2026-VIL-1639-CESTAT-KOL-ST
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SERVICE TAX CESTAT Cases

Service Tax - Taxability of reimbursement of proportionate common expenses - Scope of consideration under Section 67 Finance Act - Appellant clinic provided premises space to charitable eye hospital and recovered proportionate share of electricity charges, water charges, municipal taxes and maintenance charges, without charging any rent as per Memorandum - During audit objection was raised that reimbursements should be included in taxable value under Section 67 read with Rule 5 of Service Tax (Determination of Value) Rules, 2006 - Show Cause Notice was issued proposing demand for recovery of Service Tax with interest and penalty on allegation that arrangement constituted renting of immovable property - Whether reimbursement of common expenses can be treated as consideration for taxable service - HELD - Rule 5(1) of Service Tax (Determination of Value) Rules went beyond the mandate of Section 67 (unamended) and was ultra vires. The Supreme Court in Union of India v. Intercontinental Consultants and Technocrats Pvt. Ltd., held that in valuation of taxable service, the value shall be the gross amount charged for such service and valuation cannot be anything more or less than the consideration paid as quid pro quo for rendering such service. Section 67, as it stood prior to 14.05.2015, did not include reimbursable expenditure or cost within the scope of consideration - The amendment made by Finance Act, 2015 with effect from 14.05.2015 including reimbursable expenditure in definition of consideration was a substantive change and therefore prospective in operation. Since disputed period was October 2010 to March 2015, for period prior to 14.05.2015, reimbursements cannot be added to value of consideration - The appellant acted on bona fide belief founded upon rational interpretation that reimbursement of proportionate common expenses did not constitute taxable consideration, and the Revenue had not made case of suppression with intent to evade Service Tax - The confirmed demand is set aside and the appeal is allowed
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