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TMI Blog2017 (11) TMI 547X X X X Extracts X X X X X X X X Extracts X X X X ..... of the view that all such expenditure would go towards provision of event management services by the appellant. The service itself cannot be completely rendered without such equipments or services. Hence we have no hesitation in concluding that such amounts are to be considered as part of gross amount charged by the appellant. Pure Agent - rule 5 (2) of the Service Tax Valuation Rules 2006 - Held that: - 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 - it is to be concluded that the appellant did not have the capacity to act as pure agent and did not fulfill the conditions of pure agent under the relevant rule. Hence the appellant will not be entitled to exclude expenses incurred. Reliance placed in the decision 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 fun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ld. Counsel argued the case of the appellant which is summarized as follows: i) The impugned order is relating to the period Oct 2002 to March 2007. He submits that reimbursements are made by the service receiver only on production of bills for expenses incurred towards purchase of articles, printing and mailing of event brochures, courier charges, travel and lodging, etc. No service tax can be levied on such reimbursable amounts in the light of the decision of Hon ble High Court of Delhi in the case of Intercontinental consultants 2013 29 STR 9 (Del). The Hon ble High Court struck down rule 5 of the Service Tax (Determination Of Value) Rules 2006, to the extent that they bring reimbursements within the scope of gross amount charged by the service provider. The decision is applicable to the present case and the impugned order merits to be set aside. ii) Without prejudice to the above he also submitted that the Department has not quantified the reimbursement of expenses in the impugned order. He also submitted that they had submitted the chartered accountant s certificate indicating the correct value of reimbursable expenses recovered by the appellant, but the same was not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h the Rule, declare it as ultra vires and consequently quash the SCN itself. The judgment and its ratio do not apply to the present case since the SCN in the present case has not invoked Rule 5(1) of the Service Tax (Determination of Value) Rules, 2006. Department has invoked Section 67 of the Finance Act, 1994 and relied upon the amplification provided by TRU s Circular specifically in the context of Event management service to raise its tax demand against the appellant while dealing with the scope of Sections 66 and 67 of the Finance Act, 1994. In para 18 of the judgment, the Hon ble High Court says: The thread which runs through Sections 66, 67 and 94, which empowers the Central Government to make rules for carrying out the provisions of Chapter V of the Act, is manifest, in the sense that only the service actually provided by the service provider can be valued and assessed to service tax. We are, therefore, undoubtedly of the opinion that Rule 5 (1) of the Rules runs counter and is repugnant of Sections 66 and 67 of the Act and to that extent it is ultra vires. It purports to tax not what is due from the service provider under the charging Section, but it se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... service provider, including the expenses incurred by the appellant and subsequently reimbursed by the service receiver. The appellant has strongly opposed this proposition with the argument that such expenses have been incurred by the appellant on behalf of the clients as a pure agent and hence not includible in the assessable value for charging service tax. 10. Section 67 of the Finance act deals with the valuation of services for charging of service tax. The said section was substituted w.e.f. 01.05.2006. Concurrently the service tax valuation rules were also introduced which provide for arriving at the value for purpose of charging service tax. Under old section 67 the value of taxable services was defined as Gross amount charged by the service provider . The new section 67 w.e.f. 01.05.2006 is reproduced below: Valuation of taxable services for charging Service tax - (1) Subject to the provisions of this Chapter, service tax chargeable on any taxable service with reference to its value shall,- (i) in a case where the provision of service is for a consideration in money, be the gross amount charged by the service provider for such service provided or to be provide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ervices by the appellant. The service itself cannot be completely rendered without such equipments or services. Hence we have no hesitation in concluding that such amounts are to be considered as part of gross amount charged by the appellant. 12. W.e.f. 01.05.2006 Section 67 as well as Rule 5 of the Valuation Rules specifically provide for exclusion of certain value from taxable service subject to fulfilled of all the conditions specified in rule 5(2) of Valuation rules. 13. 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. Further, pure agent has been defined to mean a person who: a) Enters into a contractual agreement with the recipient of service to act as his pure agent to incur expenditure or costs in the course of providing taxable service. b) Neither intends to hold nor holds any title to the goods or services so procured or provided as pure agent of the recipient o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... agreement and are also bound by the principle delineated in the judgment of the High Court of Delhi but such resonance to this non-derogable principle is not per se dispositive of the issue before us, in the facts and circumstances of this appeal. 17. The effect of the Hon ble High Court of Delhi decision is that rule 5(1) of the Service Tax Rules cannot be used to include expenditure incurred by the service provider into the value which otherwise will not be includible, as consideration for providing of service. In the present case we find that the reimbursed expenditure is for activities which are part of the overall event management services. Some of them are towards services employed by the appellant in the process of providing the event management service. Consequently, we are of the view that all such cost incurred by the appellant and reimbursed by the client are nothing but a part of the overall consideration towards rendering of the event management service. By issuing separate invoices for professional fee as well as reimbursable cost, the appellant has attempted to avoid payment of service tax. 18. Having decided the issue against the appellant, we turn to the q ..... X X X X Extracts X X X X X X X X Extracts X X X X
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