LINK INTIME INDIA PVT. LTD. Vs. COMMISSIONER OF C. EX.
LAWS(CE)-2015-2-53
CUSTOMS EXCISE AND GOLD(CONTROL) APPELLATE TRIBUNAL
Decided on February 24,2015

Link Intime India Pvt. Ltd. Appellant
VERSUS
COMMISSIONER OF C. EX. Respondents




JUDGEMENT

P.R. Chandrasekharan, Member (T) - (1.)THE appeal arises from Order -in -Original No. 65/B.R. -65/S.T./Th. -I/2011, dated 12 -10 -2011 passed by the Commissioner of Central Excise, Thane -I. Vide the impugned order, a Service Tax demand of Rs. 4,62,27,547/ - along with interest thereon has been confirmed against the appellant, M/s. Link Intime Spectrum Registry Ltd., by including the value of reimbursable expenses incurred by the appellant in the value of taxable services rendered. Further, penalties have been imposed on the appellant under the provisions of Sections 76 and 78 of the Finance Act, 1994. Aggrieved of the same the appellant is before us. The learned Chartered Accountant appearing for the appellant submits that the appellant is a Share Transfer Agent ('STA' in short) and Registrar to an Issue ('RTF in short). As a RTI, it acts as an agent of a company in processing application for shares, dispatching allotment letters, refund orders, certificates and other related documents in respect of the issue. As an STA, it acts as an agent of the company to process share transfers and dispatch the transfer certificates to the transferees within the mandatory time period. In respect of these services, the appellant is liable to Service Tax w.e.f. 1 -5 -2006 under the category of RTI/STA services. For the services rendered, the appellant collects fees, reimbursement of postage paid to the post office on the company's behalf on actual basis and reimbursement of certain additional expenses like printing, travelling, telephones, etc., from the company on actual basis. Service Tax was paid by the appellant w.e.f. 10 -9 -2004 under the category of 'Business Auxiliary Service' though not payable and subsequently under the category of RTI/STA services. Service Tax was also paid on the reimbursement of other expenses for the period post 1 -4 -2006. However, Service Tax on reimbursement of postage for the period 10 -9 -2004 to 31 -7 -2007 was not paid in regular course. Therefore, the department issued a show cause notice dated 24 -4 -2008 alleging short -payment of Service Tax during 10 -9 -2004 to 31 -5 -2006 and on reimbursement of postage for the period 10 -9 -2004 to 31 -7 -2007 received from their clients, namely, M/s. MRPL and M/s. TV Today Network Ltd., the total demand raised amounting to Rs. 4,62,27,547/ -.
1.1 The appellant contended that the demand for the period 10 -9 -2004 to 30 -4 -2006 is not payable since STA/RTI services were not liable to Service Tax under 'Business Auxiliary Services'. Secondly, reimbursement of expenses and postage is not taxable and hence the demand confirmed in the impugned order is not sustainable. Reliance is placed on the decisions of this Tribunal in the case of Ankit Consultancy Ltd. - : 2007 (6) S.T.R. 101; Sathguru Management Consultants Pvt. Ltd. -, 2007 (7) S.T.R. 654 and Cameo Corporation Services Ltd. - : 2008 (11) S.T.R. 161.

1.2 As regards the period 1 -5 -2006 to 31 -5 -2006, it mainly comprises demand on postage which is not payable, since the relationship between the appellant and its client is that of an agent and principal and postage amounts to 'duty chargeable for the transmission by post of postal articles' in terms of Section 2(f) of The Indian Post Office Act, 1898.

1.3 As regards the demand for the period 1 -5 -2006 to 31 -5 -2007 so far it relates to Service Tax on other expenses incurred, the appellant has already paid Service Tax of Rs. 5,94,448/ - for the period 1 -4 -2006 to 31 -5 -2007 and hence, the demand not sustainable.

1.4 The learned Chartered Accountant also relies on the decision of the Hon'ble High Court of Delhi in the case of Intercontinental Consultants & Technocrats Pvt. Ltd. v. Union of India - : 2013 (29) S.T.R. 9 (Del.) wherein it was held that expenditure/costs such as air travel, hotel stay, etc., incurred for rendering the service are not includable in the gross taxable value of service and only value of service rendered should be brought to charge. The Hon'ble High Court further held that Rule 5 of the Service Tax (Determination of Value) Rules, 2006, which provided for inclusion or exclusion from value of certain expenditure or costs is ultra vires, and runs counter and repugnant to provisions of Sections 66 and 67 of the Act and has accordingly set aside the said provisions. Reliance is also placed on the Circular No. 187/107/2010 -C.X.4, dated 17 -9 -2010 wherein it has been clarified by the C.B.E. & C. that in case of expenditure incurred is the liability of the service provider it has to be included in the taxable value, and in case it is the liability of the service receiver and the service provider pays the same acting as a 'pure agent', then such amount is not includible in the taxable value. Though the above clarification was given in respect of stamp duty and security transaction tax, the same would apply to other reimbursable expenses incurred as 'pure -agent'. Accordingly, it is pleaded that the impugned demands be set aside and the appeal allowed.

(2.)THE learned Commissioner (AR) appearing for the Revenue reiterates the findings of the adjudicating authority and submits that in terms of Rule 5(1) of the Service Tax (Determination of Value) Rules, 2006, expenses or costs which are incurred by the service provider in the course of providing the taxable services, all such expenditure or costs shall be treated as consideration for the taxable service provided or to be provided and shall be included in the value for the purpose of charging Service Tax on the said service. He further submits that the decision of the Hon'ble High Court of Delhi in the case of Intercontinental Consultants & Technocrats Pvt. Ltd. case (supra) has been challenged before the Hon'ble Apex Court and has been admitted [2014 (35) S.T.R. J99 (S.C.)] and, therefore, the said decision is in jeopardy. Therefore, he pleads for upholding the impugned order.
We have carefully considered the submissions made by both the sides.

3.1 As regards the demand for the period prior to 1 -5 -2006, the appellant herein is rendering services of a 'Share Transfer Agent' and 'Registrar to an Issue' under the Securities and Exchange Board of India (Registrar to an Issue and Share Transfer Agents) Rules, 1993 and the connected regulations. The said service came under the tax net for the first time on 1 -5 -2006. Therefore, the question of demanding any Service Tax on reimbursement of expenditure would not arise at all prior to 1 -5 -2006, even though the appellant might have paid Service Tax wrongly under the category of 'Business Auxiliary Service'.

3.2 As regards the demand towards Service Tax on reimbursement of postage and other stationery expenditure, it is not in dispute that the said expenses have been reimbursed on actual basis. Further under Section 2(f) of the Indian Post Office Act, 1898, the expression "postage" means 'the duty chargeable for the transmission by post of postal articles' and therefore, postage is in the nature of a duty/tax. It is a settled position in law that Service Tax cannot be levied on an amount charged as tax, since the same is not a consideration for rendering any service. Postage is an amount received by the postal department for transmission by post and cannot be considered as a consideration received by the person who is the sender of the postal article. Further, when the postage is recovered from the service receiver on actual basis by a service provider, he acts as a pure -agent and, therefore, the reimbursements made to a pure -agent is not includible in the value of taxable service rendered, as what is provided under Section 67 of the Finance Act, 1994 is only the consideration received for the value of services rendered. Same is the position with respect to the cost incurred towards stationery articles used for sending various items by post. Therefore, these reimbursements on actual basis cannot form the value of taxable service at all. Therefore, the Service Tax demand by including cost of such expenditure in the value of taxable service is clearly unsustainable in law. Further, Rule 5(1) of the Service Tax (Determination of Value) Rules, 2006 has been declared ultra vires and has been set aside by the Hon'ble High Court of Delhi in the case of Intercontinental Consultants & Technocrats Pvt. Ltd. (supra). Therefore, there is no authority provided for in the law for subjecting the reimbursement of expenses to Service Tax. There is also no stay against the Delhi High Court's order and therefore, ratio of the said decision has to be followed by all subordinate forums, including this Tribunal.

In view of the above factual and legal analysis, we find that the impugned order is clearly unsustainable in law. Accordingly, we set aside the same and allow the appeal with consequential relief, if any, in accordance with law.

(Pronounced in Court)

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