TaxTMI 
TaxTMI 
2023 (8) TMI 613
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.... service tax amount will be paid by the appellant alongwith interest and equal penalty under section 78 of the said Act. The option paying reduced penalty at 25% will be available to them if service tax and interest is paid within thirty days of receipt of this order, as provided under second proviso to Section 78 of the said Act. However as penalty under Section 78 has been imposed, penalty under Section 70 and 77 are not warranted and the same is set aside. In view of above I pass the following order. ORDER The appeal is partly allowed and the O-I-O is modified in above terms." 2.1 Appellant, a recovery agent for ICICI Bank and for undertaking the job assigned they are getting certain reimbursements on account of salaries paid to their employees engaged in the work of recovery during the period 01.04.2010 to 10.07.2014. Appellant claimed that they received certain charges as Pure Agent, and hence in terms of Rule 5 (2) of Valuation Rules, 2006, these charges will not form the part of taxable value of services. If these charges are excluded then the value of taxable service provided by them is within the exemption limit prescribed throughout. 2.2 Investi....
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....y) against said M/s Kailash Associates, Agra under Rule 7C of the Service Tax Rules, 1994 read with section 70 of the Act, as discussed above." 2.4 Being aggrieved, appellant filed appeal before Commissioner (Appeals) who have by the impugned order disposed of the appeal as per the order stated in para-1. Hence, this appeal. 3.1 We have heard Ms Stuti Saggi Advocate appearing for the appellant and Shri Sandeep Pandey Authorized Representative appearing for the Revenue. 3.2 Arguing for the appellant Learned Counsel submits that the issue involved in the manner is respect of the inclusion of reimbursable expenses in the value of taxable service for the period prior to amendments made in section 67 of the Finance Act, 1994 in 2015. This is no longer res-Integra and has been decided in a number of cases by the various Courts and Tribunal. She referred the following decisions:- • P.G. Associates [Final Order No 70736/2019 dated 22.02.2019 of Allahabad Bench] • Adhikrut Jabti Evam Vasuli [2017 (6) GSTL 529 (T-Del)] • Intercontinental Consultants & Technocrats Pvt. Ltd. [2013 (29) STR 9 (Del)] • Intercontinental Consultants & Te....
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.... Agreement made between the Noticee and the Bank, excerpts thereof are reproduced below:- "6 PAYMENT (a) The Service Provider will, unless disputed by ICICI Bank, be paid charges specified in Schedule I hereto for the Services....... (c) All such costs which are required to be incurred by the Service Provider in relation to the Services and which have been agreed to be borne by ICICI Bank shall be incurred with approval of ICICI Bank and the Service Provider shall furnish to ICICI Bank all necessary receipts and other documents evidencing the incurrence of such costs, in a form and manner satisfactory to ICICI Bank." Terms and conditions are prescribed in "Standard Terms (07-VI) as applicable to the Services provided to ICICI Bank Limited by Service Provider". The relevant terms & conditions are reproduced below:- "2. REPRESENTATIONS, WARRANTIES, CONFIRMATIONS AND UNDERTAKINGS BY THE SERVICE PROVIDER The following representation, warranties, confirmations are made by the Service Provider: Confirmations, covenants, undertakings (iii) The Service Provider shall, at its own costs, undertake all repair, replacement....
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....or services so procured; and (d) receives only the actual amount incurred to procure such goods or services." 22.4. I further find that the Noticee is Collection Agent for the Bank and the services of Recovery Agent provided by them to the Bank are enumerated in Schedule-I of the Agreement which includes Collection of due from the Borrower and also take possession of assets from the Borrower as per the terms of the loan agreement etc. and deposit the amount so collected in the Bank. From the terms and conditions mentioned in the 'Service Provider's Agreement', the relation between the Noticee and the Bank is on principal to principal basis i.e. both are independent to each other in their working and the employees of the Noticee cannot be treated as employees of the Bank. Further, as per the Agreement, the Noticee is liable for payment of salaries, wages, statutory payments, etc. to their employees/ employed personnel and the Bank has no obligation to make any type of payment to the such personnel or employees of the Noticee. Further, as per the Agreement they have to procure and maintain all equipments and infrastructural facilities on their own cost. I also f....
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....llants incurred certain expenditure like parking charges, arrangement of security guards, insurance premium, videography, police escorts, publication in newspaper, etc. The appellant claimed that in terms of the agreement with the banks, these are reimbursed on actual basis. Hence, these expenses are not to be included in the value for service tax purposes. The appellant claimed that in terms of Rule 5(2) of Service Tax (Determination of Value) Rules, 2006, the expenditure incurred by the service provider as a 'pure agent' of the recipient of the services is excludible from the value for the tax purposes. It is further claimed that they have fulfilled all the conditions for being such 'pure agent'. 23. Ld. Member (T) reproduced, at length, the findings of the ld. Commissioner (Appeals) in the impugned order. It is seen that the impugned order as well as the ld. Member (T) placed reliance on the decision of the Larger Bench in Bhagvathy Traders - 2011-TIOL-1155-CESTAT-BANG.LB = 2011 (24) S.T.R. 290 (Tri.-LB). The said decision is not a ratio for disallowing reimbursable expenses for exclusion from the taxable service. In fact, the said decision only framed certain guideline....
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....service tax) @ 12% of the value of taxable services referred to in sub-clauses of Section 65 and collected in such manner as may be prescribed." 23. Obviously, this Section refers to service tax, i.e., in respect of those services which are taxable and specifically referred to in various sub-clauses of Section 65. Further, it also specifically mentions that the service tax will be @ 12% of the 'value of taxable services'. Thus, service tax is reference to the value of service. As a necessary corollary, it is the value of the services which are actually rendered, the value whereof is to be ascertained for the purpose of calculating the service tax payable thereupon. 24. In this hue, the expression 'such' occurring in Section 67 of the Act assumes importance. In other words, valuation of taxable services for charging service tax, the authorities are to find what is the gross amount charged for providing 'such' taxable services. As a fortiori, any other amount which is calculated not for providing such taxable service cannot a part of that valuation as that amount is not calculated for providing such 'taxable service'. That according to us is the plain meaning which ....
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....ling with valuation of taxable services, does not include reimbursable expenses for providing such service, the Legislature amended by Finance Act, 2015 with effect from May 14, 2015, whereby Clause (a) which deals with 'consideration' is suitably amended to include reimbursable expenditure or cost incurred by the service provider and charged, in the course of providing or agreeing to provide a taxable service. Thus, 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. Though, it was not argued by the Learned Counsel for the Department that Section 67 is a declaratory provision, nor could it be argued so, as we find that this is a substantive change brought about with the amendment to Section 67 and, therefore, has to be prospective in nature. On this aspect of the matter, we may usefully refer to the Constitution Bench judgment in the case of Commissioner of Income Tax (Central)-I, New Delhi v. Vatika Township Private Limited [(2015) 1 SCC 1] wherein it was observed as under : "27. A legislation, be it a statutory Act or a stat....