule 5 of the Service Tax Rules,2006. 

Chemplast Sanmar Ltd, the respondent-assessee was a private company and shared the cost of services of their top-level corporate staff with their group companies which are legal entities having separate PAN for income tax purposes. 

The revenue appealed against the order passed by the Commissioner for quashing the order passed by the adjudicating authority and the demand raised by them. 

Ananda Lakshmi Ganeshram, the counsel for the department contended that the assessee had suppressed the service rendered and not filed ST-3 returns clearly showing the activity nor had paid a duty or sought clarification after an amendment to the statute, which was clear and did not have any ambiguity, they had suppressed the matter and were liable to pay service tax on demand under the extended period. 

Radhika Chandrasekar, the counsel for the assessee contended that the services of employees of the company and the proportional cost of salaries were borne by the respective companies based on their turnover by way of ‘reimbursement‘ to the assessee. 

Further submitted that the entire transaction was only a cost-sharing arrangement between the group companies and there was no markup or element of profit or consideration out of the said arrangement and only the service charges received for the taxable services rendered were subject to Service tax. 

The bench observed that any expenditure or costs incurred by the service provider in the course of providing taxable service, all such expenditure or costs shall be treated as consideration for the taxable service provided or to be provided and shall be included in the value to charge service tax on the said service. 

The two-member bench comprising P. Dinesha (Judicial) and M. Ajit Kumar (Technical) quashed the order passed by the Commissioner and directed and remand the matter for fresh adjudication for the quantification of tax payable along with interest and the imposition of penalty as proposed in the show cause notice. 

To Read the full text of the Order CLICK HERE

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