1. The appeal is against the OIO No. 4-6/2014 dated 09.01.2014.
2. The appellant was rendering taxable services to M/s. Prasar Bharti, by making available broadcast personnel, as per the requirement of M/s. Prasar Bharti. As per the understanding with M/s. Prasar Bharti, the appellant received a monthly fee equal to 10% of the basic fee payable to the hired broadcasting personnel through the appellant. In addition to this monthly fee, M/s. Prasar Bharti also reimbursed the fee payable to the broadcast personnel hired through the appellant. While the appellant discharged service tax on the fee received by them from M/s. Prasar Bharti for the service of supply of man power, they did not paid the service tax on the amount reimbursed towards fee payable to broadcast personnel. The Department was of the view that service tax was required to be paid on the full amount received by the appellant from M/s. Prasar Bharti. Accordingly, the demand of service tax was confirmed against the appellant vide the impugned order along with interest as well as penalties under various sections of the Finance Act 1994. Aggrieved by the impugned order the present appeal has been filed.
3. With the above background we have heard Shri Atul Gupta, Advocate for the appellant and Shri Sanjay Jain, DR for the
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4. It is the submission of the ld. Counsel that the liability of payment of fee to the broadcast personnel was of M/s. Prasar Bharti as can be established from the agreement between the two parties. The appellant was only acting as an agent of M/s. Prasar Bharti and have received reimbursement of the broadcast personnel fees which in turn has been paid by the appellant to the personnel as a "pure agent". He also relied on the following case laws:
i) Intercontinental Consultants & Technocrats Pvt. Ltd. Vs. UOI 2013 (29) STR 9 (Tri-Del).
ii) Rolex Logistics Pvt. Ltd. Vs. CST Bangalore : 2009 (13) STR 147 (Tri-Blr)
He finally submitted that Department was not justified in including the fees payable to the broadcast personnel which are in the nature of reimbursements.
5. The Ld. DR justified the impugned order. He argued that the appellant has rendered the services of manpower recruitment or supply agency service. CBEC vide F. No. B/3/16/TRU dt. 27.07.2005 has clarified that service tax is payable on the full amount of consideration charged for such service. The value includes recovery of staff cost from the recipient including salary and other contributions. Since the appellant has received not only their commission amount but also amount towards salary for the broadcasting personnel supplied by them, service tax is liable to be paid on the entire consideration received. He also relied on the following case laws:
i) Neelav Jaiswal & Brothers Vs. CCE Allahabad : 2014 (34) STR 225 (Tri-Del)
ii) CCE Mumbai Vs. Jubiliant Enpro Pvt. Ltd : 2016 (46) STR 448 (Tri-Mum)
6. After hearing both the sides and perusal of the record, we note that the appellant has rendered the service of man power recruitment or supply service, to M/s. Prasar Bharti by making available broadcast personnel as per their requirement. In terms of the agreement between the appellant and M/s. Prasar Bharti, the appellant is entitled to receive reimbursement of the broadcast fees paid to the broadcast personnel. In addition they will also be entitled to receive 10% of such fees payable to personnel as their commission. It is seen from record, that the appellant has already discharged service tax on the commission amount, but have not paid service tax on the reimbursement of fees paid to the personnel. It is their claim that they have operated as an agent of M/s. Prasar Bharti and have transmitted the personnel fees received from M/s. Prasar Bharti as a pure agent to their employees. The dispute for resolution is whether such amounts are to be included as consideration for payment of service tax.
7. Section 67 of the Finance Act deals with valuation of services for charging of service tax. The same is reproduced below
"Valuation of taxable services for charging Service tax -
(1) Subject to the provisions of this Chapter, service tax chargeable on any taxable service with reference to its value shall,--
(i) in a case where the provision of service is for a consideration in money, be the gross amount charged by the service provider for such service provided or to be provided by him;
(ii) in a case where the provision of service is for a consideration not wholly or partly consisting of money, be such amount in money, with the addition of service tax charged, is equivalent to the consideration;
(iii) in a case where the provision of service is for a consideration which is not ascertainable, be the amount as may be determined in the prescribed manner.
(2) Where the gross amount charged by a service provider, for the service provided or to be provided is inclusive of service tax payable, the value of such taxable service shall be such amount as, with the addition of tax payable, is equal to the gross amount charged.
(3) The gross amount charged for the taxable service shall include any amount received towards the taxable service before, during or after provision of such service.
(4) Subject to the provisions of sub-sections (1), (2) and (3), the value shall be determined in such manner as may be prescribed.
Explanation--For the purposes of this section,--
(a) "consideration" includes any amount that is payable for the taxable services provided or to be provided;
(b) [ * * * ]
(c) "gross amount charged" includes payment by cheque, credit card, deduction from account and any form of payment by issue of credit notes or debit notes and 2[book adjustment, and any amount credited or debited, as the case may be, to any account, whether called "Suspense account" or by any other name, in the books of account of a person liable to pay service tax, where the transaction of taxable service is with any associated enterprise.]"
8. As can be seen above, section 67 specifies that wherever the provision of service is for a consideration, the taxable value would be a gross amount charged by the service provider for such service. The Service Tax (Determination of Value) Rules 2006 provides for exclusion from the taxable value, amount received in the capacity of "pure agent". The claim of the appellant is that the broadcast fees was received by them in their capacity as pure agent.
9. To decide whether the appellant was acting as a pure agent, we need to refer to rule 5(2) of the Service Tax Valuation Rules 2006. In the said rule, expenditure incurred by the service provider as a pure agent can be excluded from the value of taxable service subject to the condition that all the eight conditions specified there are satisfied. Further, "pure agent" has been defined to mean 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.
10. Only when all the four criteria as specified above are satisfied, a person can be called a pure agent. The adjudicating authority has elaborately discussed these criteria in para 9.1 of the impugned order as follows:
"The term pure agent has been defined in Explanation 1 to the said rule, detailed above. I note that the primary characteristics of a pure agent is that he 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. The notice have not come forward with any such contractual agreement. Condition (iii) cited supra stipulates that the recipient of service is liable to make payment directly to the third party. In the present case I note that Doordarshan/M/s. Prasar Bharti are not making any payment to Broadcast Personnel directly but the entire amount is paid by Doordarshan/M/s. Prasar Bharti to the notice only and it is the notice who makes further payment to such personnel, hence this condition is not fulfilled in the present case. Further, condition (iv) cited supra stipulates that the recipient of service authorizes the service provider to make payment on his behalf. From the documents available on record, I do not find any such arrangement where DD/M/s. Prasar Bharti have authorized the notice to make payment to the broadcasting personnel on their behalf. The DD/M/s. Prasar Bharti in the present case makes a stipulated amount for each Broadcasting personnel besides the specified fee to the notice and the notice makes payment to each Broadcasting Personnel from its own account and as such I find that this condition is also not fulfilled by the notice. Another condition (vii) cited supra stipulates that 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. However, I find that third party in the present case viz. Broadcasting personnel are not rendering any service to DD/M/s. Prasar Bharti. It is rather the notice who are providing manpower supply or recruitment service to DD/M/s. Prasar Bharti for which the entire service charges, including the amount to be paid to such Broadcasting personnel is received by them. However, the service tax has not been paid on the entire amount received but only on a fraction thereof representing fee for the notice. In view of the above, I note that the notice do not qualify the above referred three conditions to be termed as a pure agent. I further note that section 67 of the Finance Act, 1994."
11. We are in agreement with the findings of the adjudicating authority in this regard and hence, the appellant cannot be treated as a pure agent as defined in the rules. Consequently, the appellant is required to discharge service tax on the full amount received from M/s. Prasar Bharti i.e. including both the commission at the rate of 10% as well as broadcast fees.
12. We have gone through the case laws in respect of Neelav Jaiswal & Brothers and Jubiliant Enpro (Supra), we find that the decision of the Tribunal in the above two cases, supported the view that unless all the conditions pure agent are satisfied, the appellant will not be entitled to any exclusion from the taxable service for amounts received towards salary, provident fund, etc. In the case of Neelav Jaiswal the Tribunal observed as:
"6. Section 65(105)(k) enacts the relevant taxable service to mean any service provided or to be provided to any person, by a man-power recruitment or supply agency in relation to the recruitment or supply of man-power, temporarily or otherwise, in any manner. Section 65(68) of the Act defines "man-power recruitment or supply agency" to mean any person engaged in providing any service, directly or indirectly, in any manner for recruitment or supply of manpower, temporarily or otherwise, to any other person. Section 67 of the Act dealing with valuation of taxable service for charging Service Tax specifies that where the provision of service is for a consideration in money, the taxable value would be the gross amount charged by the service provider for such service provided or to be provided by him.
7. It is admitted that the liability to remit Provident Fund to Provident Fund Authorities is a statutory liability on the appellant, an employer of persons who were deployed to serve the needs of M/s. Hindalco Industries Ltd., towards the taxable 'manpower recruitment or supply agency' service. M/s. Hindalco consideration for such taxable service provided by the appellant had remitted to the appellant not only the amount agreed to between the parties for remunerating the personnel so deployed but also the amount of provident fund payable by the appellant to Provident Fund authorities, in terms of the appellant's statutory obligation. Both these amounts therefore constitute the gross amount charged by the appellant for the taxable service provided to M/s. Hindalco Industries Ltd., since the taxable service was provided for a consideration in money. Both these amounts therefore constitute the gross amount charged by the appellant for having provided the taxable service.
8. On the aforesaid analysis, we find no infirmity in the concurrent findings/conclusions recorded by the adjudicating authority and the appellate Commissioner (Appeals), warranting interference. The appeal is accordingly dismissed, but in the circumstances without costs."
13. In view of the above discussions, impugned order is upheld and appeal is dismissed