9911796707
|
Home
Issues involved: Interpretation of service tax liability for consulting engineer services and determination of whether the appellant acted as a pure agent in project execution.
For the first issue, the appellant contended that they were liable to pay service tax on the commission received, while the Department argued that service tax should be paid on the entire cost of projects executed by the contractors. The Department imposed penalties under Sections 76, 77 & 78 of the Finance Act, 1994 amounting to about Rs. 2.39 crores. In analyzing the second issue, the appellant presented a sample agreement with Kerala Tourism Development Corporation (KTDC) for a hotel construction project. The appellant received a fee of 5.5% for design, drawing, engineering, and supervision work, while the actual cost of execution was borne by KTDC and passed on to the contractors. The appellant claimed to be a pure agent, as they did not receive any extra margin for the service provided, and the transactions were categorized as reimbursement of actual expenses. On the contrary, the Department argued that the appellant was responsible for executing the contract from start to finish, making them the main contractor. They contended that the contractors should be treated as sub-contractors, and service tax should be paid on the entire project cost along with the commission received by the appellant. Upon consideration of both arguments, the tribunal agreed with the appellant's submission that they acted as a pure agent in the transactions. Referring to Explanation 1 to Rule 5 of Service Tax (Determination of Value) Rules, the tribunal found that the conditions for a pure agent were met in this case. The agreement clearly outlined the roles and payments at each stage, with the appellant not benefiting from the services or goods procured, which all went to the principal. Consequently, the tribunal ruled in favor of the appellant, waiving the pre-deposit requirement and staying the recovery of dues during the appeal process.
|
