Reimbursement of ‘Office Expenses’ has no Service Element, No Service Tax: CESTAT [Read Order]

The Bangalore bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that the reimbursement of office expenses, being no service element involved, cannot be subjected to service tax under the provisions of the Income Tax Act, 1961.

The appellants, M/s Manav Marketing Pvt. Ltd. are engaged in providing “Business Support Service” and “Management and Repair Service”; the appellants are Marketing HAS Standard Model CNC Machine Tools and have entered into an agreement with HAAS Automation Inc. USA as per which the appellant receives payment towards the service so rendered to the foreign company in foreign exchange. Claiming that the services rendered by them are export of services and are not liable to service tax, the appellants have filed two refund claims of Rs.62,40,422/- and Rs.35,63,543/-, on 04.06.2009, for the years 2006-07 & 2007-08 and 2008-09 respectively. Revenue has issued show-cause notices and rejected the refund claims on merits as well as limitations.

P. Anjani Kumar, Technical Member and P Dinesha, Judicial Member observed that the appellant may have rendered the service as an agent of his overseas principals and may have received the consideration from them towards such service.

“Service Tax being “Destination Based Consumption Tax”, as the service is rendered and consumed in the country, the service cannot be said to have been exported. For this reason, we find that the contentions of the appellants are not acceptable. In respect of reimbursed office expenses, we do not find any service aspect in the same. Even if one assumes that it is a service rendered by the appellant, it is a service rendered to themselves. Therefore, we find that the service tax is not leviable. Coming to the commission received by the appellants, we find prima facie that there is an element of service and the same appears to have been rendered to the overseas principals,” the Tribunal said.

With regard to the refund, it was observed that the appellants have relied upon some cases to argue that the provisions of Section 11B are not applicable when any tax is paid under mistaken notion of law and any such amount paid should be treated as a deposit.

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