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Issues:
Interpretation of Section 67 of the Finance Act 1994 regarding the basis for payment of service tax on cable services provided to employees as a welfare measure. Analysis: The judgment by the Appellate Tribunal CESTAT Bangalore involved a dispute regarding the payment of service tax on cable services provided by the appellants to their employees as a welfare measure. The Revenue contended that the amount paid by the appellants to the cable service provider should form the basis for payment of service tax, resulting in a demand for differential service tax for a specific period. The appellants argued that they should only be liable to pay service tax on the gross receipts as per Section 67 of the Finance Act 1994, rather than the amounts paid to the service provider. The learned Advocate representing the appellants argued that the demand was not legally tenable as per Section 67 of the Finance Act 1994, which mandates the discharge of service tax liability based on the gross receipts. On the contrary, the learned DR for the Revenue referred to Rule-3 of the Service Tax Determination Rules and contended that the amounts collected by the appellants did not represent the gross consideration due to subsidization of services provided to employees. The DR argued that the Commissioner (Appeals) correctly held that the payment of service tax would be applicable from a certain date in line with the rules. Upon careful consideration, the Tribunal found that the determination of the value for service tax payment is governed by Section 67 of the Finance Act 1994, which specifies that the gross value collected by the service provider forms the basis for service tax calculation. The Tribunal emphasized that whether the services are subsidized or provided free of charge is irrelevant to the determination of the service tax value. The Tribunal opined that the Government does not need to levy service tax on services provided for free, as the value for service tax calculation is based on the gross amount collected. Consequently, the Tribunal ruled in favor of the appellants, ordering a full waiver of the dues demanded in the impugned order. In conclusion, the judgment clarified the legal interpretation of Section 67 of the Finance Act 1994 in the context of service tax liability for cable services provided as a welfare measure, emphasizing that the gross value collected by the service provider is the basis for service tax calculation, irrespective of any subsidization or provision of services for free.
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