Hindustan Construction Company Ltd. Vs Commissioner of Central Goods and Service Tax (CESTAT Mumbai)
The CESTAT Mumbai overturned the service tax demands imposed on Hindustan Construction Company Ltd. for the period 01.04.2015 to 31.03.2017. The Tribunal noted that earlier demands for October 2008 to March 2015 were set aside based on the Supreme Court’s judgment in Intercontinental Consultants. The case centered around the appellant’s practice of reimbursing expenses like insurance and hotel costs to their group companies through debit notes, which the service tax department deemed as taxable under ‘business support service’. The Tribunal clarified that these transactions were merely reimbursements and did not constitute taxable services as defined under Section 65B and Section 67 of the Finance Act. The reimbursement for actual costs did not involve a taxable service element, and thus, the earlier adjudication and the imposition of penalties were unjustified. Consequently, the CESTAT set aside the demand and allowed the appeal, favoring the appellant.
The matter was argued by our Partner Mahesh Raichandani
FULL TEXT OF THE CESTAT MUMBAI ORDER
Brief facts of the case, leading to this appeal, are summarized herein below:
1.2 The appellants are, inter alia, engaged in the business of providing taxable services under the head of construction and other services. For provision of such services, the appellants were initially registered with the Service Tax department w.e.f. September, 2004 and subsequently, obtained the centralized registration w.e.f. May, 2007. The appellants incur certain expenditure such as insurance premium, advance tax payment, stamp paper/duty, hotel expenses etc. on behalf of their group companies. The said expenses do not relate to any supplies made to the appellants. Incurrence of such expenses were used to be reimbursed by the group companies at actual. The appellants also share cost of common expenditure that has been incurred by them, with their group companies in accordance with company’s group policy. To recover the said expenses, the appellants issue debit notes in favour of their group companies. The appellant did not pay any service tax on the transactions made by them with their group companies, owing to the reason that there is no provision of any taxable service between them and it was mere arrangement of accounting such reimbursable expenditure.
