2016 (5) TMI 134 - AT - Service Tax

Taxability - Amount received under the category of Management Consultancy and Manpower Recruitment Supply Agency Service - Appellant wrongly claimed expenses as reimbursable and did not include the same in the taxable value for payment of service tax - Held that - the appellant has been showing the amounts which has been claimed as reimbursable are not an amount towards the services but are in respect of various fees paid to DGFT authorities towards the application fees, licence fees, etc. Also the demand drafts raised in the name of DGFT authorities and receipts are issued by DGFT authorities in respect of the appellant s client who were undertaking the liasioning work with the authorities. Therefore, the service tax liability, as confirmed, is incorrect as the said amounts on which tax liability has been raised is nothing but reimbursement of the expenses incurred by the appellant for the licence fees, etc. Disallowance of Cenvat credit - Held that - the said amount is in respect of service tax paid on broad band services, courier services, internet and automobile service stations. These services are utilised by the appellant for rendering the output services i.e. Management Consultancy Services . Therefore, the appellant was and is eligible to avail Cenvat credit of this amount. Accordingly the impugned order is set aside. The issue, TDS credited to the debtors ledger for which no income tax refund has been received, needs reconsideration by the adjudicating authority as service tax payable on TDS which has been credited is more or less seems to be an accounting entry which needs to be appreciated in its proper perspective. As regards advance received prior to provisions of tax payable on advances/change in definition of services to be provided is included, it is the tax liability and advance payments received which according to the appellant, is not taxable because of various reasons, which has not been addressed by the lower authorities. Therefore, the impugned order is set aside and matter remanded back. As regards Service tax on advance/payment received of exempted services towards services provided to SEZ, Service tax on reimbursement of expenses received in the capacity of Pure agent and Service tax on receipt of amount towards reimbursement of statutory expenses, it is found that these amounts are considered by the lower authorities as taxable, but are nothing but reimbursable amounts of various expenses paid by the appellant as a pure agent. There is no dispute that these three payments on which tax liability has been raised is in respect of the payment received for exempted services provided to SEZ and reimbursable expenses of the licence fees, etc. paid by the appellant. So, the appellant has made out a case in their favour in respect of these three tax demands. Accordingly, the impugned order is set aside to that extent. As regards Service tax on reimbursement of expenses in the capacity of pure agent, it is the claim of the appellant that these tax liabilities is also on the reimbursable expenses in the capacity of pure agent but it is found that it is not so. It is noted that the appellant has been charging more than the expenditure incurred by him as a pure agent while billing the clients. So, the claim of the appellant that of a pure agent in these demands seems to be without any evidence as there is no dispute that the appellant had charged additional amount other than the amount paid as reimbursable expenses. Therefore, the service tax liability is upheld along with interest and is liable for penalty as per Section 76 of the Finance Act, 1994. - appeal disposed of

Summary

Issues:
1. Taxability of amount received under "Management Consultancy and Manpower Recruitment Supply Agency Service"
2. Disallowance of CENVAT credit
3. Service tax liability on non-inclusion of reimbursable amounts

Issue 1 - Taxability of amount received under "Management Consultancy and Manpower Recruitment Supply Agency Service":
The appeal addressed the taxability of the amount received by the appellant under the mentioned service category. The lower authorities had held that the appellant wrongly claimed expenses as reimbursable, leading to incorrect tax valuation. However, upon review, it was found that the claimed deductions were towards fees paid to DGFT authorities, not for services. The tax liability was deemed incorrect as the amounts were reimbursement for expenses incurred by the appellant. Additionally, the disallowed CENVAT credit was deemed eligible for the appellant as it was utilized for output services. The impugned order was set aside, and the appeal was allowed.

Issue 2 - Disallowance of CENVAT credit:
The disallowance of CENVAT credit amounting to ?1,249 was challenged by the appellant. It was argued that the services for which the credit was utilized, such as broadband, courier, internet, and automobile services, were essential for providing "Management Consultancy Services." The tribunal found the appellant eligible for the CENVAT credit on these services, leading to the impugned order being set aside, and the appeal being allowed.

Issue 3 - Service tax liability on non-inclusion of reimbursable amounts:
The second appeal raised concerns regarding service tax liability on the appellant for not including reimbursable amounts. Various specific demands were presented, including service tax on TDS, advances received, and reimbursements for expenses. The tribunal noted that some demands required reconsideration by the adjudicating authority, particularly those related to TDS credited and advance payments. It was highlighted that certain amounts were indeed reimbursable expenses paid by the appellant as a pure agent, thus not subject to tax. However, in one instance, where the appellant charged more than the expenditure incurred, the tribunal upheld the service tax liability and the penalty. The impugned order was set aside for specific demands, while some demands were upheld. The appeals were disposed accordingly.