In Brief
The Supreme Court examined whether Rule 5 of the Service Tax (Determination of Value) Rules, 2006, which includes reimbursable expenses in calculating taxable service value, is valid under Sections 66–67 of the Finance Act, 1994. The Court held that the charging section (Section 66) and valuation section (Section 67) limit service tax to the 'gross amount charged for such service'—meaning the consideration paid for the service actually rendered. Reimbursable expenses (travel, hotel, etc.), though incurred during service provision, are separate recoveries not charged 'for such service' and thus cannot be included. Rule 5 impermissibly expands the statute's scope. The Legislature itself recognized this by amending Section 67 in May 2015 to expressly include reimbursable expenses, but that amendment applies only prospectively. All appeals were dismissed.
The lawyer headnote and full judgment text are available to registered users.