Appeal allowed, service tax demands set aside. No penalty imposed under Section 78.

The appeal was allowed, and the impugned order was set aside with consequential relief. The demand of service tax under 'Business Auxiliary Services' for the period 10.09.2004 to 30.04.2006 was found unsustainable. The demand for service tax on reimbursable expenses post 1.5.2006 was set aside, with a requirement to deposit any service tax collected from clients. The demand under 'Manpower Recruitment or Supply Agency Service' was also set aside. The penalty under Section 78 of the Finance Act was not imposed due to lack of established elements.

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Issues Involved:
1. Demand of service tax under the head 'Business Auxiliary Services' for the period 10.09.2004 to 30.04.2006.
2. Demand of service tax on reimbursable expenses.
3. Demand of service tax under 'Manpower Recruitment or Supply Agency Service'.
4. Imposition of penalty under Section 78 of the Finance Act, 1994.

Detailed Analysis:

1. Demand of Service Tax under 'Business Auxiliary Services' for the Period 10.09.2004 to 30.04.2006:
The appellant contested the demand of service tax under 'Business Auxiliary Services' for the period 10.09.2004 to 30.04.2006, arguing that the service tax paid under protest was refunded based on an order that was not appealed by the Revenue. The Tribunal in the appellant's own case (Karvy Consultants Ltd.) had previously held that these services were not chargeable to service tax under 'Business Auxiliary Services' prior to 1.5.2006. The Tribunal reiterated that the services became taxable only from 1.5.2006 under the heads 'Share Transfer Agent' and 'Registrar to Issue' services. Therefore, the demand for this period under 'Business Auxiliary Services' was not sustainable.

2. Demand of Service Tax on Reimbursable Expenses:
The appellant argued that no service tax is payable on reimbursable expenses as per the Supreme Court's decision in Intercontinental Consultants. The Tribunal agreed, stating that service tax can only be levied on the consideration received for the service provided. Consequently, the demand for service tax on reimbursable expenses collected from clients for the period post 1.5.2006 was set aside. However, any amount representing service tax collected from clients on such expenses must be deposited with the Government under Section 73A of the Finance Act.

3. Demand of Service Tax under 'Manpower Recruitment or Supply Agency Service':
The appellant contested the demand of service tax under 'Manpower Recruitment or Supply Agency Service' for the salary of a person sent on secondment by an Australian firm. The Tribunal found that there was no evidence to show that the company providing the secondment was a manpower recruitment or supply agency. Therefore, the demand under this head was not sustainable and was set aside.

4. Imposition of Penalty under Section 78 of the Finance Act, 1994:
The Tribunal found that the elements required for imposing a penalty under Section 78, such as fraud, collusion, or willful suppression of facts, were not established. The facts were known to the Department, and the different view taken by DGCEI did not constitute suppression. Additionally, since the entire demand of tax was not sustainable, the penalty under Section 78 could not be imposed. The Tribunal set aside the penalty.

Conclusion:
The appeal was allowed, and the impugned order was set aside with consequential relief. The appellant was not entitled to a refund of any amount collected as representing service tax from clients, as per Section 73A of the Finance Act.

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