No Service Tax Demandable on Reimburseable Expense in absence of Evidence to Prove Collection of Higher Charge in Electricity Charge: CESTAT

The Chennai bench of the Customs, Excise & Service Tax Appellate Tribunal (CESTAT) has held that no service tax demandable on reimburseable expense in absence of evidence to prove collection of higher charge in electricity charge.

M/s. Ozone Projects Private Limited, the appellant is registered with the Service Tax Commissionerate for various services including works contract service. During the course of audit of accounts, it was noticed that the appellant was engaged in providing construction services for a project viz. “Metro Zone” at Anna Nagar, Chennai. Later, the appellant did not provide the services and also had to return the advance received along with compensations.

The appellant had collected electricity charges, water / CMWSSB charges and infrastructure charges from various allottees, which were includible in their taxable value and the appellant had not discharged Service Tax on such charges contending that these are reimbursable expenses. That they had availed ineligible credit on architectural fees, construction charges incurred for interior work of guest house, Sodexo Pass, insurance, air travel, etc., which according to the Department was wrongly availed; that the appellant had to pay interest on the irregularly availed CENVAT Credit which was also utilized by them.

Further, the appellant had not discharged Service Tax on the expenses incurred by them during the import of professional and technical consultancy service under reverse charge mechanism. A Show Cause Notice dated 24.10.2011 was issued proposing to demand Service Tax along with interest and for imposing penalties, by invoking the extended period. After due process of law, the original authority  dropped certain demands, however confirmed a portion of the Service Tax demand.

Counsel Shri S. Sankaravadivelu appeared and argued on behalf of the appellant. It was submitted that the appellant had collected electricity charges, water charges, sewerage charges and infrastructure charges from the allottees of the project; that these charges have been deposited with the concerned authorities. The original authority has confirmed the demand of Service Tax observing that the appellant has collected mark-up on these charges.

It was argued that the appellant was not allowed to collect any mark-up as the allottees would not pay such higher amount to the appellant. Authorized Representative Shri M. Ambe appearing for the Revenue supported the findings in the impugned order.

 A two member bench comprising Mrs. Sulekha Beevi C S, Member (Judicial) and Mr. Vasa Seshagiri Rao, Member (Technical) set aside the demand of Service Tax on the reimbursable expenses.

To Read the full text of the Order CLICK HERE

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