Hindustan Construction Company Ltd. Vs Commissioner of Central Goods and Service Tax (CESTAT Mumbai)
The appeal before the CESTAT Mumbai concerned the levy of service tax on amounts recovered by the appellant from its group companies through debit notes for the period 01.04.2015 to 31.03.2017. The appellant, engaged in providing construction and related services, incurred various expenses such as insurance, taxes, stamp duty, and other costs on behalf of its group companies. These expenses were reimbursed at actual cost, and the appellant did not pay service tax, considering them as mere reimbursements without any element of taxable service.
During audit proceedings, the department alleged that such recoveries constituted “business support services” and issued show cause notices demanding service tax along with interest and penalties. Earlier demands for a prior period had already been set aside by the Tribunal relying on judicial precedents. However, for the present period, the adjudicating authority confirmed the demand, treating the reimbursements as consideration for taxable services.
The Tribunal examined the definition of “service” under Section 65B of the Finance Act, 1994, which requires the existence of a service provider, a service recipient, and consideration. It also considered the explanation to Section 67 regarding “consideration,” including reimbursable expenses incurred in the course of providing a taxable service.
