{"id":322687,"date":"2024-05-22T16:00:46","date_gmt":"2024-05-22T10:30:46","guid":{"rendered":"https:\/\/www.scconline.com\/blog\/?p=322687"},"modified":"2024-06-07T11:57:45","modified_gmt":"2024-06-07T06:27:45","slug":"reimbursement-expenses-and-rent-free-accomodation-not-part-of-total-consideration-for-arriving-at-service-tax-payable-cestat-legal-news","status":"publish","type":"post","link":"https:\/\/www.scconline.com\/blog\/post\/2024\/05\/22\/reimbursement-expenses-and-rent-free-accomodation-not-part-of-total-consideration-for-arriving-at-service-tax-payable-cestat-legal-news\/","title":{"rendered":"Reimbursement expenses & rent-free accommodation not part of total consideration for calculating Service Tax: CESTAT"},"content":{"rendered":"
\n

Customs, Excise and Service Tax Appellate Tribunal, Hyderabad:<\/span> In the present appeal, the confirmed demand of the Service Tax by the Adjudicating Authority was challenged by the appellants. The Bench of R. Muralidhar, Member (Judicial) and A.K. Jyotishi, Member (Technical) held the demand to be time barred and further opined that reimbursement expenses and accommodation are not part of the total consideration for arriving at payable service tax.<\/p>\n

Background<\/p>\n

The appellant, CISF, was providing services to Rashtriya Ispat Nigam Ltd. (RINL), a public sector undertaking (‘PSU’). Apart from considerations received from RINL, CISF was also receiving reimbursements on various expenditures like medical bills, transportation costs, etc. They were also making a Pension Contribution Fund and its excess was being deducted from the bill amount and the Service tax was charged only on the net amount. The CISF employees were also provided rent-free accommodation by RINL.<\/p>\n

In this regard, Commissioner of Central Tax took the view that, in terms of Rule 5(1) of the Service Tax (Determination of Value) Rules, 2006 (‘Rule 5’), reimbursements must be added to the total consideration for payment of service tax. On this count, a service tax of Rs.5,18,41,050 was demanded while in respect of the excess pension contribution, Rs.10,61,476 was demanded. With regard to rent-free accommodation, 20% House Rent Allowance (‘HRA’) of the Basic Pay and Grade Pay was taken as the value of rent saved by the appellant.<\/p>\n

After evaluating the aforementioned as the total consideration in terms of Section 67 of the Finance Act, and total Rs.70,76,574 of service tax was demanded. When the adjudicating authority confirmed the demands, being aggrieved, the appellants filed the present appeal.<\/p>\n

Analysis and Decision<\/p>\n

The Tribunal recognised that the appellants were receiving reimbursements for various expenses like medical, stationery, etc., from RINL. Relying on the Supreme Court decision in Union of India<\/span> v. Intercontinental Consultants & Technocrats (P) Ltd.<\/span>, (2018) 4 SCC 669<\/a>, the Tribunal held that Rule 5 went much beyond the mandate of statutory provision and was therefore ultra vires Section 67. Therefore, such reimbursement expenses cannot be treated as ‘gross amount charged’ and the same is not a ‘consideration’ for rendering the services. The Tribunal further relied on CST<\/span> v. Bhayana Builders (P) Ltd.<\/span>, (2018) 3 SCC 782<\/a>, the Supreme Court had held that free supplies would not form part of the total value for charging service tax.<\/p>\n

In respect of the rent-free accommodation, the Tribunal followed catena of decisions to hold that the rent-free accommodation provided to the CISF personnel cannot be taken as additional consideration. Therefore, the same is not includable in taxable value.<\/p>\n

Upholding the CISF’s contention that the demand confirmed by the Adjudicating Authority for the external period was time barred, the Tribunal further opined that since both the service provider and the service recipient were government undertakings, it could not be said that there was any intention to evade the service tax payment. Resultantly, the Tribunal held that the confirmed demand was not sustainable legally.<\/p>\n

[CISF v. Commissioner of Central Tax, 2024 SCC OnLine CESTAT 483<\/a>, order dated 10-05-2024<\/span>]<\/p>\n\n

Advocates who appeared in this case :<\/p>\n

For the Appellant: Anushka Rastogi, Advocate<\/p>\n

For the Respondent: K. Srinivas Reddy, AR<\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

The Tribunal opined that both service provider and service recipient were government undertakings and cannot be said to have any intention to evade the tax payment.<\/p>\n","protected":false},"author":67011,"featured_media":319582,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[3,11],"tags":[6651,38627,20601,68980,68981,68982,43924,3208],"class_list":["post-322687","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-casebriefs","category-tribunals_commissions_regulatorybodies","tag-cestat","tag-cisf","tag-finance-act","tag-reimbursement-of-expenses","tag-rent-free-accomodation","tag-rinl","tag-section-67","tag-service_tax"],"yoast_head":"\nReimbursement expenses and rent-free accomodation not part of total consideration for arriving at Servive Tax payable: CESTAT | SCC Times<\/title>\n<meta name=\"description\" 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The appellant was a 100% Export Oriented Unit (EOU) and was\u2026","rel":"","context":"In "Case Briefs"","block_context":{"text":"Case Briefs","link":"https:\/\/www.scconline.com\/blog\/post\/category\/casebriefs\/"},"img":{"alt_text":"","src":"https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2018\/09\/CESTAT-Taxscan.jpg?resize=350%2C200&ssl=1","width":350,"height":200,"srcset":"https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2018\/09\/CESTAT-Taxscan.jpg?resize=350%2C200&ssl=1 1x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2018\/09\/CESTAT-Taxscan.jpg?resize=525%2C300&ssl=1 1.5x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2018\/09\/CESTAT-Taxscan.jpg?resize=700%2C400&ssl=1 2x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2018\/09\/CESTAT-Taxscan.jpg?resize=1050%2C600&ssl=1 3x"},"classes":[]},{"id":299958,"url":"https:\/\/www.scconline.com\/blog\/post\/2023\/08\/24\/works-contracts-leviable-to-service-tax-legal-update\/","url_meta":{"origin":322687,"position":2},"title":"“‘Works Contracts’ leviable to service tax only from July 2012 onwards”; Customs, Excise & Service Tax Appellate Tribunal, Chennai","author":"Editor","date":"August 24, 2023","format":false,"excerpt":"\u201cAfter the insertion of Section 65B (54) in the Finance Act 1994, from 01-07-2012 onwards, the definition of \u2018works contract\u2019 was expanded to include repair and maintenance services of movable properties. Hence, the composite contracts for repair and maintenance of motor vehicles are leviable to service tax from said date.\u201d","rel":"","context":"In "Case Briefs"","block_context":{"text":"Case Briefs","link":"https:\/\/www.scconline.com\/blog\/post\/category\/casebriefs\/"},"img":{"alt_text":"cestat","src":"https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2023\/08\/cestat.webp?resize=350%2C200&ssl=1","width":350,"height":200,"srcset":"https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2023\/08\/cestat.webp?resize=350%2C200&ssl=1 1x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2023\/08\/cestat.webp?resize=525%2C300&ssl=1 1.5x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2023\/08\/cestat.webp?resize=700%2C400&ssl=1 2x"},"classes":[]},{"id":280899,"url":"https:\/\/www.scconline.com\/blog\/post\/2023\/01\/03\/kaar-reverse-charge-mechanism-is-not-applicable-on-reimbursement-of-expenses-on-actuals-to-a-whole-time-director-of-the-company-legal-research-legal-news-updates\/","url_meta":{"origin":322687,"position":3},"title":"KAAR | Reverse Charge Mechanism not applicable on reimbursement of expenses on actuals to a whole-time director of the company","author":"Editor","date":"January 3, 2023","format":false,"excerpt":"KAAR ruled that reimbursement of expenses at actual cost which are incurred by the employee on behalf of the company is not liable to tax and reverse charge mechanism is not applicable on reimbursement of expenses on actuals to a whole-time director of the company who is also an employee\u2026","rel":"","context":"In "Advance Rulings"","block_context":{"text":"Advance Rulings","link":"https:\/\/www.scconline.com\/blog\/post\/category\/casebriefs\/aar\/"},"img":{"alt_text":"Authority for Advance Ruling (Karnataka)","src":"https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2023\/01\/MicrosoftTeams-image-79.jpg?resize=350%2C200&ssl=1","width":350,"height":200},"classes":[]},{"id":355919,"url":"https:\/\/www.scconline.com\/blog\/post\/2025\/08\/07\/cestat-service-tax-on-assignment-of-film-copyright-under-copyright-service\/","url_meta":{"origin":322687,"position":4},"title":"Whether service tax can be levied on transfer or assignment of copyright of the film produced under copyright service? CESTAT answers","author":"Bharti","date":"August 7, 2025","format":false,"excerpt":"The Adjudication Authority stated that the appellant\u2019s activity of receiving income from transferring temporarily or permitting the use of the right vested in the film produced by them to their clients fell under the definition of copyright service under Section 65(105)(zzzt) of the Finance Act, 1994.","rel":"","context":"In "Case Briefs"","block_context":{"text":"Case Briefs","link":"https:\/\/www.scconline.com\/blog\/post\/category\/casebriefs\/"},"img":{"alt_text":"Service tax on assignment under copyright service","src":"https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2025\/08\/Service-tax-on-assignment-under-copyright-service.webp?resize=350%2C200&ssl=1","width":350,"height":200,"srcset":"https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2025\/08\/Service-tax-on-assignment-under-copyright-service.webp?resize=350%2C200&ssl=1 1x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2025\/08\/Service-tax-on-assignment-under-copyright-service.webp?resize=525%2C300&ssl=1 1.5x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2025\/08\/Service-tax-on-assignment-under-copyright-service.webp?resize=700%2C400&ssl=1 2x"},"classes":[]},{"id":363302,"url":"https:\/\/www.scconline.com\/blog\/post\/2025\/10\/10\/transferring-tenancy-rights-not-liable-to-service-tax-cestat\/","url_meta":{"origin":322687,"position":5},"title":"Transferring tenancy and occupancy rights in immovable property not service under S. 65-B(44) of Finance Act; not liable to service tax: CESTAT","author":"Bharti","date":"October 10, 2025","format":false,"excerpt":"\"Consideration out of surrender of tenancy right on account of immovable property cannot be considered as service as per definition under Section 65-B(44) of the Finance Act, 1994 and no service tax is payable.\"","rel":"","context":"In "Case Briefs"","block_context":{"text":"Case Briefs","link":"https:\/\/www.scconline.com\/blog\/post\/category\/casebriefs\/"},"img":{"alt_text":"transferring tenancy rights not liable to service tax","src":"https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2025\/10\/transferring-tenancy-rights-not-liable-to-service-tax.webp?resize=350%2C200&ssl=1","width":350,"height":200,"srcset":"https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2025\/10\/transferring-tenancy-rights-not-liable-to-service-tax.webp?resize=350%2C200&ssl=1 1x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2025\/10\/transferring-tenancy-rights-not-liable-to-service-tax.webp?resize=525%2C300&ssl=1 1.5x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2025\/10\/transferring-tenancy-rights-not-liable-to-service-tax.webp?resize=700%2C400&ssl=1 2x"},"classes":[]}],"amp_enabled":true,"_links":{"self":[{"href":"https:\/\/www.scconline.com\/blog\/wp-json\/wp\/v2\/posts\/322687","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.scconline.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.scconline.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.scconline.com\/blog\/wp-json\/wp\/v2\/users\/67011"}],"replies":[{"embeddable":true,"href":"https:\/\/www.scconline.com\/blog\/wp-json\/wp\/v2\/comments?post=322687"}],"version-history":[{"count":0,"href":"https:\/\/www.scconline.com\/blog\/wp-json\/wp\/v2\/posts\/322687\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.scconline.com\/blog\/wp-json\/wp\/v2\/media\/319582"}],"wp:attachment":[{"href":"https:\/\/www.scconline.com\/blog\/wp-json\/wp\/v2\/media?parent=322687"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.scconline.com\/blog\/wp-json\/wp\/v2\/categories?post=322687"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.scconline.com\/blog\/wp-json\/wp\/v2\/tags?post=322687"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}