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TMI Blog2022 (6) TMI 614X X X X Extracts X X X X X X X X Extracts X X X X ..... types of payment one for its services and another towards reimbursement of the expenses which it incurred in hiring other service providers. Estimates of expenses to be incurred on the other service providers are approved by the client and the actual amounts incurred by the appellant are claimed by it as reimbursements from the client after submitting appropriate utilization certificates - In this arrangement, the only reason the Revenue sought service tax on the amounts reimbursed to the appellant by the client is that the appellant did not fulfill the conditions laid down in Rule 5 to qualify as a pure agent. However, it is found that Rule 5 itself has been held to be ultra vires of Section 67 by the Supreme Court in the case of UNION OF INDIA AND ANR. VERSUS M/S. INTERCONTINENTAL CONSULTANTS AND TECHNOCRATS PVT. LTD. [ 2018 (3) TMI 357 - SUPREME COURT] . The Commissioner sought to distinguish the appellant s case on the ground that the nature of services for which reimbursements were made in Intercontinental case were different from the case of the appellant. The nature of service should make no difference to the taxability of reimbursements when Rule 5 under which the ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pute. (b) The client requests the appellant to organize the complete event in which case the appellant approaches third party service providers and engages them as per the budget allocation and instructions given by the client. The appellant pays vendors and claims reimbursement of the cost of these vendors from the client along with utilization certificates duly certified by the auditors. 4. The dispute in this case is with respect to the second type of contracts. According to the Revenue, the appellant is providing a complete service and has to pay service tax on the entire amount including what has been paid by it to the third parties and is reimbursed by the client. According to the appellant, it is only providing the service of organizing the event and the amounts which it paid to third parties were only reimbursed by the client. Therefore, it was acting as a pure agent and no service tax can be levied on the amounts which it paid to third parties which have been reimbursed by the client. 5. Learned Counsel for the appellant submits that it has been recorded in paragraph 42 of the impugned order that the gross amount charged by the appellant includes both conceptualiz ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iary or insurance intermediary or insurance agent from the insurer; (f) the reimbursement received by the authorized service station from manufacturer for carrying out any service of any motor car, light motor vehicle or two wheeled motor vehicle manufactured by such manufacturer; and (g) the commission or any amount received by the rail travel agent from the Railways or the customer. But does not include - (i) initial deposit made by the subscriber at the time of application for telephone connection or pager or facsimile (FAX) or telephone or telex or for leased circuit; (ii) the cost of unexposed photography film, unrecorded magnetic tape or such other storage devices, if any, sold to the client during the course of providing the service; (iii) the cost of parts or accessories, or consumable such as lubricants and coolants, if any, sold to the customer during the course of service or repair of motor cars, light motor vehicle or two wheeled motor vehicles; (iv) the airfare collected by air travel agent in respect of service provided by him; (v) the rail fare collected by rail travel agent in respect of service provided by him; (vi) the cost of parts or o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... omissory note, letter of credit, draft, pay order, travelers cheque, money order, postal remittance and other similar instruments but does not include currency that is held for its numismatic value; (c) gross amount charged includes payment by cheque, credit card, deduction from account and any form of payment by issue of credit notes or debit notes and book adjustment, and any amount credited or debited, as the case may be, to any account, whether called Suspense account or by any other name, in the books of accounts of a person liable to pay service tax, where the transaction of taxable service is with any associated enterprise. 10. Service Tax (Determination of Value) Rules, 2006 were notified on 19.04.2006 in terms of the amended Section 67. Rule 5 of these Rules stipulated inclusion in or exclusion of value of certain expenditures and costs sub-rule (2) of Rule 5 specifically provided that expenditure of cost incurred by the service provider as pure agent of the recipient service shall be excluded from the value of taxable service, if certain conditions are met. This Rule 5 was held to be ultra vires of Section 67 by the Supreme Court in the case of Intercontinental ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the course of organizing and holding an event. They are not merely reimbursement of the likes of air travel, hotel stay, etc. which was the case in the judgment quoted above. Therefore, I hold that the judgment as quoted by the Noticee is not squarely applicable as far as the SCNs in the instant case are concerned. Thus, I hold that the gross amount includes all the payments received/charged by the Noticee in the course of management of event being organized by its clients in terms of Section 67 of the Finance Act (As amended) and chargeable to Service Tax. I also hold that payment made by the Noticee as detailed in para 37 above is liable to be adjusted against any liability of service tax arising out of this order . 12. Consequently, the Commissioner has confirmed the service tax and imposed penalty as proposed. 13. We find that the Commissioner has in the impugned order recorded that the appellant was claiming reimbursement. It is not the case of the Revenue that the appellant entered into a turnkey contract for the entire service and was hiring sub-contractors for various purposes. If such was the arrangement, the appellant would be the service provider and its service ..... X X X X Extracts X X X X X X X X Extracts X X X X
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