2017 (5) TMI 1298 - AT - Service Tax

Pure agent - taxability - inclusion of Provident Fund - Bonus - case of appellant is that as the amount of Provident Fund & Bonus are the liability of the principal employer and they have received the same as pure agent and passed on the same to the workers, they are not liable to Service tax on the same - Held that - the appellant had paid the due taxes and also filed the returns from time to time and as such there is no suppression etc. on their part - As the appellant is not contesting the demand of Service tax, the appellant is entitled to cum-tax benefit for calculation of Service tax - matter remanded back to the Adjudicating Authority who shall recalculate the tax payable on cum-tax basis - penalties imposed u/s 77 and 78 set aside - appeal allowed by way of remand.

Summary

Issues:
Service tax on reimbursed amount of Provident Fund & Bonus, Penalty under Section 77 & 78 of Finance Act, Interpretation of tax liability, Timeliness of appeal, Cum-tax benefit calculation, Refund of excess amount paid.

Service tax on reimbursed amount of Provident Fund & Bonus:
The appellant, a service provider, appealed against the demand of service tax on the reimbursed amount of Provident Fund & Bonus. The appellant argued that they acted as a pure agent, passing on these amounts to workers, and thus should not be liable for service tax. However, the Hon'ble Supreme Court's ruling in a similar case established the tax liability on such reimbursements. The tribunal acknowledged the non-contestation of tax liability by the appellant and directed the Adjudicating Authority to recalculate the tax payable on a cum-tax basis.

Penalty under Section 77 & 78 of Finance Act:
The appellant contested the penalties imposed under Sections 77 and 78 of the Act, citing the interpretational nature of the issue and the absence of defiance or suppression of facts. The tribunal, noting the appellant's regular tax compliance and payment, set aside the penalties, emphasizing the absence of suppression on the appellant's part.

Timeliness of appeal:
The appeal was dismissed by the ld. Commissioner (Appeals) on the grounds of limitation, as it was filed after the prescribed time limit. However, the tribunal entertained the appeal and addressed the substantive issues of tax liability and penalties, underscoring the importance of compliance and regular payment of taxes by the appellant.

Cum-tax benefit calculation:
Recognizing the appellant's payment of due taxes and their non-contestation of the service tax demand, the tribunal allowed the appellant to avail cum-tax benefit for calculating the service tax. The matter was remanded to the Adjudicating Authority for recalculation of the tax payable on a cum-tax basis.

Refund of excess amount paid:
The tribunal directed the Adjudicating Authority to reconcile the amounts paid and/or collected by the appellant during the disputed period. Any excess amount paid by the appellant, particularly due to recovery by a special mode, was to be refunded with interest as per rules upon recalculation, ensuring a fair resolution of financial discrepancies.

In conclusion, the tribunal allowed the appeal, setting aside penalties, directing a recalculation of tax on a cum-tax basis, and ensuring the refund of any excess amounts paid by the appellant. The judgment underscored the importance of tax compliance, interpretation of tax liability, and fair treatment in resolving financial matters.