2012 (11) TMI 42 - Commissioner - Service Tax

Valuation - inclusion of TDS amount in the value of services alleged that appellant had calculated and discharged the Service tax liabilities excluding the Income tax Value which resulted in short payment of service tax Held that - Gross amount billed in terms of the above example is Rs. 100/- and TDS of Rs. 5/- was paid by Service receiver directly to the Income Tax Department. The gross amount billed and paid to the service provider abroad is only Rs. 100/- and thus in terms of the decisions by Hon ble Tribunals the taxable value of service can only be in terms of contract/invoice raised which is only Rs. 100/- and not Rs. 100/- plus Rs. 5/- (TDS) - appellant had to pay service tax only on the amount billed and paid to the service provider abroad - appellant had discharged service tax on the amount billed and paid - appellant need not pay anything more than what they have paid already as no case is made against them - Appeal allowed

Summary

Issues:
1. Whether the suppression of facts justifies the invocation of the extended period of time and if the TDS amount should be included in the taxable service value.
2. Whether the appellant correctly paid the service tax on the gross amount paid to the foreign service provider and if the Income Tax amount should be considered in the calculation.

Analysis:
1. The appellant appealed against the lower adjudicating authority's order-in-original for short payment of service tax due to non-inclusion of TDS amount in the taxable service value. The appellant argued that the TDS amount was not required to be included as they paid service tax correctly on the total amount paid to the foreign service provider. The Commissioner found that there was no suppression of facts to evade tax, as the appellant paid service tax on royalty payments and Income tax directly to the Government. The Commissioner held that the extended period of time could not be invoked, limiting the demand to one year prior to the show cause notice issuance.

2. Regarding the inclusion of TDS amount in the taxable service value, the appellant contended that they correctly paid service tax on the gross amount paid to the foreign company under the reverse charge mechanism. The Commissioner noted that previous judicial decisions supported that TDS on Income Tax should not be included in the service tax calculation. The Commissioner agreed that the Income Tax amount paid directly to the Government should not form part of the gross value for service tax calculation. The appellant provided a clear example to illustrate that service tax should only be paid on the amount billed and paid to the service provider abroad, excluding the TDS amount. The Commissioner concluded that the appellant had already paid the correct amount of service tax and no further payment was required.

In conclusion, the Commissioner set aside the lower authority's order and allowed the appeal, ruling in favor of the appellant based on the correct payment of service tax and the non-inclusion of TDS amount in the taxable service value.