2016 (9) TMI 739 - AT - Service Tax

Reverse charnge - Business auxiliary services - Services availed in the interior parts of Myanmar and the expenses to be incurred for traveling tickets, telephone charges, postage, hotel accommodation, fooding etc. - reimbursement of expenses to the agent appointed in Myanmar - Held that - the Revenue has no case on merits for more than one reason. Firstly, on perusal of the various e-mails sent by Shri S. Gupta to the appellant they clearly indicate that the said Shri Gupta has claimed tour expenses monthly and it indicates only the air fare, car hire, hotel charges and petrol charges incurred by him for a particular month. The said e-mails or the expenses statement seem to have been accepted by the Revenue authorities as they are claiming service tax on the amount claimed as reimbursement by Shri S. Gupta. If the amounts which are claimed by Shri S. Gupta, are actual expenses, we find that the said amounts cannot be considered as taxable under business auxiliary services , as under the category of BAS, the amount can be taxed as a commission paid by the appellant, if any, to Shri S. Gupta. On perusal of the agreement entered into by the appellant with Shri S. Gupta, we find that there is no mention of any commission payable to Shri S. Gupta by the appellant. Demand set aside - Decided in favor of assessee.

Summary

Issues:
Interpretation of service tax liability under reverse charge mechanism for business auxiliary services based on reimbursement of expenses incurred by an agent.

Analysis:
The appeal involved a dispute regarding the liability of the appellant to pay service tax under the reverse charge mechanism for business auxiliary services due to the reimbursement of expenses incurred by an agent named Shri S. Gupta for promoting and marketing the appellant's products. The Revenue contended that the appellant was liable to pay service tax as Shri S. Gupta had rendered services falling under the category of business auxiliary services.

Upon hearing both sides and examining the records, the tribunal considered the factual matrix of the case, particularly focusing on the e-mails exchanged between Shri S. Gupta and the appellant. The appellant's counsel highlighted that the expenses claimed by Shri S. Gupta were reimbursable and pointed out a relevant judgment by the Hon'ble High Court of Delhi which struck down provisions mandating the inclusion of reimbursable expenses for service tax liability determination.

The tribunal noted that the e-mails from Shri S. Gupta indicated specific tour expenses such as airfare, car hire, hotel charges, and petrol charges, which were accepted by the Revenue authorities for claiming service tax. However, the tribunal observed that if these amounts were actual expenses reimbursed by the appellant without any commission mentioned in the agreement with Shri S. Gupta, they could not be taxed under business auxiliary services. Referring to the Delhi High Court judgment, the tribunal concluded that if no commission was paid and only actual expenses were reimbursed, the expenses could not be taxed under business auxiliary services.

Consequently, the tribunal held that the impugned order was unsustainable and set it aside, allowing the appeal with any consequential relief. The judgment emphasized the distinction between reimbursable expenses and commission payments in the context of service tax liability under the reverse charge mechanism for business auxiliary services.