2018 (2) TMI 1114 - AT - Service Tax

Valuation - includibility - amount of ₹ 3,39,539/- was received by the appellants towards reimbursement of advertisement charges from their client M/s. Watanmal Pvt. Ltd. - Department was of the view that these expenses are incurred in providing the taxable service and has to be included in the total value for the purpose of discharging service tax - whether the amount of ₹ 3,39,539/- received by the appellant would fall under reimbursable expenses or not? Held that - The appellants are engaged in rendering Manpower Recruitment and Supply Agency service and not any Advertisement Agency service - it can be seen from the advertisement charges, which was incurred to be a one-time occasion and was only expenses incurred on behalf of the client which are reimbursed on actual basis - reliance placed in the case of Commissioner of Service Tax Versus M/s. Sangamitra Services Agency 2013 (7) TMI 862 - MADRAS HIGH COURT , where it was held that if a receipt is for reimbursing the expenditure incurred for the purpose, the mere act of reimbursement, per se, would not justify the contention of the Revenue that the same, having the character of the remuneration or commission, deserves to be included in the sum amount of remuneration / Commission - demand set aside - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Whether the amount received by the appellant falls under reimbursable expenses or not.

Analysis:
The case involved the appellants registered under the category of "Man Power Recruitment and Supply Agency service" facing a demand for service tax on an amount received towards reimbursement of advertisement charges. The department contended that these expenses are incurred in providing taxable services and must be included in the total value for service tax purposes. The original authority confirmed the demand, which was upheld by the Commissioner (Appeals), leading the appellant to appeal before the Tribunal.

The appellant argued that the amount in question should not be subject to service tax as it constituted reimbursable expenses. They highlighted that arranging advertisement space was not part of the services they provided, as per the contract with the client. The appellant's practice was to forward details of potential candidates for recruitment and supply after the client placed advertisements themselves. They emphasized that the expenses were reimbursable as per the agreement and only actual expenses were charged to the client. The appellant relied on a judgment of the Hon'ble Madras High Court in a similar case to support their argument.

On the other hand, the department argued that only actual expenses could be considered reimbursable, asserting that the amount in question was incurred by the appellant in providing their service and thus should be included in the total value of taxable services. The department cited a decision in a different case to support their position.

After hearing both sides, the Tribunal considered whether the amount received by the appellant should be classified as reimbursable expenses. It was noted that the appellants were engaged in Manpower Recruitment and Supply Agency service, not Advertisement Agency service, as per the agreement terms. The Tribunal found that the advertisement charges were a one-time expense incurred on behalf of the client and reimbursed on an actual basis. Following the precedent set in a previous case, the Tribunal held that the demand for service tax was unsustainable. Consequently, the impugned order was set aside, and the appeal was allowed in favor of the appellants, with any consequential relief granted to them.