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2021 (10) TMI 588 - AT - Service TaxShort payment of service tax - Business Auxiliary Services - Share Transfer Agent services - Registrar to an Issue services rendered by them - appropriation of amount paid towards the demand of tax - demand of tax on Intellectual Property services received by them from foreign service providers - Manpower Recruitment or Supply agency services received by them from foreign service provider - demand of interest alongwith penalty - HELD THAT - Undisputedly, the appellant is rendering the service of Registrar to Issue services and Share transfer agent services, both of which became chargeable to service tax w.e.f. 01 May 2006 and it has been paying service tax from that date. Reimbursable expenses recovered by the appellant from its clients - HELD THAT - It has now been settled by the Supreme Court in UNION OF INDIA AND ANR. VERSUS M/S. INTERCONTINENTAL CONSULTANTS AND TECHNOCRATS PVT. LTD. 2018 (3) TMI 357 - SUPREME COURT , that no service tax can be levied on reimbursable expenses recovered by a service provider. The service tax has to be levied only for consideration received for service - the entire demand of service tax on reimbursable expenses collected from clients for the period post 1.5.2006 cannot sustain and needs to be set aside. Demand of service tax - Business Auxiliary Services on the services rendered by the appellant - period 10.09.2004 to 30.04.2006 - HELD THAT - This issue has already been settled by the Tribunal in appellant s own case in previous name of KARVY CONSULTANTS LTD. VERSUS COMMISSIONER OF CUS. C. EX., HYDERABAD 2007 (12) TMI 60 - CESTAT, BANGALORE where it was held that there is no dispute regarding the fact that the appellants are engaged in the services of share transfer agent and registrar official. They first brought into service tax net only w.e.f. 1-5-2006. The Tribunal in the case of COMMISSIONER OF C. EX., INDORE VERSUS ANKIT CONSULTANCY LTD. 2006 (10) TMI 61 - CESTAT, NEW DELHI cited by the learned Advocate elaborately dealt with this issue and has given a finding that prior to this period it would not come fall within the category of Business Auxiliary Services . The current demand is for a subsequent period (10.09.2004 to 30.04.2006) and there was a change in the definition of Business Auxiliary Service . Nevertheless, it has been categorically held by the Tribunal that no service tax can be charged prior to introduction of the heads of Share Transfer Agent Service and Registrar to Issue Service from 1.5.2006. Nevertheless, the appellant paid service tax under protest during this period and thereafter claimed refund which was sanctioned by the Assistant Commissioner as per the Order of the Commissioner (Appeals). Neither the order of the Commissioner (Appeals) nor the consequential order of Assistant Commissioner sanctioning refund were assailed by the Department. Manpower Recruitment Agency Service - HELD THAT - As per the agreement between M/s Computershare and the appellant, Ms. Kitchener was deputed/seconded to the appellant but her salary was paid by M/s Computershare and the appellant reimbursed these amount. This is not a case of Manpower Supply Agency Service rendered by Manpower Agency Service to the appellant. Therefore, the same cannot be charged to service tax under reverse charge mechanism merely because one person was sent on deputation by M/s Computershare, Australia to the appellant and the appellant had reimbursed her salary to M/s Computershare. Therefore, the demand on this count also needs to be set aside. Levy of penalty u/s 78 of FA - HELD THAT - Firstly, the elements required for imposition of penalty under section 78 viz., fraud or collusion or wilful statement or suppression of facts have not been established in the present case. All facts were known to the Department from the beginning. The only thing which changed is that the DGCEI has chosen to take a different view from the one already taken and accepted by the Department and the learned Commissioner has chosen to agree with that view ignoring the fact that the issue was settled - Secondly, penalty under section 78 of the Finance Act is equal to the tax evaded. It is already held that the entire demand of tax in this case is not sustainable - thus, there cannot be any penalty under section 78. The impugned order is set aside. However, if any amount not payable as service tax or interest on it has already been paid by the appellant and collected from its clients, the appellant will not be entitled to refund of the same in view of section 73A of the Finance Act. Appeal allowed - decided in favor of appellant.
Issues Involved:
1. Demand of service tax under the head 'Business Auxiliary Services' for the period 10.09.2004 to 30.04.2006. 2. Demand of service tax on reimbursable expenses. 3. Demand of service tax under 'Manpower Recruitment or Supply Agency Service'. 4. Imposition of penalty under Section 78 of the Finance Act, 1994. Detailed Analysis: 1. Demand of Service Tax under 'Business Auxiliary Services' for the Period 10.09.2004 to 30.04.2006: The appellant contested the demand of service tax under 'Business Auxiliary Services' for the period 10.09.2004 to 30.04.2006, arguing that the service tax paid under protest was refunded based on an order that was not appealed by the Revenue. The Tribunal in the appellant's own case (Karvy Consultants Ltd.) had previously held that these services were not chargeable to service tax under 'Business Auxiliary Services' prior to 1.5.2006. The Tribunal reiterated that the services became taxable only from 1.5.2006 under the heads 'Share Transfer Agent' and 'Registrar to Issue' services. Therefore, the demand for this period under 'Business Auxiliary Services' was not sustainable. 2. Demand of Service Tax on Reimbursable Expenses: The appellant argued that no service tax is payable on reimbursable expenses as per the Supreme Court's decision in Intercontinental Consultants. The Tribunal agreed, stating that service tax can only be levied on the consideration received for the service provided. Consequently, the demand for service tax on reimbursable expenses collected from clients for the period post 1.5.2006 was set aside. However, any amount representing service tax collected from clients on such expenses must be deposited with the Government under Section 73A of the Finance Act. 3. Demand of Service Tax under 'Manpower Recruitment or Supply Agency Service': The appellant contested the demand of service tax under 'Manpower Recruitment or Supply Agency Service' for the salary of a person sent on secondment by an Australian firm. The Tribunal found that there was no evidence to show that the company providing the secondment was a manpower recruitment or supply agency. Therefore, the demand under this head was not sustainable and was set aside. 4. Imposition of Penalty under Section 78 of the Finance Act, 1994: The Tribunal found that the elements required for imposing a penalty under Section 78, such as fraud, collusion, or willful suppression of facts, were not established. The facts were known to the Department, and the different view taken by DGCEI did not constitute suppression. Additionally, since the entire demand of tax was not sustainable, the penalty under Section 78 could not be imposed. The Tribunal set aside the penalty. Conclusion: The appeal was allowed, and the impugned order was set aside with consequential relief. The appellant was not entitled to a refund of any amount collected as representing service tax from clients, as per Section 73A of the Finance Act.
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