Service Tax
TRT-2025-
Cestat-New Delhi
Date:-13-06-22
In:-
Issue Favourable to Tax Payer ?:- 0
Order Date: 13 June 2022
Facts:
- The appellant, M/s Seher, is engaged in providing Event Management Services, was audited by DGGI wherein it was observed that service tax was short paid for the period 2006-2007 to 2010-2011.
- 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.
- Show cause notices were issued to the appellant proposing to recover the short paid service tax aggregating Rs. 1,19,21,936/- and also proposing to impose penalties under the Sections 76, 77(2) and 78 of the Finance Act, 1994.
- The appellant contended that 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.
- The show cause notices were adjudicated by the impugned order. Aggrieved, the present appeal is filed.
Issue:
- Whether the appellant has short paid tax for the SCN period and is he is liable for the penalties ?
Order:
- The Tribunal observed that 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, Rule 5 itself has been held to be ultra vires of Section 67 by the Supreme Court in the case of Intercontinental Consultants and Technocrats Pvt. Ltd.
- 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 Tribunal held that the nature of service should make no difference to the taxability of reimbursements when Rule 5 under which the tax was demanded itself has been ultra vires by Supreme Court.
- Consequently, it was held that the demands confirmed against the appellant do not survive.
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