2017 (11) TMI 545 - AT - Service Tax

Valuation - amount reimbursed towards fee payable to broadcast personnel - Department was of the view that service tax was required to be paid on the full amount received by the appellant from M/s. Prasar Bharti - case of appellant is that appellant was only acting as an agent of M/s. Prasar Bharti and have received reimbursement of the broadcast personnel fees which in turn has been paid by the appellant to the personnel as a pure agent - Held that - section 67 specifies that wherever the provision of service is for a consideration, the taxable value would be a gross amount charged by the service provider for such service. The Service Tax (Determination of Value) Rules 2006 provides for exclusion from the taxable value, amount received in the capacity of pure agent . To decide whether the appellant was acting as a pure agent, we need to refer to rule 5 (2) of the Service Tax Valuation Rules 2006. In the said rule, expenditure incurred by the service provider as a pure agent can be excluded from the value of taxable service subject to the condition that all the eight conditions specified there are satisfied - The adjudicating authority has elaborately discussed these criteria and held that appellant has not fulfilled the same - the appellant cannot be treated as a pure agent as defined in the rules. Consequently, the appellant is required to discharge service tax on the full amount received from M/s. Prasar Bharti i.e. including both the commission at the rate of 10% as well as broadcast fees. Reliance paced in the case of Neelav Jaiswal & Brothers Versus CCE, Allahabad 2013 (8) TMI 147 - CESTAT NEW DELHI , where it was held that unless all the conditions pure agent are satisfied, the appellant will not be entitled to any exclusion from the taxable service for amounts received towards salary, provident fund, etc. Demand upheld - Appeal dismissed - decided against appellant.

Issues:
1. Liability of service tax on reimbursement of fees paid to broadcast personnel.
2. Determination of whether the appellant acted as a pure agent.
3. Interpretation of Section 67 of the Finance Act for valuation of taxable services.
4. Analysis of relevant case laws on the concept of a pure agent.

Issue 1: Liability of service tax on reimbursement of fees paid to broadcast personnel

The appellant provided taxable services to M/s. Prasar Bharti by supplying broadcast personnel and receiving a monthly fee along with reimbursement of fees paid to the personnel. The Department contended that service tax was applicable on the entire amount received by the appellant from M/s. Prasar Bharti. The appellant argued that they acted as an agent and the fees payable to broadcast personnel were reimbursements. The Tribunal noted that the appellant had paid service tax on their commission but not on the reimbursement of fees. The key issue was whether the reimbursement amount should be included in the taxable value for service tax purposes.

Issue 2: Determination of whether the appellant acted as a pure agent

The appellant claimed to have operated as a pure agent for M/s. Prasar Bharti. To qualify as a pure agent, the service provider must meet specific conditions outlined in Rule 5(2) of the Service Tax Valuation Rules 2006. The adjudicating authority analyzed these conditions and found that the appellant did not satisfy the criteria to be considered a pure agent. Notably, there was no contractual agreement between the parties for the appellant to act as a pure agent, and the appellant did not receive authorization to make payments on behalf of M/s. Prasar Bharti. Consequently, the Tribunal concluded that the appellant could not be treated as a pure agent as defined in the rules.

Issue 3: Interpretation of Section 67 of the Finance Act for valuation of taxable services

Section 67 of the Finance Act deals with the valuation of taxable services for charging service tax. It specifies that the taxable value is the gross amount charged by the service provider for the service provided. The Service Tax (Determination of Value) Rules 2006 allow for the exclusion of amounts received as a pure agent from the taxable value. The Tribunal referred to these provisions to determine the taxable value in the present case, emphasizing the importance of complying with the statutory requirements for valuation.

Issue 4: Analysis of relevant case laws on the concept of a pure agent

The Tribunal examined case laws such as Neelav Jaiswal & Brothers and Jubiliant Enpro Pvt. Ltd. to understand the application of the pure agent concept in service tax matters. These cases highlighted that unless all conditions for being a pure agent are met, the service provider cannot exclude amounts received towards salary, provident fund, etc., from the taxable service. The Tribunal's decision aligned with the findings in these cases, emphasizing the importance of fulfilling the conditions for claiming pure agent status. Ultimately, the Tribunal upheld the impugned order, dismissing the appeal based on the analysis of relevant legal principles and case laws.

This detailed analysis of the judgment from the Appellate Tribunal CESTAT NEW DELHI provides a comprehensive overview of the issues involved and the Tribunal's reasoning in addressing each issue.

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