TMI Blog2018 (11) TMI 27X X X X Extracts X X X X X X X X Extracts X X X X ..... anpower - whether reimbursable expenses or cost of service? - Held that:- A free supply changes the nature of contract. For example a contract for painting of building would became a labour contract if paint and painting equipment is supplied free. However, a painting contract will remain a painting contract even if the agreement has clause where actual cost of paint and equipment is reimbursed - the appellants are not entitled to exclude the rent and salaries from the assessable value. The demand on this count in respect of services provided to ICICI is upheld on merit. Contract entered into by the appellant with Tata Teleservices Ltd. - Held that:- The service provided is in the nature of supply of manpower. In these circumstances the demand of service tax under the head of BAS cannot survive. Time Limitation - Held that:- The service provided is in the nature of supply of manpower. In these circumstances the demand of service tax under the head of BAS cannot survive - The ST-3 form prescribes disclosure of all amounts received in respect of service even if not part of Assessable value. Failure to disclose the same amounts to misdeclaration. Thus, the appellant s argume ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... able value. Ld. Counsel also relied on the decisions of Tribunal in the case of Malabar Management Services Pvt. Ltd. 2008 (9) STR 483 to assert that such reimbursement cannot be included in the assessable value. 2.2 Ld. Counsel further argued that they also provide service to Tata Teleservices under a different agreement. He pointed out that para 9.1.1 of the order in original elaborated a scope of the services provided by them. He pointed out that from the description of the services, it is apparent that the services provided by them is not BAS services but temporary supply of manpower service and on this basis the demand should fail. 3. Ld. AR relied on the impugned order. He argued that the service provider never disputed that the service provided by them is BAS service and they had themselves registered under BAS service itself. Ld. AR pointed out that the appellant themselves started paying taxes on service provided by them to both these clients from April, 2008 onwards. He read out reply to question 15 from the letter of the appellant dated nil received on 11/03/2010: Q.15 In your statement dated 03.02.2010, you had stated that from April 2007 in case of M/s ICICI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ject to the terms of this Agreement, shall be responsible for the selection, hiring, assigning and supervising of the personnel and shall employ sufficient number of personnel to provide the services in prompt and efficient manner. The Service Provider agrees that the personnel shall work under the Supervision, control and direction of the Service Provider. The Service Provider shall be responsible for all negotiations with personnel relating salaries and benefits, and shall be responsible for assessments and monitoring of performance and for all disciplinary matters. He argued that agreement was not a for the manpower supply but for the services under BAS. He further argues that even if it is considered as manpower supply services, still salaries of personnel needs to be included in the assessable value. Ld. AR argued that there is no specific agreement between the reimbursement of rent expenses and other expenses. If this is observed, he relied on the letter dated nil, received on 17.03.2010 wherein responses of classification no. 5 has been stated: Q.5 Is there an specific agreement regarding reimbursement of rent expenses and other expenses? Ans.- No there is n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... harge his tax liability for the previous year also. The fact that the appellant started paying duty for the subsequent period, even though the same was under a wrong belief, the same belief should have made him to pay duty for the previous year also instead of suppressing the value of the work done during that period. The fact that during the period 2005-06, appellant had done the same service came to the notice of the Revenue only by the audit conducted in subsequent years. In this scenario we hold that the appellant acted with a mala fide and suppressed the work done by him during the period 2005-06 in which case, the longer period stands rightly invoked by the Revenue. He asserted that the appellant should have paid on their own the entire liability for the period prior to that. 3.4 Ld. Counsel for the appellant in rebuttal pointed that in reply to question no. 10 12 of their letter no. received by the Revenue on 11/03/2010, they have clearly specified: Q.10. What are the incentives paid to the persons employed by Modern Business solution? Who decides such incentives? Whether the salary has been received on actual basis, if yes then produces evidence to the effec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... services: A) the relationship between ICICI Bank and the service provider shall be on a principal-Principal basis. The service Provider shall perform the following functions/ provide the following services and such other services as may be assigned in writing by ICICI Bank to be performed by the Service Provider, from time to time. Upon such conditions and charges as may be stipulated by ICICI Bank in writing: 1. The service provider shall identify eligible customers for the purchase of retail finance products of ICICI Bank including credit cards/commercial cards/ prepaid cards/ merchant acquisition and other retail finance products. The Service Provider shall take into consideration the eligibility criteria notified by ICICI Bank from time to time. 2. The service provider shall provide certain services relating to issuance of credit cards, as mentioned in the following sections for on behalf of ICICI Bank, on the terms and conditions herein contained, in consideration of ICICI Bank agreeing to consider granting credit cards to the customers introduced by the Service Provider to the Bank. From the above description it is apparent that the contract entered w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the assessable value, however, what constitutes reimbursement has to be determined in light of the decision of larger bench in the case of Bhagawathy Traders (supra). The larger bench has clarified as follows: 6.1 Having analyzed the various decisions cited on behalf of the assessee and on behalf of the department, it would be appropriate to consider the scope of the term reimbursements in the context of money realized by a service provider. A person selling the goods to another cannot treat cost of raw materials or the cost of labour or other cost components for inputs services, which went into the manufacture of the said goods as reimbursements. If the buyer enters into a contract for supply of raw materials after negotiating prices from the supplier for the raw materials and the raw materials are received by the manufacturer and the manufacturer pays the amounts to the supplier of raw materials and recovers the same from the buyer, it can certainly be considered as reimbursements. It is to be noted that in such a case, the manufacturer has no role about choosing the source of the materials procured or the price at which the materials procured and the manufacturer is n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... towards service charges. 6.4 The claim for reimbursement towards rent for premises, telephone charges, stationery charges, etc. amounts to a claim by the service provider that they can render such services in vacuum. What are costs for inputs services and inputs used in rendering services cannot be treated as reimbursable costs. There is no justification or legal authority to artificially split the cost towards providing services partly as cost of services and the rest as reimbursable expenses. In the instant case, in the context of BAS, the rent and cost of manpower is not a reimbursable expense but a cost of service. Just by terms of the contract, an assessee cannot convert a cost into a reimbursable expense. The Institute of Cost Accountants of India, a statutory body under an Act of Parliament has a Cost Accounting Standard Board. It has formulated procedure to determine the cost. The CASI prescribes classification of costs. It classified cost in under different head like: 1. Direct Material costs to factor in expenses on purchase of material. 2. Direct Labour Costs to factor in expenses in employees labor directly involved in production. 3. Overheads to fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... authorized personnel. e) On basis on this data the Agency shall raise the monthly bill for the contract and submit the same to TTSL‟s authorized personnel by every month. f) Once the accepted invoice is handed over by TTSL on the 30th of the months to the Agency, the latter shall ensure that salaries are paid to all its employees on the 1st of every month. g) The Agency shall facilitate all its employees‟ salaries to be paid through a bank account through a single cheque payment debiting its account and crediting the individual account holder. All employees shall be issued with an ATM card by making necessary arrangements with the concerned bank to allow all these accounts to be NIL Minimum Balance Accounts. This way, salaries can be paid to the employees of the Agency within 4 hours from the time of receiving credit of payment from TTSL. Ld. AR had relied on clause c and e of the agreement to assert that the appellants were not engaged in providing manpower services but were providing business auxiliary services to the service recipient. Clause c and e of the agreement reads as follows: (c) Alone determine the service conditions of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the present system of self-assessment documents like invoices and other transaction details are not supplied to the Department. Moreover, M/s MBS did not furnish the required details of amount of taxable value to the Department, the intention will have to be believed as that of evasion. Once the details are not submitted to the Department, it amounts to mis-declaration or suppression which is rightly invoked in the case before me. I, therefore, conclude that the element of suppression with intent to evade payment of service tax is conspicuous by the peculiar facts and circumstances of the case as discussed above. In view of the above discussion and findings, the ratio of cases relied by the said service provider cannot be applied in the case before me. The argument of the appellant that they had bonafide belief is bases on the decision of LB of Tribunal in case of Bhagawathy Traders (supra). We do not find merit in the said argument. The ST-3 form prescribes disclosure of all amounts received in respect of service even if not part of Assessable value. Failure to disclose the same amounts to misdeclaration. Thus, the appellant s argument on limitation is dismissed. Even if th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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