TMI Blog2019 (1) TMI 512X X X X Extracts X X X X X X X X Extracts X X X X ..... ) has no existence except in conjunction with rule 5(1) of Service Tax (Determination of Value) Rules, 2006 is not convincing as the condition precedent, i.e. ‘subject to’ does not reduce one to that of dependent of the other. In the absence of rule 5(1), the expression ‘subject to’ in rule 5(2) is rendered superfluous and the rest standing on their own - The claim of the assessee does not find merit in the absence of any justification to be compliant with the description of ‘pure agent’ as defined in the Rules. The appeal of M/s Swarupananda Enterprises is allowed on the substitution of penalty under section 78 with that under section 76 - deduction of expenses not allowed - demand of tax and imposition of penalties, as upheld by first ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 65(105)(k) of Finance Act, 1994, the levy for the period thereafter in the first show cause notice and for the entire period of the second notice was upheld; while setting aside the penalty under section 78, the penalty under section 76 of Finance Act, 1994 was substituted for the demand pertaining to October 2010 to March 2011. The plea of the appellant for restricting the demand to the commission received from the recipients of the service was rejected but, in directing the jurisdictional authority to quantify the recoverable tax, the impugned order has allowed the claim for cum-duty and the benefit of notification no. 6/2005-ST. 3. M/s Swarupanand Enterprises has filed two appeals against the denial of exclusion of payments made t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to invoke a penal provision that was not the subject of appeal is beyond the competence of an appellate authority. Such jurisdiction could have been assumed for such imposition in the impugned order had the first appellate authority placed the appellant on notice of such intention. There is no record of communication of such intent. The imposition of penalty under section 76, in the absence of conformity with principles of natural justice, is bad in law and is liable to be set aside. 5. We now turn to the legality and propriety of dropping demand for the period upto September 2010 and have heard Learned Authorized Representative and Learned Counsel for assessee at length. It is not in dispute that the appellant did contract with its two ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e liability to tax is not in dispute but appellant claims that it should have been restricted to the commission or consideration for the service that has been rendered. Learned Counsel submits that the plea before the lower authorities that the deductions are out of out of pocket expenses reimbursed by the client and challenges the finding that elements enumerated to identify pure agent in rule 5(2) of Service Tax (Determination of Value) Rules, 2006 have not been met with the counter that, in the absence of rule 5(1) declared ultra vires, rule 5(2) cannot be claimed to exist. According to Learned Counsel, with the decision of the Hon ble Supreme Court in Union of India v. Intercontinental Consultant Technocrats Pvt Ltd [2018 (10) GSTL ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oes not reduce one to that of dependent of the other. In the absence of rule 5(1), the expression subject to in rule 5(2) is rendered superfluous and the rest standing on their own. The claim of the assessee does not find merit in the absence of any justification to be compliant with the description of pure agent as defined in the Rules. 9. No justifiable reason for interfering with the concessions in the directions for computation of tax in relation to the two demands has been offered for us to be convinced. 10. Considering the findings above, we dismiss the appeal of Revenue and, while allowing the appeal of M/s Swarupananda Enterprises on the substitution of penalty under section 78 with that under section 76, we dismiss their ..... X X X X Extracts X X X X X X X X Extracts X X X X
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