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PJ/Case Law/2014-15/2169

Whether service tax is levialbe on the amount which an assessee collect from the client for those services of which payment made by an assessee on behalf of the client?

Case:-DATAMATICS FINANCIAL SERVICE LTD. Versus COMMR. OF SERVICE TAX, MUMBAI
 
Citation:- 2013 (31) S.T.R. 203 (Tn. - Mumbai)

Brief facts:-The applicants are share transfer agents and provides the registration services to an issue. They are acting as an agent of the Company in processing application for shares and dispatching letters, refund orders certificate and other related documents in respect of the issue. As they are processing the share transfer and dispatching the transfer certificate to the transferee therefore, they are paying postage on those dispatched, which they recovered from principal on actual basis. The case of the department is that applicants are liable to pay service tax on the total remuneration received from the clients as per Rule 5(1) of the Service Tax Valuation Rules, 2006 there­fore, the above demands have been confirmed.
 
Appellant’s Contention:-  The Appellant submitted that as per Rule 5(2) of the Ser­vice Tax Valuation Rules, 2006 they are not liable to pay service tax on the post­age recovered from the principles for dispatching the documents to the trans­feree.
 
Respondent’s Contention:-The respondent reiterated findings of lower authorities
 
Reasoning of Judgment:-Having heard  the applicant and gone through the provi­sions of Rule 5(2) of Service Tax Valuation Rules, 2006 and the Indian Post Office Act, 1898 . We are satisfied that the applicant are not liable to pay service tax on this postage charges. Therefore, prima facie the applicants have made out a case for 100% waiver of pre-deposit. Accordingly, we waive the requirement of bal­ance amount of service tax, interest and various penalties under the Finance Act, 1994 and stay recovery thereof during the pendency of the appeal.
 
Decision:-Stay granted.
 
Comment:-The analogy drawn from the case is that if the assessee incurs a certain expense on behalf of his client and subsequently recovers the same from his client then he is not liable to pay service tax on the same.
 
 

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