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March, 22nd 2013

%                                      Judgment delivered on: 18.03.2013

+       W.P.(C) 1784/2013

THROUGH MOHAN GOEL                                             ... Petitioner


SERVICE TAX                                                    ... Respondent
Advocates who appeared in this case:
For the Petitioner    : Mr Nageshwar Rao with Ms Rajeshwari K. G., Mr Raghuram
                        Srinivasan and Ms Sayaree Basu Mallik
For the Respondent    : Mr Rahul Kaushik




1.      This writ petition is directed against the order dated 05.02.2013,

whereby the Customs, Excise and Service Tax Appellate Tribunal

(CESTAT) has granted partial relief to the petitioner on its application

under Section 35F of the Central Excise Act, 1944 read with Section 83

of the Finance Act, 1994 with regard to the amount of pre-deposit to be

made by the petitioner.

WP(C) 1784/2013                                                       Page 1 of 7
2.      As per the order-in-original, which is the subject matter of the

appeal before CESTAT, a demand of service tax of approximately ` 3.57

crores has been raised against the petitioner. A penalty of ` 4 crores has

also been imposed on the petitioner. As against this, the Tribunal has

directed that the petitioner should deposit a sum of ` 1 crore in three

instalments, namely, ` 40 lacs by 20.02.2013, ` 30 lacs by 20.03.2013 and

` 30 lacs by 10.04.2013. The petitioner has already deposited the first

instalment of ` 40 lacs. The petitioner is before us seeking waiver of

deposit of the balance amount of ` 60 lacs.

3.      It is the case of the petitioner that the respondents have added a

figure of approximately ` 37.55 crores and have levied service tax on that

amount to the extent of ` 3.57 crores. It is the case of the petitioner that

the figure of ` 37.55 crores is ex facie wrong inasmuch as the petitioner

has only received a sum of ` 14.22 crores by way of reimbursement for

expenses incurred by it. It is, if at all, only the sum of ` 14.22 crores

which could be the subject matter of taxation. If the approximate average

rate of tax is taken to be 10%, then the entire tax liability, if at all, would

be only to the extent of ` 1.4 crores. Therefore, according to the learned

counsel for the petitioner, even if the stand of the revenue is accepted that

WP(C) 1784/2013                                                     Page 2 of 7
the reimbursed expenditure can be the subject matter of service tax, only

an amount of ` 1.4 crores would be the resulting tax. However, the

learned counsel for the petitioner submitted that the issue of charging

service tax on reimbursable expenditure has been decided against the

revenue in the case of Intercontinental Consultants & Technocrats Pvt.

Ltd v. Union of India: 2013 (29) STR 9 (Del). Therefore, according to

the learned counsel for the petitioner, even that issue stands settled and as

a consequence, no amount of service tax would be due from the petitioner

in respect of the relevant period, i.e., 01.10.2002 to 31.03.2007.

4.      There is also the issue of invocation of the extended period of

limitation inasmuch as there has been, according to the petitioner, no

wilful suppression or concealment on the part of the petitioner. Therefore,

in any event, the show cause notice ought to have been issued within the

period of one year and it is only the demand for the period of one year

before the date of issuance of the show cause notice that could be raised,

if at all. He submitted that if the period of one year is taken, then the

entire demand would be reduced to approximately ` 7 lacs, as against

which the petitioner has already deposited a sum of ` 40 lacs.

WP(C) 1784/2013                                                      Page 3 of 7
5.      The learned counsel for the respondents, however, submitted that

the demand raised under the order-in-original specifically indicates that

the expenditure to the extent of ` 37.55 crores was reimbursed and,

therefore, on that basis the demand of ` 3.57 crores has been worked out.

As against that, the Tribunal has already granted substantial relief by

restricting the pre-deposit amount to ` 1 crore and has also granted the

petitioner the benefit of instalments. Therefore, according to the learned

counsel for the respondents, the petitioner has been adequately protected

and substantial relief has been given to the petitioner and this Court ought

not to interfere with the impugned order passed by the Tribunal.

6.      Having examined the matter at some length, we find that, prima

facie, the issue of levying and charging service tax on reimbursable

expenditure has been settled by the decision of this Court in

Intercontinental Consultants & Technocrats Pvt. Ltd                  (supra).

Therefore, prima facie, the amount of ` 14.22 crores, which has been

actually received by the petitioner from its clients towards reimbursement

of expenses, could not be the subject matter of service tax. Anyhow,

even if we assume that the expenditure, which has been reimbursed to the

petitioner could be the subject matter of levy of service tax, that amount

WP(C) 1784/2013                                                    Page 4 of 7
would have to be restricted, prima facie, to the sum of ` 14.22 crores and

not to the figure of ` 37.55 crores which has been taken by the revenue.

This is so because we do not find any material which would indicate that

the petitioner received anything in excess of ` 14.22 crores by way of

reimbursement from its clients. The figure of ` 37.55 crores includes the

direct expenditure incurred by the petitioner for which no reimbursement

was claimed nor given. That can never be added on to the figure of

professional fees which has been charged for by the petitioner and paid

for by the clients and on which service tax has already been levied and


7.      As per the financial statements of the petitioner, total revenue, on

account of transactions between 01.10.2002 and 31.03.2007, came to

approximately ` 57.58 crores. Out of this, the billing for professional

service was a figure of approximately ` 33 crores. The expenditure for

which the reimbursement was claimed and billed by the petitioner was to

an extent of approximately ` 14.58 crores (though the actual amount

received as reimbursement was approximately `. 14.22 crores).             The

balance figure of approximately ` 10 crores was stated to be `contra

entries'. These contra entries, according to the learned counsel for the

WP(C) 1784/2013                                                   Page 5 of 7
petitioner, merely inflated the figure of receipts, but in reality, the actual

receipts did not increase by ` 10 crores inasmuch as there were contra

entries indicating direct costs of the same amount of ` 10 crores.

8.      Thus, if the figure of ` 37.55 crores, which has been taken by the

revenue, is added to the figure of ` 33.00 crores, which has been billed

and received by the petitioner for professional services, the resulting

amount would be approximately ` 70 crores. This would mean that the

petitioner actually received a sum of ` 70 crores as revenue from its

clients. But, according to the learned counsel for the petitioner, it is

nobody's case that the petitioner actually received the said sum of ` 70

crores. Therefore, in whichever way we look at it, we find that the

petitioner has been able to make out a very good prima facie case that no

additional tax is payable by it in respect of the service rendered by it.

However, since the petitioner has already paid a sum of ` 40 lacs,

following the directions of the Tribunal, we are not inclined to interfere

with that part of the order. Insofar as the balance ` 60 lacs is concerned,

we feel that it would not be necessary for the petitioner to deposit the

same by way of pre-deposit so as to have the petitioner's appeal heard by

the Tribunal.

WP(C) 1784/2013                                                    Page 6 of 7
9.      Consequently, we allow this writ petition by directing that the pre-

deposit of ` 40 lacs be regarded as sufficient compliance of the provisions

of Section 35F of the Central Excise Act, 1944 read with Section 83 of

the Finance Act, 1994 for hearing the petitioner's appeal which is

pending before the Tribunal. The petitioner shall not be required to

deposit any further amount till the disposal of the appeal. We also make

it clear that our views indicated above are only prima facie and should

not be taken into account by the Tribunal while hearing the appeal on


                                        BADAR DURREZ AHMED, J

                                               R.V.EASWAR, J

MARCH 18, 2013

WP(C) 1784/2013                                                   Page 7 of 7
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