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2022 (6) TMI 614 - AT - Service TaxRecovery of Short paid Service Tax - works contract service - taxability of reimbursements - demand of service tax on the entire amount including what has been paid by it to the third parties and is reimbursed by the client - HELD THAT:- The Commissioner has in the impugned order recorded that the appellant was claiming reimbursement. It is not the case of the Revenue that the appellant entered into a turnkey contract for the entire service and was hiring sub-contractors for various purposes. If such was the arrangement, the appellant would be the service provider and its service would be the entire package on which it would be liable to pay the service tax. The others would have been the sub-contractors to the appellant who would have been liable to pay service tax on the amounts they received for their services. In such an arrangement the services of others would have been input services to the appellant on which the appellant would have been entitled to avail Cenvat credit of the service tax paid by such sub-contractors. Revenue accepts that the appellant was receiving two types of payment – one for its services and another towards reimbursement of the expenses which it incurred in hiring other service providers. Estimates of expenses to be incurred on the other service providers are approved by the client and the actual amounts incurred by the appellant are claimed by it as reimbursements from the client after submitting appropriate utilization certificates - In this arrangement, 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, it is found that Rule 5 itself has been held to be ultra vires of Section 67 by the Supreme Court in the case of UNION OF INDIA AND ANR. VERSUS M/S. INTERCONTINENTAL CONSULTANTS AND TECHNOCRATS PVT. LTD. [2018 (3) TMI 357 - SUPREME COURT]. 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 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 in the case of Intercontinental Consultants and Technocrats Pvt. Ltd. - the demands confirmed against the appellant do not survive. The penalty imposed upon the appellant also needs to be set aside - Appeal allowed - decided in favor of appellant.
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