ASP Ship Management (India) Pvt Ltd Vs Commissioner of Service Tax (CESTAT Mumbai)
CESTAT Mumbai held that demand of service tax on reimbursement of expenditure by the ship owner goes beyond the mandate of Section 67 the Finance Act, 1994. Accordingly, demand of service tax confirmed u/r 5 doesn’t survive as rule 5 itself has been held to be ultra vires of section 67.
Facts- The appellants are engaged in rendering “ship management services” and are registered under service tax. On the basis of investigation, it was concluded that various reimbursable expenses received during October 2006 to March 2011, on which service tax is liable to be paid have not been paid by the appellants. Accordingly, show cause proceedings were initiated. Commissioner had confirmed the adjudged demands besides the imposition of penalty u/s. 76, 77 and 78 of the Finance Act, 1994.
Conclusion- Held that the demand for service tax on reimbursement expenses goes beyond the mandate of Section 67, which is a charging section for levy of service tax. Section 67, both before and after the 01.05.2006 amendment authorises the determination of the value of the taxable service to charge service tax under Section 66 as the gross amount charged by the service provider for such service provided or to be provided by him, in a case where the consideration for the service is money. The underlined words i.e. “for such service” are important in the setting of Sections 66 and 67. The charge of service tax under Section 66 is on the value of taxable services. The taxable services are listed in Section 65(105). The service provided by the petitioner falls under clause (zzzt).
Hon’ble High Court of Delhi in the case of Intercontinental Consultants and Technocrats Pvt. Ltd. Vs. Union of India held that what is brought to charge under the relevant Sections is only the consideration for the taxable service; thus by including the expenditure and costs, Rule 5(1) goes far beyond the charging provisions and cannot be upheld.
Held that the service tax demands confirmed under Rule 5 do not survive, in as much as Rule 5 itself has been held to be ultra vires of Section 67.
FULL TEXT OF THE CESTAT MUMBAI ORDER
This appeal has been filed by M/s ASP Ship Management (India) Private Limited (herein referred to as ‘appellants’ for short) with address at Atrium 215, A Wing, Unit No.201-203, Andheri Kurla Road, Andheri (East), Mumbai-400093, against Order-in-Original No. 17-19/ST-V/SKD/2015 dated 14.10.2015 (referred to as ‘impugned order’) passed by Commissioner, Service Tax-V, Mumbai.
2.1. Briefly stated, the facts of the case are that the appellants herein are inter alia, engaged in rendering “ship management services” and are registered under service tax registration No. AABCV3134CST001. On the basis of investigation conducted by anti-evasion wing of Service Tax-I Commissionerate, Mumbai, it was found that the appellants were rendering the services of ship management, commercial management, technical management and crew management services to vessel owners and are receiving fixed cost equivalent to monthly management fees and are getting reimbursed the cost incurred by them for ship/vessel crew, cost of purchase of vessel consumables, repairs and maintenance of ships/vessels, and administrative costs etc. The appellants assessee is paying service tax on management fees for service rendered to Indian shipowners for which payment is received in Indian currency and in respect of foreign owners where payment is received in foreign currency, the appellants are not paying service tax claiming it as export of service. The investigation concluded that various reimbursable expenses received during October 2006 to March 2011, on which service tax is liable to be paid has not been paid by the appellants. Accordingly show cause proceedings were initiated by issue of three show cause notices dated 20.04.2012, 16.10.2012 and 16.09.2014 as per the Finance Act, 1994, as detailed below:
