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TMI Blog2023 (8) TMI 613X X X X Extracts X X X X X X X X Extracts X X X X ..... I 150 - DELHI HIGH COURT] , referred to by in the order of CESTAT. Hon ble Supreme Court while upholding the order of Hon ble Delhi Court has observed only with effect from May 14, 2015, by virtue of provisions of Section 67 itself, such reimbursable expenditure or cost would also form part of valuation of taxable services for charging service tax. In view of the above decision of the Hon ble Supreme Court for the period prior to 2015 the demand or service tax in respect of reimbursable expenses cannot be sustained - the same is set aside, demand and penalties imposed on the appellant are also set aside. Appeal disposed off. - MR. P.K. CHOUDHARY, MEMBER (JUDICIAL) AND MR. SANJIV SRIVASTAVA, MEMBER (TECHNICAL) Ms Stuti Saggi, Advocate for the Appellant Shri Sandeep Pandey, Authorized Representative for the Respondent ORDER This appeal is directed against Order-in-Appeal No.24-ST/APPL/LKO/2018 dated 17/01/2018 passed by Commissioner (Appeals) Customs, Central Excise Service Tax, Lucknow, vide the impugned order Commissioner (Appeals) has held as follows: 6. The appellant could not produce any evidence in support of their claim to be Pure Agent o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er with intent to evade payment of Service Tax; (iv) Penalty should not be imposed upon them under Section 77 of the Act for contravention of the provisions of the Act and Rules made there under, for failure in appearing to tender the statement in compliance of Summon issued by the Officer of Central Excise Service Tax. (v) Amount as prescribed under rule 7(C) of Service tax Rules, 1994 should not be demanded and recovered from them for delayed submission of ST-3 returns. 2.3 This show cause notice has been adjudicated by the Deputy Commissioner, holding as follows: (i) I hereby confirm the demand of service tax amounting to Rs 11,87,873.00 (including Edu. Cesses) [Rupees Eleven Lakh Eighty Seven Thousand Eight Hundred and Seventy Three only] against M/s Kailash Associates, S-13, Block No E-136 raman Tower, sanjay Place, Agra under proviso to sub-section (1) of Section 73 of Finance Act, 1994. (ii) I also confirm demand of interest at appropriate rate against said M/s Kailash Associates, Agra under section 75 of the Finance Act, 1994. (iii) I impose a penalty of Rs 11,87,873.00 [Rupees Eleven Lakh Eighty Seven Thousand Eight Hundred and Seventy T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ehalf of ICICI Bank for which it is reimbursed. Deputy Commissioner, while rejecting the contentions of appellant in his Order-in-Original has observed as follows:- 22.1. The Noticee also pleaded that they acted as Pure Agent to M/s ICICI Bank Ltd. and the reimbursable expenditures made by them as Pure Agent is deductible from the Gross Value/amount received from the Bank in terms of Rule 5(2) of the Service Tax (Determination of Value) Rules, 2006. The Noticee also claimed that the words i.e. for such service used in Section 67 of the Act clearly show that only consideration received for providing service is taxable, as Explanation to Section 67 defining the term Consideration was amended only from 14.05.2015 by the Finance Act, 2015. Therefore, the reimbursable expenditures are excludible from the taxable value. The Noticee also submitted copy of Contract/ Agreement made between them and the Bank. 22.2. I find that the Noticee has accepted that they have provided Recovery Agent's service to the Bank and the Bank has also confirmed the fact that the Noticee has provided such services to them, during the course of investigation of the case by the officers of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nk be liable for any payment or claim or compensation... (b) The personnel of the Service Provider shall continue to be the personnel of the Service Provider and work under its directions and shall not become or claim any employment from ICICI Bank/ or any customer of ICICI Bank on whose behalf the Service Provider is appointed by ICICI Bank, by virtue of providing the Services, irrespective of the location of the performance of the Services (c) The Service Provider shall be solely liable for the acts, deeds and things done by the personnel of the Service Provider. 22.3. The Noticee has claimed that they acted as 'Pure Agent for the Bank and work expenditures has been paid to third party through cheques. In order to further clarify the matter, it is necessary to go through the definition of Pure Agent' given in Explanation-1 Rule 5(2) of the Service Tax (Determination of Value) Rules, 2006 which is reproduced below:- Explanation 1.-For the purposes of sub- rule (2), pure agent means 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 pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the Bank. Merely mentioning any amount in their defence submissions as reimbursable expenditure is not suffice to accept it, without any corroborative evidence. Therefore, I hold that entire consideration received by the Noticee from the Bank is for the provision of service of Recovery Agent and the gross amount received by them from the Bank by the Noticee is the taxable value for the service provided by them and leviable to Service Tax and the Noticee cannot be treated as Pure Agent of the Bank. 4.3 Further, In case of M/s Adhikrut Jabti Evam Vasuli [2017 (6) GSTL 529 (T-Del) in similar facts of case, Tribunal has by majority order held as follows:- 19 . The present appeal is referred to third Member in view of difference of opinion between the members in the Division Bench on certain aspects. The brief facts of the case are that the appellant is in the business of providing services as Recovery Agent to various nationalized banks for the past many years. The services rendered by them were subjected to service tax w.e.f. 1-5-2006. One of the disputes involved in the present appeal is relating to valuation of the taxable services provide by the appellant. The d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... High Court held that the Rule 5(1) of the Valuation Rules, 2006 is ultra virus of the substantive legal provisions of Section 67 and 68 of Finance Act, 1994. The High Court was dealing with similar reimburseable expenditure regarding travel or accommodation. The facts of the present case along with connected documentary evidences are to be examined in line with the observation of the Tribunal in Shree Bhagvathy Traders (supra) and Hon ble Delhi High Court in Intercontinental Consultants Technocrafts Pvt. Ltd. (supra). This can be done by the Original Authority for a fresh decision. As such, the findings of the ld. Member (J) with reference to remand of the matter to the Original Authority is correct. 4.4 Issue in regards to levy of service tax on the reimbursement expenses prior to amendment of Section 67 and Rule 5 has been considered by Hon ble Supreme Court in the case of Union of India Vs Intercontinental Consultants And Technocrats Pvt. Ltd. 2018 (10) G.S.T.L. 401 (S.C.) while deciding the Appeal filed by revenue challenging the order of Hon ble High Court of Delhi, referred to by in the order of CESTAT referred above. Hon ble Supreme Court while upholding the order o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of sub-section (1) of Section 67 is manifest, as noted above, viz., the service tax is to be paid only on the services actually provided by the service provider. 26 . It is trite that rules cannot go beyond the statute. In Babaji Kondaji Garad, this rule was enunciated in the following manner : Now if there is any conflict between a statute and the subordinate legislation, it does not require elaborate reasoning to firmly state that the statute prevails over subordinate legislation and the byelaw, if not in conformity with the statute in order to give effect to the statutory provision the Rule or bye-law has to be ignored. The statutory provision has precedence and must be complied with. 27. The aforesaid principle is reiterated in Chenniappa Mudaliar holding that a rule which comes in conflict with the main enactment has to give way to the provisions of the Act. 28 . It is also well established principle that Rules are framed for achieving the purpose behind the provisions of the Act, as held in Taj Mahal Hotel : the Rules were meant only for the purpose of carrying out the provisions of the Act and they could not take away what was conferred b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to have a retrospective operation. The idea behind the rule is that a current law should govern current activities. Law passed today cannot apply to the events of the past. If we do something today, we do it keeping in view the law of today and in force and not tomorrow s backward adjustment of it. Our belief in the nature of the law is founded on the bedrock that every human being is entitled to arrange his affairs by relying on the existing law and should not find that his plans have been retrospectively upset. This principle of law is known as lex prospicit non respicit : law looks forward not backward. As was observed in Phillips v. Eyre [(1870) LR 6 QB 1], a retrospective legislation is contrary to the general principle that legislation by which the conduct of mankind is to be regulated when introduced for the first time to deal with future acts ought not to change the character of past transactions carried on upon the faith of the then existing law. 29. The obvious basis of the principle against retrospectivity is the principle of fairness , which must be the basis of every legal rule as was observed in L'Office Cherifien des Phosphates v. Yamashita-Shinnihon Stea ..... X X X X Extracts X X X X X X X X Extracts X X X X
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