No Service Tax on Travel Expenses incurred by Employees as Services are never received in India: CESTAT [Read Order]

service tax on travel expenses - CESTAT - Taxscan

The Customs, Excises, and Service Taxes Appellate Tribunal (CESTAT), Bangalore Bench held that no service tax on travel expenses incurred by the employees as the services are never received in India.

The appellant, M/s NCR Corporation India Private Limited was issued a Show cause Notice alleging non-payment of service tax on various grounds and sought to recover the same from the appellant along with interest and penalty. The SCN proposed to demand the tax on the ground that on review of the Balance Sheet of the Company it was observed that the Company had incurred certain expenses in foreign exchange, categorized as “Travel and Others” in the balance sheet, which was related to the “Professional Services‟ received under the ISA.

As per provisions of Section 67 of the Finance Act, 1994 read with Rule 5 of the Service Tax (Determination of Value) Rules, 2006, all expenses incurred in relation to the provision of main services were includible in the gross value charged for the provision of such service, and thereafter, leviable to Service Tax. Accordingly, such expenses incurred are to be included in the value of service referred to supra, and chargeable to service tax under the Reverse Charge Mechanism, under the taxable category of Business Support Services. Similar observations were made for the period FY 2007-08 to 2010-11 as well. The Authorities proposed to demand service tax to the tune of INR 15,20,96,837/- on this account, along with the applicable interest.

The issue raised was whether the Appellant is liable to pay service tax on travel reimbursement paid to its own employees for their overseas business travel and whether the Appellant is liable to pay service charge on third party vendor cross charge received from the overseas group companies.

The appellant has also produced on record specimen expenditure reimbursement claims of one of its employees along with appointment letter issued to the said employee in order to prove that foreign expenditure booked under the category of travel, is not towards the reimbursement made to any overseas group entity or any employee of the overseas group entity.

The appellant submitted that the impugned SCN demanding the service tax under the Business Support Service category does not bring on record as to how the purported services are covered under the Business Support Service category and specifically covered under which limb of the Business Support Service definition.

The coram of S.S.Garg and P.Anjani Kumar held that travel expenses incurred by the employees of the appellant were not incurred in relation to Integrated Services Agreement. These services are never received in India and hence cannot be taxed in the hands of the appellant under Section 66A of the Finance Act, 1994.

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