TMI Blog2017 (9) TMI 1005X X X X Extracts X X X X X X X X Extracts X X X X ..... the agreement. Conditions No.(iii) read with (iv) will make it clear that if the appellant is making payments as authorized by the service recipient on actual basis then such expenses shall not form part of the taxable value - On perusal of the documents submitted by the appellant in support of their claim for consideration as Pure Agent and also upon perusal of the agreement dated 1.8.2008 between these two parties, the impugned order is not sustainable in rejecting the claim of the appellant for consideration as pure agents. Business Support Services - re-imbursement from group companies for expenditure incurred on their behalf - Held that: - The appellants did not provide any infrastructure support service using any of their infrastructure or providing any service to other group companies. The infrastructure facilities were commonly shared and the third party was paid by the Nodal Company (appellant). Thereafter the said expenditure was apportioned with other group companies, who availed the same service - the appellants and other group companies are service recipient though the considerations were initially paid by the appellant and proportionately thereafter, distributed to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Event Management Service, as recipient of such service from foreign service providers; (b) Internet Telecommunication Service; (c) Management Consultancy Service; (d) Business Support Service; and (e) Interest on delayed payment of service tax in respect of services provided to associated enterprises. 2. These demands were contested by the appellants. The case was adjudicated The Original Authority confirmed a total service tax liability of ₹ 2,75,64,632/- along with interest liability of ₹ 14,34,421/- in respect of demand notice dated 24.01.2011. Penalty of ₹ 5,13,95,467/- under Section 78 and ₹ 5,000/- under Section 77 of Finance Act, 1994 were imposed. A service tax liability of ₹ 41,02,467/- was confirmed along with penalty of ₹ 10,000/- under Section 77 and further penalty under Section 76 were imposed in respect of demand notice dated 7.9.2012. 3. In the present appeal, the demands were contested both on merit as well as on limitation except in respect of service tax on Internet Telecommunication Service, the tax liability on which is not contested. Ld. Sr. Counsel on behalf of the appellant elaborately submitted against the tax liab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the adjudication order regarding condition (iii) under the said Rule 5(2) is erroneous and without appreciating the facts. It is clear that the recipient of service is liable to make payment to third party but he authorizes the service provider to make payment on his behalf. The facts in the present case, as evidenced from the terms of the agreement, clearly fulfill such conditions. The findings of the Original Authority are erroneous. Reliance was placed on various decided cases in support of the said contention. (c) Regarding liability of the appellant under the category Business Support Service , the ld. Counsel submitted that they have not provided any infrastructure support to various associated enterprises. As per the arrangement among the associated enterprises, the appellants incurred certain expenditure as a Nodal Company and thereafter the expenditure was shared with group companies. Such cost sharing arrangement among group companies is supported by debit notes and due accounting. There is no service rendered by the appellant. It is merely allocation of expenses out of common pool. When a service is procured from a third party and is paid by one group company and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x liability of the appellant under Management Consultancy Services , it is submitted that the appellants have not fulfilled the conditions of a pure agent . The ld. AR supported the findings recorded by the Original Authority on merit as well as on limitation. 5. I have heard both the sides and perused the appeal records. 6. We consider the disputed issues one by one. First point for decision is the liability of the appellant to pay service tax on reverse charge basis under the category of Event Management Service . The statutory provisions relevant to the present issue are as below:- Section 65(41) of the Finance Act defines event manager as follows:- event manager means any person who is engaged in providing any service in relation to event management in any manner Section 65(40) of the Finance Act defines event management as follows:- event management means any service provided in relation to planning, promotion, organizing or presentation of any arts, entertainment, business, sports, marriage or any other event and includes any consultation provided in this regard . Section 65(105)(zu) of the Finance Act defines taxable s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the ground that they have acted as pure agent to arrange on actual cost basis, goods and services for the clients. We note that the claim of the appellant was rejected by the Original Authority relying on the conditions no.(iii) under Rule 5(2) of the Valuation Rules. The said condition states that the recipient of service is liable to make payment directly to the third party. The Original Authority held that M/s. H.T. Burda are not making any payment to third party and hence, the appellant cannot be regarded as pure agent . We find that the Original Authority fell in error in not reading together all the conditions mentioned under sub-rule (2) of Rule 5. It is clear that to be Pure Agent , that the provider of service has to make payment to the third party on behalf of the principal (service recipient) and such arrangement should be on actual basis with prior knowledge, in terms of the agreement. Conditions No.(iii) read with (iv) will make it clear that if the appellant is making payments as authorized by the service recipient on actual basis then such expenses shall not form part of the taxable value. On perusal of the documents submitted by the appellant in support of their ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Original Authority instead of examining the actual nature of the infrastructure sharing arrangement by the appellant group company, relied on the said decision to confirm the service tax liability. We find merit in the contention of the appellant on this issue. 11. The final point for decision is the liability of the appellant to pay interest on delayed payment of service tax in respect of services provided to associated enterprises. The Original Authority held that in terms of Section 67 read with Rule 6 of Service Tax Rules along with notification no.19/08-ST dated 10.05.2008, the appellants is liable for interest for the period 10.05.2008 to 31.03.2011 for delayed payment of service tax. In other words, he held that the amendment carried out in Explanation (c) under Section 67 (w.e.f. 10.05.2008) is applicable to the appellants case, since they did not discharge due service tax liability for each relevant month when entries were made in the books with reference to services rendered for associated companies. We note that the appellants argued that such explanation can have only prospective effect and should cover only such book entries or payments made after 10.05.2008. The ..... X X X X Extracts X X X X X X X X Extracts X X X X
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