Seher Vs Commissioner of Service Tax Delhi-II (CESTAT Delhi)
The Delhi, CESTAT in M/s Seher v. Commissioner of Service Tax Delhi [Service Tax Appeal No. 52708 of 2016 dated June 13, 2022] held that, service tax is not payable on reimbursement of expenses as the nature of service should make no difference to the taxability of reimbursement.
Facts:
M/s Seher (“the Appellant”) is engaged in providing Event Management Services was hired by Indian Council for Cultural Relations, Ministry of External Affairs (“ICCR”) to manage its various events. To complete the service, the Appellant engaged third-party vendors on payment and the same payment was reimbursed by the ICCR.
The Revenue department (“the Respondent”) conducted an audit for the period of 2006-07 to 2010-2011 and found that against the services provided amounting Rs. 10,30,78,749 to the Appellant has shortly paid the service tax of only Rs. 51,21,220 (including service tax) and observed that service tax, was short paid.
Accordingly, the Show Cause Notices (“the SCN”) dated August 3, 2012, April 02, 2014 and April 17, 2014 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 Chapter V of the Finance Act, 1994 (“the Finance Act”)
Then, Order-in-Original (“the Impugned Order or the OIO”) was passed holding that the Appellant 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.
Subsequently, the Appellant preferred an appeal before the Commissioner (Appeals) who vide the Order-in-Appeal (“the Impugned Order”) upheld the OIO. Being aggrieved, the present appeal has been filed.
Argument by the Respondent:
The Respondent contended that the Appellant for engaging the third parties does not qualify as ‘Pure Agent’ under Rule 5 of the Service Tax (Determination of Value) Rules, 2006 (“the Service Tax Valuation Rules”) and hence, was providing a complete service who has to pay tax on the entire amount including the payment made to third-party vendors and reimbursed by the client.
Argument made by the Appellant:
The Appellant contended that, they are 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 paid to third parties which have been reimbursed by the client.
Issue:
Whether Reimbursement of Expenses was chargeable to Service tax?
Held:
The Delhi, CESTAT in held as under:
