Custom, Excise & Service Tax Tribunal
Reliance Ada Group Pvt. Ltd vs Commissioner Of Service Tax on 30 November, 2015
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL, WEST ZONAL BENCH AT MUMBAI COURT No. I Appeal No. ST/86341/15 (Arising out of Order-in-Original No. 08/STC-IV/SKS/14-15 dated 30.04.2015 passed by Commissioner of Customs, Central Excise, & Service Tax, Mumbai IV) For approval and signature: Honble Mr. M.V. Ravindran, Member (Judicial) Honble Mr. C.J. Mathew, Member (Technical) ================================================
1. Whether Press Reporters may be allowed to see : No the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?
2. Whether it should be released under Rule 27 of the : No CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?
3. Whether Their Lordships wish to see the fair copy : Seen of the Order?
4. Whether Order is to be circulated to the Departmental : Yes authorities?
Reliance ADA Group Pvt. Ltd.
Appellant Vs. Commissioner of Service Tax Mumbai IV Respondent Appearance:
Shri V.S. Nankani, Sr. Advocate with Shri Gopal Mundra, C.A. Ms. Ginita Bodani, Advocate Shri Prithviraj Chaudhari, Advocate for appellant Shri V.K. Singh, Spl. Counsel for respondent CORAM:
Honble Mr. M.V. Ravindran, Member (Judicial) Honble Mr. C.J. Mathew, Member (Technical) Date of Hearing: 30.11.2015 Date of Decision: ..
ORDER NO Per: M.V. Ravindran The instant appeal under section 84 of Finance Act, 1994 is arising out of the Order-in-Original No. 08/STC-IV/SKS/14-15 dated 30.04.2015.
2. We have carefully considered the records before us and the submissions advanced and various case laws relied upon by both the sides. The brief facts of the case are as follows-
3. The appellant M/ s Reliance ADA Group Private Limited is currently holding Service Tax Registration no. AAFCA4482QST001. The appellant is a Guarantee Company under Section 27 of the Companies Act 1956, has entered into contractual agreements with its participating Group Companies to procure certain services on their behalf so as to share the cost among the Participating Group Companies. This arrangement is a mere cost sharing arrangement, and the role of the appellant is limited to monitoring and coordinating the arrangement for all participants. Such procurement inter alia includes provision of Aircraft Hiring Services, Branding Services, Professional Services, Custodian Services etc. The expenses/cost incurred by the Appellant in procuring the specified services on behalf of the Participating Group Companies would be separately charged to and reimbursed by the Participating Group Companies. The allocation of cost is based on the estimated uses of such procured services by each member of the Participating Group Companies.
3.1 An EA 2000 Service tax audit was conducted by the Department on the books of accounts of the Appellant for the period from 2006-07 to 2009-10. During the course of audit, it was observed that the Appellant has provided certain Business Support Services to its various Participating Group Companies by way of accounting and processing of certain transaction and certain operational assistance as required by these Group of companies under an agreement between the appellant and the group companies. As per the Agreements entered by the appellant, the Participating Group Companies would jointly pay fixed fee of Rs. 1 Crore per annum as remuneration to the appellant for acting as a manager and carrying out the activities envisaged under the agreement. As per the Memorandum of Association the objective of the company is to promote, manage, administer, counsel or otherwise assist in the growth and operation of the Group Companies. It was also observed that the appellant has classified these services under the category of Support Services of Business or Commerce and have been paying service tax since 2008-09 onwards. It was alleged that in the Financial Year 2006-07 and 2007-08 (impugned period'), the appellant had provided similar services for an amount of Rs.33,01,29,105/- and Rs.1,13,53,17,136/- respectively. The Respondent vide its final Audit Report No. ST/ HQ / Audit/ EA2000/ Gr.6 / Reliance / 2010 dated 05.08.2011 inter alia alleged that the Appellant has neither taken the Service tax Registration for the impugned period nor has discharged the Service tax liability on the service rendered to the Participating Group Companies under taxable category Support services of Business or Commerce under section 65(105)(zzzq) of the Finance Act, 1994.
3.2 The appellant vide letter dated 18.4.2011 stated that they run on No profit, No loss basis and only recover cost from the group companies and they were acting as pure agent. The Appellant in the letter dated 23.08.2011 replied to the Audit Objections and submitted that-
(i) The scope of the 'Support Service of Business or Commerce' as defined under Section 65(104) of the Act has been amended w.e.f. 01.04.2011 to include within its ambit all the 'operational or administrative assistance provided in any manner';
(ii) The Department has erroneously computed the demand by taking the total amount shown in the Profit & Loss account as the receipts from the Participating Group Companies;
(iii) The Appellant does not provide any "services" to the Participating Group Companies. The services are provided by various service providers with whom the appellant enters into contractual arrangements on behalf and for the benefit of the Participating Group Companies. Thus, in respect of the procurement of services the Appellant has acted only in the capacity of 'Pure Agent' and therefore, the expenditure incurred on behalf of the Participating Group Company shall be excluded for the purpose of chargeability of Service tax;
(iv) The Appellant does not hold any title to the goods or services procured on behalf of the Participating Group Company;
(v) The fixed remuneration of Rs One Crore as stipulated by one of the clauses in the Agreements has never been received by the Appellant from the Participating Group Companies. Such remuneration, even if charged and/or received would alone be liable to service tax being the fee accruing to the Appellant. The arrangement has been accepted as such by the Income Tax Authorities who have not considered the recoveries from Participating Group Companies as income of the Appellant nor considered the amounts paid to the various services providers as expenditure of the Appellant.
3.3 Pursuant to its reply to the Audit Objections dated 23.08.2011, the Appellant vide an e-mail dated 06.09.2011 communicated to the Department the details of the reimbursement received from the Participating Group Companies during the impugned period under the Agreements.
3.4 A Show Cause Notice no. ST/MUM/DIV-III/Gr.VIII/Reliance ADAG/2011 /2791 dated 20.10.2011 (Impugned SCN') was issued to the appellant, alleging therein that-
(i) The services rendered by the Appellant to its Group Companies is classifiable under 'Business Support Services' under Section 65(105) (zzzq) of the Act;
(ii) Chargeability of Service tax is unconnected with profit or loss made by the Appellant. As long as the taxable services are provided and the taxable value is collected and paid, the Service tax is chargeable,
(iii) The appellant also recovers all the expenses like communication expenses, staff salaries etc from the group companies and do not have to spend anything from their own pocket.
(iv) The Appellant is a Company incorporated under the Companies Act, 1956 and is therefore, a legal entity in its own right having its registered office, manpower and activities, which are different from the ones to whom it is providing services.
(v) The Appellant has failed to satisfy the Condition No. (iii) and (vii) of Rule 5(2) Service Tax (Determination of Value) Rules, 2006 (The Valuation Rules') in as much as the Appellant himself is making arrangement for procuring the services and liable to pay to third party and the Appellant has recovered from the recipient of service not only such amount as has been paid by Appellant to the third party but an additional amount by way of administrative expenditure, salary etc. as per the contractual agreement.
3.5 On the basis of these allegations, the Appellant was called upon to show cause as to why:-
(i) The service provided by the Appellant to its Group Companies should not be classified under the category of 'Support Services of Business or Commerce' under the Section 65(105) (zzzq) of the Act;
(ii) The Service tax amounting to Rs 15,14,14,192/- for the period from 2006-07 and 2007-08 should not be demanded and recovered under the Section 73 of the Act read with Section 68 of the Act and Rule 6 of the Service Tax Rules,1994 (` the Rules').
(iii) Interest on the above should not be charged and recovered under Rule 6 of the Rules read with Section 75 the Act;
(iv) Penalty should not be imposed upon them under provisions of Section 76 and 77 of the Act, for non-payment of the Service tax;
(v) Penalty should not be imposed on the Appellant for suppressing and mis-stating the facts under the provisions of Section 78 of the Act.
3.6 In its reply, the appellant refuted all the allegations and submitted that-
(i) The Appellant is a Guarantee Company, without any share capital and has entered into cost sharing arrangement with the Group Companies and they have incurred the expenditure and subsequently allocated the cost to its Participating Group Companies.
(ii) The Appellant is acting in the capacity of a pure agent as the appellant does not use such services or goods purchased and receives only the actual amount incurred to procure such goods or services from the third party vendors/service providers.
(iii) A new service category 'Supply of Tangible goods services' was introduced w.e.f. May 2008. As the majority (90%) of the Appellant's expenses pertaining to the reimbursement of Aircraft Expenses, the Appellant under an abundant caution applied for Service tax registration and started discharging Service tax from 2008 onwards.
(iv) The cost sharing arrangement cannot be covered under the broader category of Business Support Services as the definition of Business Support Services has limited application to the word and phrases used therein and cannot be simply extended to all the services;
(v) The Circular No. 120 (A)/2/2010-ST dated 16.04.2010 clarifies that the arrangement between the Insurance Company and Reinsurance Company is only sharing of expenses and there is no service provided by the Insurance Company to the Re-insurance Company for a consideration;
(vi) Section 74 of the Finance Act, 2011 has expanded the definition of Business Support Services' to include 'operational or administrative assistance in any manner' with effect from 01.05.2011 prospectively.
(vii) Without prejudice, even if the cost sharing is held to be covered under the definition of 'Business Support Services' even prior to 01.05.2011, the value for the purpose of levying Service tax be the gross amount charged by the service provider for such services provided or to be provided.
(viii) Without prejudice, even if the Rule 5(2) of the Valuation Rules is applied, the Appellant is acting only as a pure agent being the trustee and manager of the Participating Group Companies;
(ix) The Appellant has acted under a bona fide belief that the cost sharing activity is chargeable to Service tax only with effect from the 01.05.2011 therefore, suppression cannot be alleged in the instant case.
3.7 In the Personal Hearing before the adjudicating authority additional submissions were also made stating that, during the relevant period all the Participating Group Companies were discharging the Service tax and consequently were entitled to the CENVAT Credit of Service tax charged by the Appellant. Therefore, the entire exercise is revenue neutral. Further, it was submitted that the Appellant during the relevant period had availed various services for providing the disputed output services and therefore the Appellant would be entitled to avail CENVAT Credit of such services if the demand is confirmed on such output services.
3.8 Thereafter, the Respondent vide an e-mail dated 27.04.2015 enlisted certain invoices pertaining to Financial year 2006-07 and 2007-08 and asked the Appellant to furnish the copies thereof so as to substantiate the claim of the Appellant in respect of CENVAT Credit. The Appellant after seeking some time submitted the invoices under the cover of letter dated 07.05.2015.
3.9 The impugned Order-in-Original No. 08/STC-IV/SKS/14-15 dated 30.04.2015 was passed which confirmed the allegations levelled in the said SCN, and also confirmed the demand of Service tax of Rs.15,14,14,192/ - along with interest u/s 75, invoking the extended period under proviso to Section 73(1) of the Act; while imposing a Penalty of Rs 15,14,14,192/- under Section 78 of the Act.
3.10 Being aggrieved, the instant appeal was preferred by the Appellant.
3.11 The learned Senior Counsel has taken us through the elaborate grounds of appeal. He vehemently argued that the impugned Order-in-original was erroneous on several grounds as urged in the appeal. He relied upon several decisions in support of the appeal.
4.1 The Learned Departmental Representative strongly opposed grant of any relief to the appellant and submitted that the findings recorded in the impugned Order are detailed, legal and proper. He took us through the findings recorded in the impugned Order-in-Original and with the help of several case laws made efforts to persuade us to dismiss the appeal and uphold the findings of the Respondent Commissioner.
5. After hearing both sides at considerable length, considering their submissions and perusing the illustrative contracts and various case laws relied upon by both the sides, we are of considered opinion that -
5.1 The main issue is whether the activities of the appellant, at the relevant time i.e. in 2006-07 and 2007-08, qualified as taxable service classifiable as Business Support Services under section 65(105)(zzzq) of the Finance Act, 1994 as amended by Finance Act, 2006.
5.2 The definition of Business Support Services' as per section 65(104c) is as follows-
"Support Services of Business or Commerce" means services provided in relation to business or commerce and includes evaluation of prospective customers, telemarketing, processing of purchase orders and fulfilment services, information and tracking of delivery schedules, managing distribution and logistics, customer relationship management services, accounting and processing of transactions, operational assistance for marketing, formulation of customer service and pricing policies, infrastructural support services and other transaction processing.
Explanation For the purposes of this clause, the expression "infrastructural support services" includes providing office along with office utilities, lounge, reception with competent personnel to handle messages, secretarial services, internet and telecom facilities, pantry and security;"
5.3 Admittedly, the object of the appellant company as per the Memorandum of Association is to promote, manage, administer, counsel or otherwise assist in the growth and operation of the Group Companies. The said objective is pursued by way of entering into a cost sharing agreement with the Participating Group Companies. The services in question are provided by third parties and/or employees employed by the Appellant so that the cost thereof can be shared. The Appellant does not provide any services to the Participating Group Companies except coordinating and monitoring the cost sharing arrangement. The Appellant has entered into contract with each of the Participating Group Companies to enable such cost sharing in respect of the specified activities to minimize the overall operational cost. The Agreements specify the appointment of the Appellant as a Trustee or Manager to obtain, hold and manage the resources required for jointly carrying out the activities. The Agreements also prescribe that the Participating Group Companies would share the cost of obtaining and employing resources in relation to the specified activities. Further, the Appellant shall be entitled for a fixed remuneration of Rs. One Crore per annum for acting as a manager. The Appellant has agreed to act as such Manager on the basis that the cost of obtaining and employing the Resources would be distributed to and borne by the Participating Group Companies by sharing of costs of arrangement.
5.4 The adjudicating authority has relied upon the Notes to the accounts in the balance sheet for the period ending 31.3.2008 in para 4.2 of the impugned Order. On the basis of these Notes it is also the finding of the adjudicating authority that-
4.3 From the above Note, it is clear that the company procure lot of common services because of the cost advantage and share the services with the group companies and expenditures are allowed based upon agreed methodology. The nature of common services procured by the assesse includes Aircraft hiring, Branding expenses, Professional Charges, Employees expenses, Travelling expenses, Custodian expenses (for shares and securities). The above expenses have been detailed in Schedule 6 of the Balance Sheet. The Input Service Invoice on which they have paid Service Tax to the service provider also shows that most of the payments have been made for Aircraft hiring, professional charges, branding expenses, Auditors fees etc. 5.5 It is therefore clear that common services are not provided by the appellant but, only these are only procured by the appellant from the Service Providers. Costs thereof are shared by the recipient Participating Group Companies by making reimbursements to the Appellant. The Appellant merely carries out the agency function of procurement of services for the Participating Group Companies which share the costs and expenses thereon.
5.6 We find that the reimbursements of the cost /expenses incurred by the Appellant cannot be regarded as consideration flowing to the Appellant towards the taxable service provided by the Appellant rather the receipts are towards the reimbursements of the cost/expenses incurred by the Appellant in terms of the cost sharing agreement with the Participating Group Companies.
5.7 Section 64(3) of the Act which states the "Extent, commencement and application" of Chapter V of the Act, reads as under -
"(3) It shall apply to taxable services provided on or after the commencement of this Chapter."
Service tax is a levy on rendition of taxable service. We find that in the peculiar facts of the instant case, the Appellant is merely acting as a manager/trustee to incur expenses on behalf of the Participating Group Companies. The object of entering into such cost sharing arrangement is to reduce the cost of operation of the Participating Group Companies. The activities carried out by the Appellant enables the Participating Group Companies to share the common services, the best available talent and resources required for carrying out their business activities. No taxable service is provided by the Appellant and therefore in absence of rendition of such service by the Appellant to the Participating Group Companies, the demand of Service tax cannot sustain.
5.8 It is seen that in the impugned Order contrary to the above findings recorded in para 4.3 regarding procuring of services which are reproduced hereinabove, the adjudicating authority in Para 4.5 onwards of the impugned Order erroneously proceeds on the basis that those services were provided by the appellant. This self-contradictory finding is not supported by any documentary evidence. On the basis of such erroneous self-contradictory findings, the adjudicating authority holds that the activities do fall under the definition of Business Support Services under section 65(104c) read with section 65(105)(zzzq). We find that these observations and findings of the adjudicating authority emanate from the confusion that the Appellant provides the services in question, whereas the Appellant at best acts as an agency to procure services and allocate cost to various Participating Group Companies for which it can claim an amount of Rs. One Crore jointly from all participating group companies as its fees in addition to the reimbursement of the total costs incurred towards such common services.
5.9 No direct statutory provision or any binding precedent could be shown to us by the Revenue, which for the relevant time, covers the activity of incurring costs and seeking reimbursements as Pure Agent under the purview of the Business Support Services under clause (105) of section 65 of the Finance Act, 1994 as amended by Finance Act, 2006. There is no dispute on the fact that no additional fees or profits or consideration for Pure Agent services is received by the appellant, who has merely recovered actual costs incurred from the Participating Group Companies.
5.10 We find that the definition of Business Support Services covers only specific activities in its inclusive part of the definition. Only if such specific activities are carried out, it would be classifiable as Business Support Services'. The Appellant per se in its own capacity has not provided any of the specified services to the Participating Group Companies. The attempt of the adjudicating authority to link all the activities of the Appellant with the marketing policies, customer evaluation procurement policies, distribution policies, customer relation policies, taxation policies etc., and also considering the appellant as a Service Provider, appears to be for anyhow bringing the same in the definition of taxable serves, which exercise is only on assumptions, without any documentary evidence, and contrary to the findings recorded in earlier part of the same impugned Order (in para 4.3 thereof).
5.11 We find that the activity of incurring cost as service is not in the nature of outsourced activity as contemplated in the definition of Business Support Services and therefore would not be taxable under the category of 'Business Support Services'. In JM Financial Services Pvt. Ltd. Vs Commissioner of Services Tax, 2014 (36) STR 151, the Tribunal held that such reimbursement of expenses so recovered by the assessee is not chargeable to Service tax and observed that-
"7.1 The contention of the Appellant is that the amount is received by way of reimbursement of electric charges and office expenses from other group companies. In actual, no service has been rendered to the other group companies. So far receipt of Rs. 2,72,269/ - is concerned, the same relates to the receipt on account of infrastructural support provided to the group companies on which liability has been admitted by the Appellant. So far electric charges and other expenses are concerned, the same have been received by way of share of the expenses and no service has been rendered, and accordingly, reimbursement of expenses is not leviable to Service Tax. Further, the Revenue has not discharged their onus by establishing that the taxable service has been rendered or any service has been rendered under the category of 'Business Support Services'."
In Tata Technologies Limited Vs CCE, Pune, 2007 (8) S.T.R. 358 the Tribunal held that the activity of receiving consideration from its group companies towards procurement of service by acting only as an agent is not providing a taxable service, and observed that-
"It is very clear that the Appellant only acts as agent for SAP India. They enable the group companies of Tata group to procure the SAP software and its maintenance. In the circumstances, we cannot come to the conclusion that the Appellant provides management consultancy service to the affiliates."
In Kumar Beheray Rathi Vs Commissioner Of Central Excise, Pune, 2014 (34) S.T.R. 139, the Tribunal held that the assessee was acting merely as a trustee or a pure agent as it was not engaged in providing any service but only paying on behalf of various flat buyers to various service providers.
5.12 The Honble Delhi High Court in the case of Intercontinental Consultants and Technocrats Pvt. Ltd Vs Union of India, 2012-TIOL-966-HCDEL-ST held that reimbursement of expenses at actuals is not includible in the value of taxable service. Moreover, before that various Circulars issued by the Central Board of Excise & Customs also clarified the position regarding chargeability of Service Tax on reimbursement of expenses. For eg.-
(i) In CBEC Circular under F. No. B 43/1/97 dt. 6.6.97 it was clarified in respect of customs house agent's service and steamer agent's service, that the reimbursements of expenses are not chargeable to Service tax.
(ii) In CBEC Circular under F. No. 343/5/97 dt. 2.7.97 it was clarified in relation to Consulting Engineers Service and Manpower Recruitment Agents Service that the reimbursements of actual expenses were not subject to Service tax.
(iii) In CBEC Circular under F.No. B11/3/98 TRU dt. 7.10.98 it was clarified in respect of Market Research Agency Services and Security Agency Services that the expenses reimbursed by the service recipient are not subject to Service tax.
(iv) In CBEC Circular under F.No. B11/1/2002 dt. 1.8.02, it was clarified in respect of Cargo Handling Service, that Service tax is not payable on reimbursements.
The definition of the term 'Consideration' has been recently amended prospectively by the Finance Act, 2015 by adding an Explanation to Section 67 of the Act so as to include any reimbursable expenditure or cost incurred by the service provider and charged in course of providing a taxable service. This prospective amendment also shows that in the relevant period the reimbursement of expenses were not subject to the Service tax.
5.13 There is no dispute on the fact that w.e.f. 1.5.2011, the words operational assistance for marketing earlier appearing in clause 104(c) of section 65 were substituted with operational or administrative assistance in any manner, to enhance the scope of the definition of support services of business or commerce. This amendment is only prospective in operation. Therefore, in any event, prior to 1.5.2011 any such assistance by the appellant cannot be within the scope of the definition of support services of business or commerce, and consequently, neither any such assistance was a taxable service within the scope of section 65(105) under clause (zzzq), nor was any person providing such assistance was falling within the term service provider under section 65(105).
5.14 Vide a Circular No 127/09/2010-ST dated 16.08.2010 it has already been clarified that unless the link between the amount and the taxable activity can be established, the amount cannot be subjected to Service tax, in the following manner-
"The important point here is regarding the presence or absence of a link between 'consideration' and taxable service. It is a settled legal position that unless the link or nexus between the amount and the taxable activity can be established, the amount cannot be subjected to Service tax. ."
5.15 The adjudicating authority erred in refusing to treat the Appellant as 'Pure Agent' under Rule 5(2) of the Valuation Rules merely because the services procured by the Appellant are not attributable to any one particular Group Company. The Rule 5(2) of the Valuation Rules does not stipulate any condition as to one on one identification of service recipient and service provider in order to fall within the ambit of 'Pure Agent'. The pre-requisite is that the expenses should have been incurred by the person on behalf of the service recipient and the expenses so incurred should be reimbursed to him on actual basis. Rule 5(2) of the Valuation Rules prescribes certain expenses that can be excluded from the value of taxable services, if incurred by the service provider as a pure agent on fulfillment of certain conditions specified therein. Relevant extract of the said Rule is as follows-
(2) Subject to the provisions of sub-rule (1), the expenditure or costs incurred by the service provider as a pure agent of the recipient of service, shall be excluded from the value of the taxable service if all the following conditions are satisfied, namely:
(i) the service provider acts as a pure agent of the recipient of service when he makes payment to third party for the goods or services procured;
(ii) the recipient of service receives and uses the goods or services so procured by the service provider in his capacity as pure agent of the recipient of service;
(iii) the recipient of service is liable to make payment to the third party;
(iv) the recipient of service authorises the service provider to make payment on his behalf;
(v) the recipient of service knows that the goods and services for which payment has been made by the service provider shall be provided by the third party;
(vi) the payment made by the service provider on behalf of the recipient of service has been separately indicated in the invoice issued by the service provider to the recipient of service;
(vii) the service provider recovers from the recipient of service only such amount as has been paid by him to the third party; and
(viii) the goods or services procured by the service provider from the third party as a pure agent of the recipient of service are in addition to the services he provides on his own account.
5.16 Further, the term 'pure agent' is defined under Explanation 1 to the said rule which has been reproduced below here under:-
"Explanation 1 - For the purpose of sub-rule (2), 'pure agent' means a person who
(a) enters into a contractual agreement with the recipient of service to act as his pure agent to incur expenditure or costs in the course of providing taxable service;
(b) neither intends to hold nor holds any title to the goods or services so procured or provided as pure agent of the recipient of service;
(c) does not use such goods or services so procured; and
(d) Receives only the actual amount incurred to procure such goods or services.. 5.17 As has been discussed above, the Appellant has procured various services which have been used by the Participating Group Companies either individually or collectively. The expenditure incurred in procuring such services is then allocated to the concerned Group Company/Companies in a pre-determined ratio and are subsequently recovered by the Appellant. The amount so recovered by the Appellant are only towards the actual amounts payable by the Appellant to the third party vendors or Service providers. The Appellant has not recovered any amount over and above the actual expenses incurred by it in facilitating the provision of common services to its Participating Group Companies. The Appellant has made the payment to the third party vendors or service provider for procurement of specified services on behalf of the Participating Group Companies. The services so procured by the Appellant has been used or availed by the Participating Group Companies. Having used the services Participating Group Companies in law would be liable to make the payment directly for such services to third party vendors or service providers, however, for convenience such payment has been routed through the Appellant under the pass through mechanism. The Participating Group Companies have authorized the Appellant to procure the services. Such authorization has been executed in the form of contractual agreement between the Appellant and Participating Group Companies. Participating Group Companies are completely aware of the fact that the services are procured from the third party vendors or services providers and the Appellant is only facilitating the provision of such Services. The invoice issued by the Appellant categorically specifies that the Appellant recovers only the amount that is being paid to the third party on behalf of the Participating Group Companies. The amount recovered by the Appellant from the Participating Group Companies is precisely the same as has been paid by the Appellant to the third party vendors/ service providers. The goods or services procured by the Appellant for the use of participating Group Company are not availed by the Appellant for its own use or consumption, and the Appellant has no function or existence other than as Trustee / Manager (agent) of the Participating Group Companies cost sharing arrangement. We therefore find no bones in observing that the Appellant completely satisfies the conditions of a 'Pure Agent' as set out in Rule 5(2) of the Valuation Rules.
5.18 In Pharmalinks Agency (I) Pvt. Ltd. Vs CCE, 2015 (37) STR 305, the Tribunal in the matter of a clearing and forwarding agent, who was receiving reimbursement towards freight charges under a separate agreement from the service recipient, held that the assessee is acting as a Pure Agent by making the payment of expenses subsequently taking the reimbursement of the same from the service recipient. Therefore, in the instant case the amount so recovered by the Appellant is in the capacity of a Pure Agent and thus the same cannot be subjected to the Service tax.
5.19 In Para 4.23, the adjudicating authority erroneously holds that despite repeatedly being asked for the production of the invoices for the support of the claim of CENVAT Credit, the Appellant failed to submit any invoice. A letter dated 20.03.2015, a certificate of Chartered Accountant was submitted providing the details of the CENVAT Credit available during the period from 2006-07 and 2007-08 amounting to Rs.20,97,962/- and Rs.3,58,24,163/- respectively. In the certificate, the Chartered Accountant had clearly mentioned the details of suppliers and particulars of payment of principal amount together with the Service tax. The letter also states that the Appellant could produce the invoices for examination if the Respondent wished to verify the same. This CA Certificate submitted by the Appellant detailing the CENVAT Credit otherwise available to the Appellant is not even noticed in the impugned Order. The Appellant had duly submitted all the invoices under the cover of letter dated 07.05.2015, and a copy of the CA Certificate along with the details of CENVAT Credit otherwise available during the relevant period has been produced before us.
5.20 The impugned Order erroneously invokes extended period for demanding Service Tax for the Financial Year 2006-07 to 2007-08. It is seen that even if the activities carried out by the Appellant are subjected to Service tax, the Participating Group Companies who were duly registered with the Service tax authorities during the relevant period and were discharging Service tax on their activities, would be entitled to avail the CENVAT Credit thereof. Copies of the Service Tax Return (ST3) filed by the Participating Group Companies namely Reliance Communication & Infrastructure Limited, Reliance Energy Limited, Reliance Capital Limited, Reliance Communications Limited and Reliance Telecom Limited for the Financial Year 2006-07 and 2007-08 were submitted by the appellant in the adjudication proceedings. The adjudicating authority has also categorically accepted the position of revenue neutrality and recorded the relevant findings at Para 4.26 of the impugned Order as under:-
"4.26 I find that this is a case where Support Services for Business and Commerce was introduced in 2006 and at the initial period, the assesse might not have paid the Service Tax on the understanding that sharing of expenses may not be covered in the definition of business support service. Infact, ther is no clear mention of such sharing of expenses in the definition or in the instruction issued by the Board. I also find that there are number of judgments of Tribunal which has held that at the time of levy of any new services if there are interpretational issue, for that purpose the person should not be penalized. Judgments are also there that wherever there is a question of interpretation of law, the assesse should not be penalized. I also find that it is a case of revenue neutrality because the service tax paid by the assessee was available as CENVAT Credit to the group companies who were also paying service tax. Therefore there could not have been any intention on the part of the assessee not to pay the service tax. "
5.21 The adjudicating authority therefore categorically recorded a finding on lack of any intention on the part of the assesse not to pay the Service Tax. He also recorded a finding that the case is revenue neutral. The Honble Gujarat High Court in CCEX Vs Indeos ABS Ltd., 2010 (254) ELT 628 (Guj) found no infirmity in the Tribunal not examining other issues on finding the case of revenue neutrality. The Tribunal in Daman Ganga Board Mills Pvt. Ltd. Vs CCE, 2012 (276) ELT 532 held the show cause notice as barred by limitation on finding that the entire exercise alleged was revenue neutral. In CCEx Vs Reclamation Welding Ltd., 2014 (308) ELT 542, it was held by the Tribunal that when recipient of same group company is eligible to avail the CENVAT Credit of the duty paid by the assessee, the assessee could not be alleged to have mala fide intent to evade payment of duty and accordingly extended period of limitation cannot be invoked. Therefore, even on this ground the entire demand and any contrary finding recorded for invoking extended period, are liable to be set aside. The appellant has cited several case laws in this regard, and has raised further issues. However, we do not find it necessary to deal with the same.
5.22 Therefore, in the peculiar facts and circumstances of the instant case, the appeal is allowed with consequential relief and the impugned order is set aside.
(Pronounced in Court on..) (C.J. Mathew) Member (Technical) (M.V. Ravindran) Member (Judicial) nsk ??
??
??
??
1 31Appeal No. ST/86341/15