[2016-TIOL-2171-CESTAT-MUM] Tata Quality Management Services vs. Commissioner of Central Excise, Pune-III

Facts:
Appellant engaged services of foreign service providers and paid service tax under reverse charge mechanism on the amounts paid to them. Further, amount on their stay and other out of pocket expenses during their visit in India was also paid.  The department contended that these expenses are required to be included in the value of the service rendered by the foreign party as the same is incurred in relation thereto. It was argued that these amounts were paid to various service providers who have charged service tax on the bills raised by them and therefore adding these amounts for payment of service tax under reverse charge mechanism will result in double taxation. Further the decision of Intercontinental Consultants and Technocrats Pvt. Ltd. vs. Union of India & Anr. – 2012-TIOL-966-HC-DEL-ST was relied upon.

Held:
The Tribunal noted that due service tax is discharged on the entire amount paid to the foreigners. The amount paid for stay and travel are incidental expenses paid directly to the vendors who have paid applicable service tax and cannot be considered as amounts paid or payable to the foreigners. Further it was held that the said amount can be taxed only as per Rule 5(1) of the Service Tax (Determination of Value) Rules, 2006 which is struck down as ultra vires by the Hon’ble High Court of Delhi in the case mentioned above and therefore is not liable for service tax under reverse charge mechanism and the appeal was allowed.