Pure agent reimbursement under service tax valuation supported waiver of pre-deposit and stay of recovery.

Amounts separately earmarked for contractors were, on a prima facie view, treated as reimbursements received and passed on by the appellant as a pure agent under the Service Tax (Determination of Value) Rules, 2006. The contract and payment routing indicated that the appellant earned only the agreed consultancy fee and derived no benefit from the contractor payments, so the conditions for pure agent treatment were found satisfied. Pre-deposit was waived and recovery stayed during pendency of the appeal.

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Issues: Whether the appellant had made out a prima facie case for waiver of pre-deposit and stay of recovery on the footing that the amounts paid to contractors represented reimbursement as a pure agent under the valuation rules.

Analysis: The contract and the manner in which payments were routed showed that the appellant received only the agreed fee for consultancy services, while the amounts paid to contractors were separately earmarked, passed on from the principal, and did not confer any benefit on the appellant. The conditions of a pure agent under Explanation 1 to Rule 5 of the Service Tax (Determination of Value) Rules, 2006 were found to be satisfied on a prima facie view.

Conclusion: The appellant was held to have a prima facie case for treatment as a pure agent, and pre-deposit was waived with stay of recovery during pendency of the appeal.

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