2005 (1) TMI 682 - Commissioner - Service Tax

Summary

Issues:
Allowable deductions from taxable value of services rendered by a provider of photographic services.

Analysis:
The appeal was filed against an Order-in-Original for short payment of service tax during a specific period. The appellants contended that certain materials sold during the service provision should not be included in the taxable value as per Section 67 and notification No. 12/03-ST. They argued that subsequent circulars should not negate the benefits allowed under the notification. The appellants relied on Supreme Court decisions to support their stance.

During the personal hearing, the appellants reiterated their arguments, emphasizing that the Order-in-Original did not consider the deductions permitted under notification No. 12/03-ST. They claimed that they had made complete and accurate declarations, including deductions, and thus, interest and penalties were unjustified.

The issue in dispute revolved around the deductions from the taxable value of services provided by a photographic services provider. The Commissioner examined Section 67, notification No. 12/2003-ST, and a subsequent circular to determine the availability of deductions for goods sold during service provision. The Commissioner noted that deductions could be claimed based on documentary proof for goods sold with individual bills/invoices.

However, for consumables where separate pricing on each bill was impractical, the Commissioner allowed deductions based on apportionment at the end of an assessment period. The circular imposed limitations on the notification's operation by requiring consumables' values to be indicated on bills/invoices. The Commissioner emphasized that the substantive relief under the notification should prevail over procedural requirements.

Relying on Supreme Court decisions, the Commissioner concluded that deductions should be allowed for consumables sold during service provision, even if their values were not separately indicated on bills/invoices. The service provider needed to maintain and produce records of the cost/value of such consumables for claiming deductions. The Commissioner directed the reworking of duty liability after allowing the deductions as per the notification.

In the final decision, the appeal was allowed, setting aside the impugned order, and instructing the adjudicating authority to recalculate the duty liability after considering the deductions permitted for consumables sold during the service provision.